Survive The Depression Best Case - Part II

If Ben Bernanke does this - buy the long end to $300B - and he does it some more (It is this "more" that is the mystery. At what point of purchases of Treasury's will this cause The No Mas Moment?), eventually what happens is The Nightmare Scenario. The entire world U.S.A. Sovereign debt market sells into Ben Bernanke's bids, he buys up most T's causing a crash in value of those he doesn't hold. He thus buys up more, repeat until Ben Bernanke has increased the FOMC H.4.1 by $6,000B - all existing outstanding T's. When this Ouroboros Moment is over, there will be no further deficit spending because The Federal Reserve cannot arbitrage itself. Ben Bernanke can spend more than he sells to himself, but that would require blatant, naked, printing that would immediately show up on the Fed b/s. He wants to buy up $3,000B of Treasury's, but only has $1,500B. He increases the FOMC H.4.1 balance sheet. But this will last for a few days at most as everyone dumps the dollar in response. Just like they did this afternoon.

When that moment of cornering the market occurs, at that instant the U.S. Government will need to shrink to tax revenues. As in a fortnight. As in the budget goes from $4,000B to $1,500B in two weeks time. Then we get the annihilation of Social Security, Medicare, Medicaid, the evaporation of the rest of the budget, and a Post-Soviet style collapse of our military budget to 50% or less.

The 'crash' will take 2 or 3 news cycles as the info spreads by email, social networking, blogs, forums, Internet and text message. The MSM will be clueless and useless up to and until rioting breaks out, and even then they simply won't be able to "Get It". We will end up just like Iceland. 72 hours and we will be well-done.

At first the rest of the world will rejoice in the collapse of our military. Then the regional troublemakers will rise up, and the critics will rue the day they ever spoke poorly of the USA.

I don't want this. None of you do. But if Ben Bernanke continues, if he REALLY buys $300B of the long end and stops with the "Credible Threat of..." and actually DOES IT...well, we will be on our way.

It will only be a matter of 'when', not 'if'.