Banks forced to buy government debt -time bomb!

It sure  doesn’t take a genius economist to figure out where this is taking us. Keeping interest rates low is a requirement in keeping the charade going. I gather thus, if any of the PIGS countries default, the result will take the banks down as well as their poor customer’s money down with them. Now this is the ultimate time bomb. The secret is out.

US and European regulators are essentially forcing banks to buy up their own government’s debt—a move that could end up making the debt crisis even worse, a Citigroup analysis says.

Regulators are allowing banks to escape counting their country’s debt against capital requirements and loosening other rules to create a steady market for government bonds, the study says.

“Captive bank demand can buy time and can help keep domestic yields low,” Lorenzen wrote in an analysis for clients. “However, the distortions that build up over time can sow the seeds of an even.bigger crisis, if the time bought isn’t used very prudently.”  More at CNBC