The Fed’s decision to buy $400 billion of longer-term US Treasuries in this environment is essentially the Fed announcing that it will be covering a significant portion of new debt issuance going forward as a means of putting off the inevitable US debt default. At most the Fed has bought 2-3 months of time for the US. I fully believe that before the end of this year, the bond market will shift its sights away from Europe to the US. At that time, the US debt bubble will burst resulting in systemic failure.

My primary point with all of this is that the bailout/ intervention gravy train has come to an end. Indeed, while the lemmings pile into stocks believing in this nonsense, smart investors are already preparing for the next leg down in the markets. The reason is simple: last week’s sell off is JUST the beginning of what's coming.

Because of the intertwined nature of the derivatives market, a Greek default could result in systemic risk for the simple fact that if one of the banks that goes down with Greece has extensive exposure to Spain as well, then things could get ugly very, VERY fast.

A mere two weeks ago FIVE central banks intervened to help the European banking system. The benefits of that intervention last one week. Things are now so bad in Europe that corporations are now pulling their money from private banks and depositing directly with the ECB:

The reality is that Europe in its current form is over. No German backstop means no success for the EFSF no matter who big it becomes. Germany IS the backstop for the EU. Take it out of the equation and the EU in its current form is finished.

Yes, the GREAT COLLAPSE has begun. The markets will be going to new lows (below the March 2009 lows) in the coming months. We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.

The Fed is trying to lower long-term interest rates… at a time when Treasuries are trading at all time highs. This is akin to buying Tech stocks in late 2000 or buying Housing stocks in late 2007. The US debt market is officially in a bubble… and the Fed wants to spend $400 billion trying to make it bigger. With leverage of over 50-to-1 the Fed is finished.

I fully believe that the Great Collapse, the time when the Fed completely loses control of the markets, has arrived. We're going to be seeing Market Crashes, Bank holidays, riots, food shortages, and more in the coming months.

While most commentators proclaim that QE is a completely new phenomenon, we have in fact seen a version of it in the form of the Fed’s and Asia’s (especially China’s) purchases of US Treasuries/ currency pegs over the last decade or so.

Folks, if a coordinated intervention on the part of FIVE central banks can’t even give us one week of gains in the European banks… nor lower the cost of Dollar swaps… then we’re in the absolute END GAME for central bank intervention.

Worldwide, there is a shortage of capital. Leverage levels exceed those of the Tech Bubble. Even Central Banks, such as the Fed are leveraged to the hilt (with $50 billion in capital and $2.8 trillion in assets, the Fed is leveraged at 56 to 1. Lehman was at 30 to 1 prior to its collapse).

I fully believe that we may in fact be on the verge of a Crash in the markets. All the Red Flags are there. Europe’s entire banking system is on the verge of systemic collapse. Take a look at European banks and you’ll see what I mean.

This move reeks of desperation. The fact it occurred during options expiration further illustrates one of our long-held views: the Central Banks intervene during options expiration week whenever possible to permit the largest upside move (See the Fed’s juicing of the market post-QE 1 in 2010).

The primary problem is that the world Central Banks continue to intervene to prop the markets up. We had a global intervention earlier today… forcing the US Dollar to collapse while the Euro soared.This is an act of desperation. It is essentially an admission on the part of the Central Banks that Europe is in a full-scale liquidity crisis a la pre-Lehman.

The market has become dominated by rumors. The primary rumor is of China supporting Europe. We saw similar rumors in 2008 for Wall Street banks. Those purchases all resulted in massive losses for the funds in question. And yet we are seeing similar rumors inciting large rallies in stocks today, this time the rumors pertaining to China and Japan buying Europe.