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A few points\u2026
\nFirst, the Fed does not set the interest rates. They would like you to believe they do, but they don\u2019t. What the Fed does is to follow the 2yr. rate which ever direction it goes. If you doubt what I say, simply overlay a chart of the Fed overnight rate over the 2 yr rate and that fact will be very obvious. The 2yr rate always moves first, then the overnight rate follows it.
\nSecond, there is already a run on the banks happening. The idiot masses are learning one by one that their deposits in their local bank are dead money, and that they can make far more by moving their cash into money markets, brokered CD\u2019s or buying short term treasuries.
\nAs the idiot masses slowly pull their money from savings accounts to reinvest in 5+% investments, the banks are being forced to liquidate their stash of 30yr notes at huge losses.
\nThird, the account the Fed uses to purchase Treasuries at auction is its Reverse Repo Account. That account that was well over 2 trillion a year ago, is now under 800 billion, and will probably be depleted around March or April.
\nThis will severely affect the Feds ability to purchase Treasuries, at a time when China and the wealthy oil producers in the Middle East are also either cutting purchases, or stopping purchases all together.<\/p>\n