Having just read the article in the latest Economist magazine on Emerging Market economies creating a welfare state I started thinking about how economies mature.

The rescue efforts from 2008 – 2012 to bail out the global economy have resulted in a massive inflation of sovereign balance sheets almost everywhere from the US Fed, to the Bank of England, the Bank of Japan, the Peoples Bank of China, and even the ECB.

Given the fragile state of the global economy the resilience of risky assets is remarkable.

The co opting of banks in debt monetization, the fear of investors, the shackles of Basel 3, place significant constraints on the banking industry. 

What’s all this talk of QE3? The private commercial banks have been big buyers of US treasuries to the extent that they are operating QE3 on behalf of the Fed. Buying has accelerated from 63 billion usd in 2011 to 136 billion usd YTD 2012. The Fed is already the largest lender to the US