A new set of regulations that most people have never even heard of that was developed by an immensely powerful central banking organization that most people do not even know exists is going to have a dramatic effect on the global financial system over the next several years. The new set of regulations is known as “Basel III”, and it was developed by the Bank for International Settlements. The Bank for International Settlements has been called “the central bank for central banks”, and it is headquartered in Basel, Switzerland. 58 major central banks (including the Federal Reserve) belong to the Bank for International Settlements, and the decisions made in Basel often have more of an impact on the direction of the global economy than anything the president of the United States or the U.S. Congress are doing. All you have to do is to look back at the last financial crisis to see an example of this. Basel II and Basel 2.5 played a major role in precipitating the subprime mortgage meltdown. Now a new set of regulations known as “Basel III” are being rolled out. The implementation of these new regulations is beginning this year, and they will be completely phased in by 2019. These new regulations dramatically increase capital requirements and significantly restrict the use of leverage. Those certainly sound like good goals, the problem is that the entire global financial system is based on credit at this point, and these new regulations are going to substantially reduce the flow of credit.
The only way that the giant debt bubble that we are all living in can continue to persist is if it continues to expand. By restricting the flow of credit, these new regulations threaten to burst the debt bubble and bring down the entire global economy.
Not that the current global financial system is sustainable by any means. Anyone with half a brain can see that the global financial system is a pyramid scheme that is destined to collapse… but Basel III may cause it to collapse faster than it might otherwise have. [Read more...]