enter the new crash word, page-5

Remember a bailout only replaces the money thats already been lost, its a zero sum game, bailout dont inject money into the economy they just avert bank collapses.

If a a bank for instance has 100B in loans outstanding and in order to maintain a say 5% reserve then if the 5B of loans og bad QE will buy out those bad assets from the bank so it can maintain a 5% reserve. With shadow banking system the leverage though is much higher than 20/1 its more like 100/1, which means that they have 1 trillion of loans outstanding for every 5B of reserves, the accounting regulation on the treatment of Credit default swaps allows them to leverage much much high than they have reserves.

So the QE strategy of replenishing reserves by buying dud assets eventually has the defaults outrunning the central banks ability to bail out. The bail out bucket eventually is eventually to small to effectively bail, then they get a larger bucket and then a larger one, eventually they run out of bigger buckets (where we are now) and the debt obliterates the central banks efforts.