Whats A Ponzy Scheme?

If you ever wanted to know what exactly a ponzy scheme is?

Check this out.....

U.S. Treasury to borrow $362 bln in Oct-Dec quarter
http://in.reuters.com/article/idINWAL1ME6QU20101101

We all know that the Fed is starting there new asset swap scheme with Wall Street Institutions on Wednesday November 3rd.

This has been aptly named QE2. 
So....The Treasury issues/auctions bonds to raise cash to level/even out the reserves in the system. They primarily auction this debt to Wall Street institutions and foreign central banks. The Fed then buys the same Treasury Debt form the Wall Street institutions.

To which I say....

Why in the world is the Treasury going through the trouble of auctioning these securities to Wall Street Institutions when they should just swap them to the Fed in exchange for cash? We all know direct bidding by Wall Street PD's is at record levels, they are really the only ones buying.

The reason is quite simple. Treasury can auction these to the Fed, but the Wall Street Institutions who run the Fed and Treasury combined want it their way so that they can take newly printed Fed Money so they can feed their HFT machines with more candy. This is the only reason why are stock markets are not making new lows.

For example...In Todays POMO, the Fed monetized $2.5B from PD's, $85MM of the amount was part of an auction two weeks ago!. So stay with me. Treasury auctions to PD's, the PD's hold them for two weeks, then they sell the bonds they bought from Tax Cheat Timmy to Benny & The Ink Jets. They get the newly minted dollars from the Fed and automatically buy in this order:

1-SPY
2-QQQQ
3-Apple Computer
4-Google
5-NetFlix
6-Bidu
7-Priceline.com
8-SalesForce.com
9-F5 Networks

Sometimes you truly can't make things up.