Well, folks, it's official - mark November 22, 2010 in your calendars - today is the day the Ponzi starts in earnest. With today's $8.3 billion POMO monetization, the Fed's official holdings of US Treasury securities now amount to $891.3 billion, which is higher than the second largest holder of US debt: China, which as of September 30 held $884 billion, and Japan, with $864 billion. The purists will claim that the TIC data is as of September 30, and that as the weekly custodial account shows UST buying continues the data is likely not correct. They will be wrong: with the Fed now buying about $30 billion per week, or about $120 billion per month, for the foreseeable future and beyond, it would mean that China would need to buy a comparable amount to be in the standing. It won't. In other words, the Ponzi operation is now complete, and the Fed's monetization of US debt has made it not only the largest holder of such debt, but made external funding checks and balances in the guise of indirect auction bidding, irrelevant. For what tends to happen next in comparable case studies, please read the Dying of Money. And congratulations to China for finally not being the one having the most to lose on a DV01 basis on that day when the inevitable surge in interest rates finally happens. That honor is now strictly reserved for America's taxpayers.
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