U.S. Treasury auctions are a fraud

There is growing evidence that the Federal Reserve is secretly buying more US treasury notes than they are willing to admit. Since March, when the Chinese premier expressed concern over the US government devaluing the dollar, foreign investment is flowing out of the US. In April, net foreign capital outflow was over $53 Billion. The BRIC nations have all decided to buy IMF bonds rather than US Treasuries. Bloomberg reported last week that American investors are shying away from US treasuries.

This leads to the mysterious situation where at each auction, the Treasury Department reports record foreign investment demand for treasuries. If neither foreigners nor Americans are buying treasuries, then who is? The mystery is solved when you consider the fact that the Treasury Department changed the definition of who a foreign investor is. The change was published on 1 June 2009 with little fanfare. Essentially, primary dealers...that's right, any of the 16 financial institutions that trade at the Fed's window...they can now be counted as "foreign" investors. It stands to reason that these institutions (...they are required to bid at the auctions, by the way...) are buying the treasuries for the Fed. I suppose the US government wants to hide the fact that they are monetizing the national debt. So they are trying to do so with subterfuge. Can anyone trust the US government anymore? I don't.