Originally Posted by
kingofmath
I think there's tremendous value for us to understand why the MS instruments exist and who (aside from us and the criminals) the customers are.
MS instruments exist because the Federal Reserve system ordered the banks to create them. Any money transactions, including MS, increase the velocity of money -- and it's the Fed's primary metric to indicate how well the 'economy' is doing. They would also like to suck the cash out and cycle all transactions through the banking system. Every time money passes through banks, they grab a tiny portion of it. Cash transactions obviously don't need to involve the banks. They are still a part of the economy, but the Fed can't count them in, and the banks can't skim a tiny portion of them.
I guess MS must be a nuisance to the Fed, as it doesn't siphon the paper out of the system, but they must still love the increased velocity of money.