BREAKING: Federal Reserve’s Ownership of US Debt tops $2 Trillion for 1st Time

The most effective way to control someone is to have them in debt to you.
The Federal Reserve’s holdings of publicly traded U.S. Treasury securities—federal government debt—pushed above $2 trillion for the first time last week, hitting approximately $2,001,093,000,000 as of Aug. 14, according to the Fed’s latest weekly accounting.
The Fed’s accounting for the previous week showed that it had owned approximately $1,993,375,000,000 in U.S. Treasury securities as of Aug. 7.
Back on Dec. 31, 2008, before the Fed began its strategy of “Quantitative Easing,” the Fed owned only $475.9 billion in U.S. Treasury securities. Since then, the Fed’s holdings of U.S. government debt have more than quadrupled.
Launched in 2009, the Fed’s Quantitative Easing (QE) efforts have attempted to stimulate the economy.
http://www.cnsnews.com/news/article/2001093000000-fed-s-ownership-us-debt-breaks-2t-first-time
CREDIT SUISSE: The End Of Zero Interest Rates May Create A ‘Huge Financial Disruption Akin To The End Of A War
It wasn’t so long ago that the challenge of making money with interest rates stuck around zero was investors’ top concern. Those days are gone. Today, they’re worried about the opposite: the threat that now-rising rates pose for fixed income investments. That, and the downturn in emerging markets that many only recently embraced in the hunt for yield caused by those near-zero rates.
It’s easy to identify the date that things changed: May 22, the day that the Federal Reserve first alerted markets that it might soon start “tapering” the $85 billion in monthly asset purchases it has been making since December to juice the economy. And soon looks to be getting even sooner. A steady improvement in U.S. employment figures—unemployment fell from 7.6 percent in June to 7.4 percent in July—has brought into focus the 6.5 percent unemployment target the Fed set as a prerequisite for raising short-term interest rates. On Thursday, the U.S. Bureau of Labor Statistics released yet another piece of good news on the employment front: New applications for unemployment benefits sank to their lowest levels in six years in July.
That’s great news for Americans who happen to be landing new jobs, but not as pleasant for bond investors worried about rising rates. The employment data, as well as news that inflation rose significantly in July (another potential trigger for the Fed to tighten monetary policy) led investors to dump U.S. Treasuries Thursday, pushing yields to a two-year high. The yield on a 10-year Treasury bond has topped 2.8 percent, about 60 percent higher than at the beginning of the year.
Now that yields have started climbing, investors should expect that improving economic momentum will keep them moving higher – and that will have serious implications for investors in the world’s three largest economies: European Union, Japan and the United States. “In our view, the potential end of near-zero interest rates is exactly the type of event that can trigger enormous changes in asset prices and capital flows within and across economies,” Credit Suisse’s fixed income strategy team explained in a note this week called ”Zero Isn’t Forever.” “This can create a huge financial disruption akin to the end of a war.”
This particular “war” is ending later than it should have, the team wrote, arguing that long-term interest rates have remained low far longer than the data warranted. Rates in the G3 started falling in mid-2011, when the European crisis was at its worst. But industrial production momentum, a key indicator of global economic activity, started looking more solid as early as last November. Add to that the steady recovery in the U.S. labor market and the receding threat of a breakup of the euro zone since European Central Bank President Mario Draghi’s July 2012 pledge to take any measures necessary to hold the monetary union together, and one would have thought rates would have been climbing some six months before the Fed caused such pandemonium in May. So why didn’t they? Because the major central banks continued easing in the face of that good news, that’s why. And why would they do that? Because they were more focused on falling inflation, despite the fact that inflation is a lagging indicator. (If it’s not one thing, it’s another.) The recent jump in long-term rates, then, is simply an overdue correction. “We think long-term interest rates were significantly mispriced even before tapering talk began,” the strategists wrote.
The uptick in industrial production momentum around the world, which tends to track quite closely with long-term bond yields, is still going strong, and the analysts expect it to continue putting upward pressure on rates. Global industrial production momentum went from -1 percent in November to 4.1 percent in May, and the strategists expect it to hit 7 percent by the end of this year, as both Europe’s painful recession and China’s significant slowdown appear to be flattening out.
http://www.thefinancialist.com/zero-isnt-forever/#ixzz2cVRkp1Iy