Federal Reserve Balance Sheet Update: Week Of March 3; 98% Of Q.E. Over; Just $35 Billion In MBS/Agency Purchases Left

Tyler Durden's picture

The Federal Reserve's assets were at $2.26
trillion as of March 3, flat sequentially. 

  • Securities
    held outright: $1,971 billion (an increase of $60 billion MoM,
    resulting from $57 billion increase in MBS and $3 billion in
    Agency Debt), or a $6 billion decrease sequentially. 
  • The
    fed has completed $169.1 billion of $175 billion in the agency MBS
    program: there is just 3% of Agency dry powder remaining (no new purchases in the week ending March 3).

    The Fed has completed $1.22 trillion of its $1.25 trillion MBS debt
    purchase program, or 98%, through March 3 (including the $10 billion announced today).
    There is now just $35 billion left in Quantitative Easing capacity.
  • Net
    borrowings: unchanged at
    $103 billion from the prior fortnight.
  • Float,
    liquidity
    swaps, Maiden Lane and other assets: a $1 billion decline sequentially to $190
    billion. The CPFF program was at $7.7 billion. FX liquidity swaps are
    now at zero. Maiden Lane I
    and Maiden Lane II increased and were $27.2 and $15.6
    billion, while Maiden Lane III came flat at $22.4 billion.

Custody foreign securities holdings increased by $4.4 billion sequentially to $2,969 billion.

The maturity distribution change of Fed assets from the prior week is shown below. Some $6 billion in sub 15 days USTs and Reverse Repos matured, offset by some Agency rolls into this dated category. Other assets maturing up to a year increased by about $8 billion, consisting mostly of Bills rolling closer. The net decline in assets across the entire curve was $6 billion.

The roll off of Quantitative Easing for MBS/Agencies can be seen below. The Fed's ability to artificially keep mortgage rates low is almost over.

And since everyone is concerned about the impact of the end of QE, here is Goldman Sachs to soothe everyone's nerves, by hoping readers believe that as a result of the artifical floow in the MBS market being lifted, the impact will be at most 10 basis point (that's right 10 bps. At least Goldman doesn't see a tightening in rates as a result).

In this Daily Comment we present a statistical analysis suggesting that the impact of the Fed’s asset purchase on mortgage rates has come mostly via the stock of announced MBS purchases rather than the flow of actual purchases. Our estimates suggest a total effect of around 80 basis points (bp), of which 70bp is due to the announced stock of purchases and 10bp to the week-to-week flow of purchases. Taken at face value, our results imply that mortgage rates should only rise by around 10bp when the Fed stops buying MBS over the next few weeks, although the uncertainty remains significant

Many market participants worry that the end of the Federal Reserve’s purchases of mortgage-backed securities (MBS) purchases in March will push up mortgage rates substantially.  One popular approach for gauging the likely effect is to estimate the impact of the Fed’s purchase program via the deviation of the 30-year fixed mortgage rate from its normal relationship with the 10-year Treasury yield.  As shown in the chart below, mortgage rates are currently about 70bp lower than would be expected based on the current 10-year Treasury yield.  (The 30-year mortgage rate is typically compared with the 10-year rather than 30-year Treasury yield because the embedded prepayment option reduces the duration of mortgages compared with Treasuries of equal maturity.)  Thus, some analysts have argued that mortgage rates could rise by 70bp once the Fed stops buying MBS.

 

This approach, however, ignores the distinction between the announced stock of Fed purchases and the flow of actual Fed purchases. If markets are forward-looking and therefore discount the Fed’s eventual demand for assets, rates should depend on the announced stock of purchases. This implies that the entire effect of the Fed’s purchase program should have occurred when it was announced in November 2008 and expanded in mid-March 2009. Only to the extent that markets are imperfect should the mortgage rate respond to actual Fed purchases. The distinction between stocks and flows becomes critical when the Fed stops purchasing MBS but does not change its announced MBS holdings – i.e. what we expect to happen in March.

 
To asses the outlook for mortgage rates after the Fed stops buying, we construct simple models to estimate the effect of the Fed program on the mortgage rate. It is important to note that it is difficult to be confident in the results of this exercise, as we have few observations and many other factors have affected mortgage rates at the same time. Still, we believe that our results provide a useful benchmark for what might happen to mortgage rates in coming months.

 

Our model explains the 30-year Freddie Mac primary market fixed mortgage rate (or its spread over 10-year Treasuries) using the stock of announced purchases, the weekly flow of actual MBS purchases, and a number of macroeconomic control variables. The stock of announced MBS purchaseswas initially set at $500bn on November 25, 2008 and then raised to $1.25tr on March 18, 2009. The Fed started purchasing MBS in January 2009; the purchase rate peaked in March 2009 at $33bn per week and has slowed to $11bn per week since then, averaging about $20bn per week during this period. We also include a measure of the corporate Baa yield because we want to allow for changes in overall attitudes to risk that may or may not be related to the Fed’s purchases. Furthermore, we include cyclical indicators such as the ISM manufacturing index, changes in nonfarm payrolls and the unemployment rate. Using a weekly sample from 2007 to the present, we arrive at the following results (see table below):

* First, we consider the effect of the purchase program on the spread between 30-year fixed rate mortgages and 10-year Treasuries, controlling for overall credit spreads as measured by the Baa spread over Treasuries. We estimate that the total effect of the purchase program on the current mortgage/Treasury spread is 70bp; of this, 58bp is due to the announced stock of purchases while 12bp is due to the flow of purchases (see column 1).

* Second, we consider the effect on the level of the mortgage rate, while again controlling for credit conditions by including the Baa yield. We find a total effect of 82bps on the mortgage rate; again most of the effect due to the announced stock (72bp) with the remainder (10bp) due to the flow of purchases (see column 2).

Table: Estimated Effect of the Fed MBS Purchase Program

 

The magnitude of the total effect we uncover is broadly consistent with a December 2009 speech given by Brian Sack, the head of the New York Fed’s markets group, which implies that Fed purchases have reduced the mortgage rate by about 100bp (see “The Fed’s Expanded Balance Sheet”, 2 December 2009, Remarks at the Money Marketeers of New York University). The magnitudes Sack refers to are broadly consistent with our own previous work. We have argued that Fed asset purchases of $1tr are roughly equivalent to a cut in the federal funds rate of about 100bp or, equivalently, 35bp in financial conditions (see “The Ps and Qs of Unconventional Easing”, Daily Comment, March 18, 2009). Using the weight of the long-term interest rate in the financial conditions index (55%) this effect is equivalent to roughly a 65bp drop in long-term interest (e.g. mortgage) rates for a $1tr purchase program, broadly consistent with the estimates presented above.

While we believe that the Fed’s ultimate objective is to reduce the borrowing rate that consumers actually face – i.e. the level of the primary mortgage rate used in the foregoing analysis – we test the robustness of our findings by considering two alternative measures: (1) a secondary market mortgage rate, and (2) a mortgage rate that is adjusted for the value of the prepayment option (i.e. the fact that borrowers may refinance prior to the maturity of their mortgage). For both of these measures the above conclusion – that the announced stock is the key in pushing down the mortgage rate – continues to hold and the flow effect of the purchases weakens further (not shown in the table).

One key caveat in our analysis is that we only consider the effect of the Fed MBS purchase program on the mortgage rate. We were not able to identify separately the effects of the Fed’s agency debt and Treasury purchase programs on the mortgage rate – essentially because they were announced at the same time and, in the statistical jargon, are hence highly “collinear” with the MBS purchase program. However, to the extent that the agency debt and Treasury purchase programs – which are much smaller in magnitude – had an impact on the mortgage rate, we believe that our approach should implicitly include this effect. In other words, we view our 70-80bp estimate as a reasonable gauge of the total effect of all Fed programs on the mortgage rate. The fact that we find a larger effect on the mortgage rate than on its spread over Treasuries is consistent with a modest impact of Fed purchases not just on mortgage spreads but also on Treasury yields.

In sum, we find that the stock of announced Fed purchases has been more important in pushing down mortgage rates than the flow of actual purchases. Thus, our analysis only points to a modest rise in mortgage rates of around 10bp when the Fed stops buying MBS in a few weeks. Together with the subdued outlook for MBS origination volumes in a weak housing market environment (see “The GSE at a Crossroads”, Fixed Income Monthly, February 2010), this suggests that nominal mortgage rates will remain low. However, an announcement to sell MBS – which we believe will not occur for some time to come – would likely result in a much bigger rise in mortgage rates of up to 80bp. Again, however, we emphasize that it is difficult to have a great deal of confidence in our regression results given the inherent difficulty of estimating the impact of an unprecedented policy in an environment of nearly unparalleled swings in the mortgage and broader asset markets.

Sven Jari Stehn

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trav7777's picture

so who the fk is gonna buy them now?

deadhead's picture

The Fed.

The Fed will not stop buying MBS.

The Fed will not stop buying US Treasuries.

The Fed will not raise interest rates.

The Fed will not pull liquidity.

 

wackyquacker's picture

geez, DH, how much more MBS stool is out there? Doesn't 1.25T cover the garbage?

johngaltfla's picture

Bingo. Deadhead has it spot freaking on.

They may pause but the minute rates crack 6% and sales plummet for 2 full months, panic will set in.

It's not so much the MBS, it's the ABS. Who in their right freaking mind would buy credit card, student loan, auto loan, and unsecuritized loan ABS?

I know one nation who won't be:

China

Let the panic set in....

deadhead's picture

Who in their right freaking mind would buy credit card, student loan, auto loan, and unsecuritized loan ABS?

Yes, good point!

Student loans are a shoe to drop....notice how there has been zilch said about these?  most of these kids owe 25-100 grand and they can't even get a phucking job let alone swing 300 to 700 per month in student loan payments. just another little black swan hanging around the corner.

 


Anonymous's picture

It doesnt matter because the Fed said they have zero intentions of selling the MBS. So they will just proceed along with the plan to hold them until the economy hs a super recovery and home prices resume bubble levels. If the world ends and they are stuck with them what is the difference in their mind because "Hey the world ended".

It is a double down bet. Im sure there will be some sort of hidden MBS purchases through banks being fed money from the discount window anyway.

Mark Beck's picture

No it matters.

The FED will need to tighten on the MBS, through reverse repos or some other concoction. They will be under pressure to show that they can control the money supply. At some point the FED will need to show that the MBS purchases are as convertable as Treasuries, as the MBS purchase implies same maintenance of wealth similar to Ts. If the MBS are not as liquid, or as protected in terms of buyers at close to par, it will be a glearing failure.

Another problem for the FED is if the underlying asset class, real estate, declines sharply in price. Lets say another 30% from today. The erosion of real worth and the damage done by foreclosures, will result in a huge hair cut. How will the FED justify the loss, when the purchase was supposed to be as safe as Ts.

The FED knows the projected losses on the stuff they hold. I would bet there is a real-time dash board for Ben to see the exposure. Pricing the stuff, at its true market value, must be very difficult. Also, the foreclosure mechanism must be one of a substantial tranche write off after default. The security in a sense, will never regain its original derived mechanism of implied worth. It would be interesting to see if there is any contigency on the derivative exposure built into the contracts.

Eventually, the FED will not be able to hide the amount of QE needed to fund government.

It's going to be a long year.

The appetite for US debt is only so large, even with the euro zone problems. Once the primary slack is gone, the FED will have a short period of wait and see, while expenditures are delayed, as a buffer. When this is used up the FED will have to step in and directly buy Treasuries again.

I, myself am very interested in what excuse the FED will site for justification.

This would be a significant event, not just the magnitude, my guess is around $800B for FY2010, but confirmation of the governments inability to create growth after massive stimulus. The remaining USD confidence will be gone, and Treasury rates will slowly increase.

Mark Beck

Anonymous's picture

Fed can't allow rates to go up. Higher rates mean higher interest payments on our ballooning debt. There was a ZH story on it a few weeks ago.

Justin Credible's picture

+ 175,000,000,000...

Who in their right mind thinks that we'll stop now?!

QE1 = QE1 + x, where x = ad infinitum.  There is no QE2, that would be politically unacceptable.

Plenty of levers to use....  e.g. HAMP extended 1+ year.

Like it or not, right or wrong, they will not stop.  No way.

If things are as bad as they are, (and as bad as 95% of ZH posters demand), there is no other choice but to keep going.

The whole world is getting lubed up worse than a hooker on a Sat night.

No one will let anyone fail (except individuals of course), the whole world will bail out anything/anyone that even hints at contagion or systemic risk.

Imagine a never ending, global chain of 'reach arounds' and you get the pic.

The new normal?  Sure, whatever.  Will it end in a terrible mess?  I dunno, can't we just change the accounting rules along the way to suit whatever outcome we desire?  Worked before.

From a galactic macro view, isn't the worldwide financial system really the biggest ponzi scheme ever?

 - my too sense.

 

 

 

 

 

merehuman's picture

The Fed, The Fed , i wish  that it was dead!

KabOOm!!

Tethys's picture

Mostly I have no clue regarding MBS, but does this mean that Fannie (i.e., the taxpayer) is going to pick up where the Fed left off?  

We anticipate that we will purchase approximately 150,000 — 200,000 loans from MBS trusts in the month of March, and expect that we will continue purchasing loans in each of the subsequent few months until we have substantially reduced the current population of loans that are four or more months delinquent.

From: http://www.fanniemae.com/newsreleases/2010/4960.jhtml?p=Media&s=News+Rel...


johngaltfla's picture

Yes, they have already said they will buy pretty much all MBS composed of conforming loans because they have an unlimited budget to do so (the taxpayer). So they will issue it and monetize it without even calling the Fed.

DavosSherman's picture

You if you have a 401K or IRA - they will steal it and buy them with your (what was your) money.

hambone's picture

Banks will just want to hold onto them after origination.  Cause that's how they like to tie up their capital now that the security market isn't functioning plus who doesn't want questional loans with returns at historically low interest rates.  What could go wrong?  Sounds like EZ money.  Some satire involved in the making of this mail.

Anonymous's picture

Ever heard of the Slow Food movement?

I'd like to see that applied to banking.

johngaltfla's picture

By "them" it's safe to assume you mean the two loans per year they will originate?-:)

Ned Zeppelin's picture

Your sarcasm is dead on.  GS/Jari pays no attention to the fundamentals of how the agency MBS market works.  The banks originate, but do NOT hold.  FNMA buys, packages and sells sausage.  You need buyers for the sausage.  Now that the credit risk monster and housing ( and throw on liquidity risk, wth the Fed holding a monster sized portion of MBSs it may need to sell at some point in the future - talk about shadow inventory - appear on the same investor sheet, who is buying at rates with a tight spread to 10 year Treasuries? Where is JAri's credit analysis, and liquidity analysis for Agency MBs? It fails on both counts, when for years it was treated as if it had similar credit and liquidity characteristics such that it closely tracked a 10 yr.  That machine is broken and it ain't coming back.

hambone's picture

I do appreciate that Jari notes nobody's going to be buying anyway ("subdued outlook for MBS origination volumes in a weak housing market environment") so rates won't go up?  A bit circular here in that if rates only rise 10bps, wouldn't that maintain current originations?  Seriously, Trav777's question of who is buying now (90%+ Fan, Fred, FHA, Gin?) and what impact will (could) the loss of the MBS purchase have...does anything change or do Fred, Fan, FHA, and Gin just keep buying anyway since all the losses move along to the taxpayer either way (either direct through Fed's purchase and/or backdoor to taxpayer through MBS losses).  Is this a much ado about more of the same? 

ghostfaceinvestah's picture

Jari hasn't traded a fucking agency MBS in his life.

Anonymous's picture

I just applied for an account, so in the meantime, I guess I'm posting anonymously.

There is a huge issue with GS analysis - notwithstanding the silliness about markets being perfect and thus reacting completely at the time of announcement - which *might* have been only a naive statement a few years ago before the markets became completely manipulated - which is now a completely absurd thing to say.

Anyway, the huge issue is that the purchase of MBS does directly lower mortgage costs, but it ALSO DRAMATICALLY LOWERS THE RETURN of the 10 year bond - because 1.22 trillion new dollars have been spent on (and to overpay for) assets. That money had to find a home, and much of it went into a "safer" location (as per the original intent of the money thinking the MBS were safe) of BONDS.

So the GS analysis that says that they can tell by looking at the spread between MBS and the 10 year Treasuries is meaningless. Treasury yields are down BECAUSE of the QE, and thus when this QE ends, we should expect mortgage rates to rise, as well as bond rates to rise (as well as the stock market to fall - after all, where do you think the funds to rally the market have come from? They've come from traders who got out of (worthless) MBS, and had to find a home, some of which was in stocks.

All in all, GS "analysis" is based on a totally flawed premise that these funds had no multiplier effect on other asset classes. Classic misdirection. I wonder if the FED themselves have missed this point and they believe their own (oh, I mean Goldman's - easy mistake) analysis?

--Brian

buzzsaw99's picture

 I wonder if the FED themselves have missed this point...

 

Don't be silly, and stop being logical.

hambone's picture

The Fed's to smart not to know something so fundamental - goes back to the double down theory.  Fed doesn't intend to stop til the next bubble is blown or the economy is blown...whichever comes first.

Anonymous's picture

Doesn't leave alot for Op Ex week.

waterdog's picture

"Again, however, we emphasize that it is difficult to have a great deal of confidence in our regression results given the inherent difficulty of estimating the impact of an unprecedented policy in an environment of nearly unparalleled swings in the mortgage and broader asset markets."

Then why in the hell even bring it up?

 

Anonymous's picture

Does anyone really think they are going to let this thing collapse now?

Anonymous's picture

Okay, can someone break this down for a J6P like me? All the lines on the charts are going up and to the right...that's a good thing, yes?

Anonymous's picture

QE is the money they tell you about. If they stop buying treasuries via proxy, you will notice, for shortly after the government will collapse.

deadhead's picture

Ding a ling....Ding a ling....

BB: Hello, Ben speaking

....sound of a crash and an "oh shit" as diet Coke spreads all over the table, dripping on Larry's fat gut...

LS: Uh, Ben, hey, thanks for taking my call.  Hold on a minute, I gotta save my donuts from getting soaked in my diet Coke.

BB: take your time Larry...

....click, click, clickety click...the sound of an obvious master of the keyboard, entering an order to buy another $25 Billion Euros, and a couple of hundred million extra Greek bonds....

LS: Ben, the NFP number is not going to be good, even with Rahm threatening to decapitate Hilda Solis with his teeth.  We need a little help....again.

BB: My pleasure Larry, after all, that was part of the deal that we have.  I'll call Dimon now and the London team will spike some nice green candles on the minis later tonight.

LS: Heckuva job, Ben. Anything I can do for you?

BB: Actually, yes Larry.  Don't even think about sending that cow Romer over here as my Vice Chair, got it?

LS: Ummm, Ben, that's going to be tough.  Rahm thinks her prevarication skills suck and Obama needs some meat for the libs and that breaking the glass ceiling at the Fed is a beauty for him.

BB: Phuck......

 

Ned Zeppelin's picture

Love the phone calls. . . diet coke - +1000 LOL

deadhead's picture

and, voila, futures up strongly in the face of a consensus negative NFP number.

 

the snowstorm propaganda worked quite well so far.  propaganda and spin do work well until they don't.

chalk one up for Summers, the Fed (beige book snowstorm edition), Bernanke's meteorological testimony to Congress a few days ago, financial main stream media obsession with little white pieces of frozen water......

Ponzi would be so very proud.

Anonymous's picture

Funny DH but you kno GS is probably right on.
"Fighting the Fed is jutht tho thilly" BF

chindit13's picture

As QE1 passes below the horizon, most assuredly QE2 is undergoing the last polishing of the brass and will be setting sail as soon as Mrs. Bernanke cracks the champagne across the bow.  Abby Joseph Cohen, your prince has come!

Actually, Ben is far more than a prince.  He is more than a king.  He is a savior!  He himself believes this, as in one of his gospels, which someday will be held in the same esteem as the Bible, Koran, Bhagavad Gita or Book of Moroni, Ben stated:  "We saved the world".  (Gods are known to refer to themselves in the plural.)

An old god told a man to build an ark to save the world.  Ben knows a helicopter does the job much faster, and if need be one can always use it to escape the infidels and apostates.

Another bearded one from long ago, a piker some people call savior, merely made a few fish and loaves appear out of nowhere.  So what's that worth?  Even with inflation probably no more than a few hundred dollars.

Ben has made at least two trillion dollars of his own, not to mention the trillions he has added to the equity market, the quadrillions he has added to Hamptons' real estate values, and the quintillions he has added to the accounts of the partners at Goldman Sachs. 

Who wants smelly old fish in the desert when one can have Beluga caviar on Nantucket?

And the best various and sundry other false gods can do is make lots of footprints or drop more teeth than a great white shark, make milk drip from a statue, or father way too many kids.  Parlor tricks!

One savior forgives sins.  Ben forgives debts. We all know which one carries more value.

One savior says those who err must atone and repent.  Ben says those who err should be rewarded and are welcome to do it again.

One savior tossed the gamblers out of the house of worship.  Ben has restored the gamblers to their rightful place, at the center of the Universe.

One magic man turned straw into gold.  Ben turned gold into tungsten.

One savior says we should face Mecca five times a day.  Ben calls 85 Broad twenty times a day.  Who gets more done?

One savior asks us to take Sunday off.  Ben says Sunday night is sacred worktime, especially in the S&P futures.

One book says it is easier to pass a camel through the eye of a needle than for a rich man to get into the Kingdom of heaven.  The Beige Book says it is easier for Ron Paul to get into the Fed's archives than for a bear to get into the Hamptons.

Even the Greeks have given up their false gods of Zeus and Apollo and accepted the sacramental healing power of supplemental debt.  The faithful cheered 3x (oversubscribed) and partook of the body.

Ben, when our spirits were deflated you inflated us!  When our cups were empty you filled them to overflowing.  When we were on the verge of being contrite, you led us back unto temptation!  Show us the way to Dow 36000!

Assets to ashes or debts to dust?  Ben has chosen.

 "let he who is without sin....pay for everyone else's"

 

 

merehuman's picture

Nicely written. Thats a really good comment Chindit

Anonymous's picture

Beautifully written and profound. Thank you.

Mrmojorisin515's picture

The worst part is the headline, "JUST $35 Billion dollars left", just give me one of those billions and i will have an east coast autoparts empire, but nooooooo my name isn't Zuel

Anonymous's picture

Hi all, just want to point out this is a classic example of GS's 2-tiered (at least) research. They issue different 'analysis' to different clients, with the top level being face-to-face only, nothing in print (or if so, given back to them at the end of the meeting). Stuff that gets published is very often the opposite of what their actual private recommendations are. The above piece is most likely just to reassure the other side of the trade, they need 2-way flow to keep making money on the desk daily (2-3 bps bid-ask on the most relevant MBS product and they have the biggest market share in it) and allow their bigger clients to position for a widening at a good entry price still (along with GS's prop position).

Ned Zeppelin's picture

One look at the Fed balance sheet tells you we are in No Country For Old Men.  I think "Overt QE I" will stop on schedule - a causal factor for hyperinflation/currency crisis is unending overt printing.  This bout has worked precisely because it was announced and given a shape and size.  Covert QE operated in tandem to leverage it up.  But the mortgage market in particular is on intravenous therapy, and but for government mortgages the financing for home purchases would be utterly flatlined.  Private, unsecuritized mortgages are few and far between, not enough to fund a resumption to anything resembling even a tenth of normal housing sales. If no one is buying the agency MBSs, the mortgages originated and sold to FNMA and Freddie have no where to go, and those agencies will fill with unmarketable sausage, sausage that in a rising interest rate market may not age well at all.

This does not automatically mean rates will rise. Only if demand holds and increases. But if rates rise, the whole pile of mortgages (and the agency MBSs held by the Fed) lose value every day, and the stench will rise to high heaven.

Securitization is dead. I heard the last batch of TALF financing went to absorb student loan receivables.

 

pezhead's picture

hahahaha - these comments are great - better than watching Jersey Shore

Ned Zeppelin's picture

I understand "The Situation" is strictly in the camp of the Austrian economists.

Anonymous's picture

JUST $35 Billion dollars left says a lot.

Well the FED's using 98% has reinflated the stock markets world wide; they are in a "blow off" -- they will fall any day; and the Great World Wide Credit Bubble will burst any day soon, as all so called "excess liquidity" is at The Fed.

I envision a liquidity squeeze, that is an evaporation of liquidity and a fast fall in the US Dollar, stocks, and US Treasuries; when people can't get their money out of their money market accounts or have taken a severe hair cut on them due to them breaking the buck -- loosing their constant one dollar value, there will be social unrest and martial law installed by President Obama, and the terms of the Security and Prosperity Agreement, the SPP, installed, resulting in a unified North American government operating under principles of global governance.

The Federal Reserve Chairman Ben Bernanke effected a bloodless financial coup d'état by swapping out US Treasuries for toxic mortage debt of all kinds including residential mortgage backed securities and commercial property mortgages. As part of the financial coup d'état, the Fed Chairman effectively created the banks and investment bankers, JP Morgan, Wells Fargo, PNC Financial Services, Bank of America, Citigroup, AIG Insurance, as sovereign entities.

The US lost its finanical sovereignty when the US Treasury bond market broke down on Wednesday 2-10-2010 http://tinyurl.com/yef6uel In other words, the sovereing debt of the US became worthless on Feberuary 10, 2010.

The Sovereignty of the United States passed to gold on February 19, 2010, when the US Dollar peaked at 81.34 and the gold ETF, GLD, rose to 109.47. The gold ETF is now trading higher at 110.81 and the US Dollar lower at 80.45.

Got gold? I suggest that one buy British Sovereign gold coins, gold at BullionVault.com and own the gold EFT, GLD, in a Trust Account and not a brokerage account.

Great article Tyler ... And timely too.

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