1 vote

Twist and Shout Should Be the Fed’s Next Maneuver

Retro active Government. Repeating bad mistakes, to the Sound of Music.

Bloomberg News: Markets today are expecting the Federal Reserve to announce Operation Twist, a financial maneuver aimed at rescuing the U.S. recovery.
Like the Chubby Checker song, the twist will involve some gyrations. The idea is to flip the maturities of the Fed’s $1.65 trillion bond portfolio by selling short-term Treasuries and buying longer-term ones. ...

Unfortunately, the twist probably won’t have much effect. The last time the Fed tried something similar -- in 1961, when “The Twist” was actually atop the hit parade -- it managed to lower long-term rates by a mere 0.15 percentage point, economists estimate. In a 2004 paper, Fed Chairman Ben S. Bernanke himself pooh-poohed the move. Now, with unemployment high, many households still deep in debt and with mortgages tough to get, such a small step is unlikely to generate much spending. ...

Muted Effect
Words, however, seem to be the only way to quell the criticism leveled from the campaign trail -- criticism that has confused the public and muted the effect of the Fed’s easing efforts. ...
http://www.bloomberg.com/news/2011-09-21/the-twist-and-shout...