Freakonomics: Operation Twist 101

Freakonomics:

Given the confusion about Operation Twist, here’s an explanation.

What is Operation Twist? Basically the Fed can’t reduce short-term interest rates any further—they’re already at zero. So they want to reduce long-term interest rates instead. They do this by buying long-term bonds. When you buy more of something, you raise the price. And when you raise the price of a bond, you lower the interest rate. So what the Fed is doing, is lowering long-term interest rates.

Read the whole story: Freakonomics

Comments

[taurus58]

04:05 PM on 09/25/2011

Twist?? why not call it what it is...QE3, more bank bailouts

[Carl Caroli]

07:47 AM on 09/24/2011

No. Inflation may be good for bankers and the fed, but it will devastate people on fixed incomes, people that are living on lower wages than they were just a few years ago, people that lost so much of their savings and investments and now can't retire but can't find work. Economists do not even attempt to relate to these people, which is why we can't get our country moving again. They need to get their heads out their charts and graphs and sterilized statistics and look what is happening to the real people that make up this country, not at the corporations, banks and well heeled like themselves.

[Joseph LeCompte]

04:53 AM on 09/24/2011

You stupid homeowner.if you bought or refi'd your house in the last .10 years you were stupid. Stupid for listening to your president your treasury secretary,your fed chairman your bank,your broker,your real estate agent,or anyone how have advice on tv financial shows. You will not be helped out because the experts need bailouts.you are a bum. And must pay for others mistakes

[Joseph LeCompte]

04:38 AM on 09/24/2011

You still can't refi if your house value went down below loan value.so it doesn't matter what the rates are.low rates with out credit expansion won't help. We need a refinance corp set up.just like in the depression.

[LunaPark]

03:51 AM on 09/24/2011

The twist already failed. It was priced into the market. The long term yield went up today.

http://globaleconomicanalysis.blogspot.com/2011/09/has-operation-twist-played-out-already.html

[Carolab]

04:07 AM on 09/24/2011

Fed Watch - Original Operation Twist Took Years To Work

The concept is based on the original operation “twist” from the 1960s.

For a graphic look at what happened then, Australian economist Bill Mitchell has a video of what happened to the yield curve over the four years when the program was in place.

The chief takeaway seems to be that if the Fed wants to flatten the yield curve, it can, but it will take time.

http://dailybail.com/home/fed-watch-original-operation-twist-took-years-to-work.html

[Carolab]

03:43 AM on 09/24/2011

This is clear and well-written.  And I think this latest move will help.

[hammhome]

03:25 AM on 09/24/2011

So I'm thinking that in the end....it's the American Taxpayer whose gonna be left twisting....probably in the wind........lovely visual.

[thep3333]

01:18 AM on 09/24/2011

Can someone make the Federal Reserve stop destroying America's economy and stealing it's wealth? Please make it stop. This "Operation Twist" will only prolong the inevitable deflationary spiral that we are all going to experience, and it's going to be bad. If you agree with this statement check out my blog:
http://ccapitalist.blogspot.com/2011/09/there-is-something-terribly-wrong-with.html

[Grace Note]

10:36 PM on 09/23/2011

I don't see how it could hurt anything.

[NOSOCIALNETS]

09:53 PM on 09/23/2011

Great, stocks in the tank and I now will get less from long term bonds. You cannot make this stuff up. I thought Greenspan was a disaster, this guy is worse.

[Squiggie]

08:36 PM on 09/23/2011

The FED...What an effing scam...
You can bet that whatever these robber-bankers do it will first and foremost ensure that the wealth of the planet continues it's upward flow to the ruling-class.
If, whatever they do happens to lessen the plight of the global under-class, that's purely coincidental...
The modern banking/financial system is by far the biggest scam ever foisted on the people of this planet...

[SellPuts]

07:27 PM on 09/23/2011

Operation Fail.

[offmyrocker]

07:26 PM on 09/23/2011

I can't get past the headline got me all confused.........twisted

[bealebkk]

07:06 PM on 09/23/2011

Ben Bernanke remarked sluggish economy?
...Duh! what's an economy?

[PROGRESSISGOOD]

06:54 PM on 09/23/2011

To Ben Bernacke,

Please, please, please do not do anything to improve this perfectly horrible economy we have. It took nearly 30 years to get things this bad. We don't want that ------ getting re-elected. If you do, don't go to Texas.

Sincerely,

John Boehner, Mitch McConnel and the Tea Party.