Breakdown of new $267 billion Operation Twist plan

[Roland99]

Source: MarketWatch

The Federal Reserve's $267 billion extension of its Operation Twist program will have 32% of purchases between six and eight years, 32% between eight and ten years, 4% between 10 and 20 years, 29% between 20 and 30 years and 3% in TIPS. The program of bond buys and bond sells of securities three years and under will run through the end of 2012.

Read more: http://www.marketwatch.com/story/breakdown-of-new-267-billion-operation-twist-plan-2012-06-20?link=MW_home_latest_news

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Well...mortgage rates should stay low for longer now but that's about it.


yay for more debt!

[drm604]

1. I don't think this causes more government debt.

The Fed buys bonds in the aftermarket. In other words, they're buying previously issued bonds, so this is not new government debt.

However, like you, I'm skeptical that this will achieve much. When there's no reason to hire people (no demand for goods and services) nobody's going to borrow in order to hire people, even if interest rates are lower.

[bossy22]

3. I think they know it won't do much

But they believe it will help a bit (and so do I).

[drm604]

4. It may be better than nothing.

And nothing is what we're getting from the current legislature.

[bossy22]

2. this isn't increasing the amount of debt

This is just the fed buying debt that is already out there on the market.

[happynewyear]

5. mortgage rates should stay low for longer now but that's about it

That is not "that's about it".

Lower rates = less money for savers which means less spending and more inflation inflation inflation which will be denied at all levels. How do you like that $5.00 loaf of bread soon to be a $10.00 loaf of bread?

Welcome to Japan!

Bernanke needs to find something else to do with his stupid self.

[banned from Kos]

6. nonsense - we are in a deflationary environment and have been since QE

began in 2008.

All consumer commodities have fallen since then.

Someone is ripping you off with $5 bread. I pay less than $1 and only $2/gal for whole milk. Oil and gas are over 40% down since 2008.

[bossy22]

8. Japan?

you do realize that Japan's "lost decade" was mainly due to deflationary pressures. Also, if you are just looking at comparitive food prices between the 2 nations you have to realize that japanese import 60% of their nations food so overall their costs are going to be higher.

The problem with the economy is that the demand for savings so outstrips the demand for investment so that normal central bank tools (such as interest rate changes) are no longer effective.

In fact we could use a little more inflation to get the real interest rate at equilibrium with the demand for savings.

remember, in an economy spending=income. if everyone saves at once, welcome to a depression

[truedelphi]

7. IN A NUTSHELL, WHAT OUR ECONOMY NEEDS THE MOST IS JOBS...

Unfortunately, everyone inside the Beltway has already determined that nothing like that will happen again.

Even the damn collection workers for Sallie Mae are in Bangladesh. If Americans cannot be ensured that they will at least get a job collecting for the student loan folks, how caa they be expected to pay said loans off?