Operation Twisted Logic
by Detlev Schlichter on September 26, 2011
[Detlev Schlichter will be presenting a Mises Academy webinar this Friday, September 30.]
Last week the US Federal Reserve delivered no real surprises. Its new policy was expected by the market and those members of the public who still follow the central bank's every move with interest and, I can only assume, in the misguided belief that it has the answer to our problems. As part of "Operation Twist" the Fed will purchase $400 billion of long-dated government bonds and sell an equivalent number of short-dated securities from its extensive portfolio over the coming nine months. The operation is aimed at lowering long-term market rates and flattening the yield curve. In their infinite wisdom, the bureaucrats on the central bank's policy-setting committee decided that here was another set of market prices that required their astute adjustment, or at least gentle guidance.
