I do not like Operation Twist. The Fed Res says they are selling short term instruments and purchasing long term instruments. I read somewhere that the Fed Res or the primary dealers (the Fed Res) are buying 60% of the 20+ year paper. Now why would they be doing that ?
1) Europe made a big mistake. The countries sold short term paper and spent the money on operating expenses for the most part – transfer payments of one kind or another. The US is doing better i suppose. The Fed Res is selling the Fed Gov long term low interest rate money. We spend the money on transfer payments of one kind or another but we do not have to roll the long term paper over for many years. We just pay the low interest and spend the money now. Europe ended up have to roll short term paper over into a hostile market environment.
2) It enables the Fed Gov to just keep the spending spree going non-stop until after the election or possibly longer.
3) The Fed Res lies. This was proven by the Bloomberg Freedom Of Information Act suit. We really have no idea what they are doing. We only know what they say.
I do not like it because it is creating a time bomb for the future. Someday we are going to have to pay back the principle or defalt. As the amount of the principle will be in the trillions we will simply not be able to pay it back. Or, the world will simply not want any more dollars. Either way – very bad things will happen then. The good news is we do have time to prepare. The government is preparing and so should you.