End The Madness: Terminate Twist
By Ron Harrod:Yes, we know that Operation Twist expires at the end of June, and the Federal Open Market Committee meets in less than three weeks. But let's get serious. We have now reached the point where U.S. Treasury bond rates plummet to record lows nearly every day. In this environment, does it make any sense to actively manipulate these rates even lower?
Back on September 21, 2011, the Federal Reserve announced the Maturity Extension Program and Reinvestment Policy commonly called "Operation Twist." Through this action, the Federal Reserve seeks to reduce long-term interest rates by selling its short-term (3 years or less) U.S. Treasuries and buying long-term (6 to 30 year) U.S. Treasury bonds. While Operation Twist is considered "balance sheet neutral," it does elevate risk. In fact, it further compromises the already highly leveraged Federal Reserve holdings by increasing its exposure to loss when interest rates rise.
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