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"Q & A About the Fed's 'Operation Twist'."

What is "Operation Twist"?

  • We borrowed $400 billion from the Fed

    Votes: 3 75.0%

  • A push/pull deal, balanced, no liability, no added debt.

    Votes: 2 50.0%

  • Is this a collaterol loan?

    Votes: 1 25.0%

  • Is this a loan?

    Votes: 1 25.0%
  • Total voters
    4
  • Poll closed .
DaveFagan

DaveFagan

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http://hosted.ap.org/dynamic/storie...ERVE_QA?SITE=FLTAM&SECTION=BUSINESS&TEMPLATE=

"The plan is to sell $400 billion in Treasurys coming due in the next few years and use the cash to buy Treasurys due between six to 30 years from now."

Do you know this is another $400 billion dollar loan for the Private Corporation, the Federal Reserve Corporation, to the taxpayers of the USA and since bankers are bankers, we must be providing some collaterol? If someone can explain this in detail please do so. Thank you. Also, what makes the Fed presume that anyone will want to buy the $400 billion in short term Treasuries?
 
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36 lookers and only 4 voters. Is this complicated? I'm serious. Is it deceptive? Let's talk!
 
DaveFagan said:
News From AP | TBO.com

"The plan is to sell $400 billion in Treasurys coming due in the next few years and use the cash to buy Treasurys due between six to 30 years from now."

Do you know this is another $400 billion dollar loan for the Private Corporation, the Federal Reserve Corporation, to the taxpayers of the USA and since bankers are bankers, we must be providing some collaterol? If someone can explain this in detail please do so. Thank you. Also, what makes the Fed presume that anyone will want to buy the $400 billion in short term Treasuries?
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I don't think I understand the question... You've explained what operation twist is... and then asked what Operation twist is. The Fed is extending it's existing debt on its balance sheet out the yield curve to entice long-term borrowing by keeping rates low. This will also keep mortgage rates low. Though the money is already practically free.... I have no idea why they think this will help. It didn't work the first two times. Why try it a third time? Definition of insanity...
 
fredmertz said:
I don't think I understand the question... You've explained what operation twist is... and then asked what Operation twist is. The Fed is extending it's existing debt on its balance sheet out the yield curve to entice long-term borrowing by keeping rates low. This will also keep mortgage rates low. Though the money is already practically free.... I have no idea why they think this will help. It didn't work the first two times. Why try it a third time? Definition of insanity...
Click to expand...

"Operation Twist" is phrased in such a way that most citizens would not think it is another loan, and it is. I was attempting to translate "Fedspeak" into the common, reality-based language that we live by. The range of questions to discover who knew it was a loan, and who fell victim to deceptive media practices. This board is a savvy crowd and it is interesting to note that, I think, many found this post and its options confusing.
 
I'm no expert, but here's my take: Fed using its money to artificially affect interest rates in order to try to help the housing market. I'm not smart enough to understand why it thinks a fraction of a point will make someone go buy a home - home mortgages are almost free now. The Fed will raise some money by selling some of what it already owns to buy another investment - intentionally increasing the demand of that investment, lowering the return on said investment (the more people who buy, the less return has to be paid - yes they're all loans). Home mortgages and some other products are tied to these, so the interest rates should go down even further if it all works out. But, I think they take a hit on the front end sale and they'll take another on the purchase side (lower returns, remember). So, basically, they're hoping the investment will work produce a return in the economy.

I'm not sure why it's all that newsworthy except, I guess, because the Fed doesn't already have the money to do the buy down? It's somewhat of a push/pull except they could just keep the money from the maturing debts instead of reinvesting again. I think the Fed needs to stay out of the market for awhile.
 
GreenvilleGrows said:
I'm no expert, but here's my take: Fed using its money to artificially affect interest rates in order to try to help the housing market. I'm not smart enough to understand why it thinks a fraction of a point will make someone go buy a home - home mortgages are almost free now. The Fed will raise some money by selling some of what it already owns to buy another investment - intentionally increasing the demand of that investment, lowering the return on said investment (the more people who buy, the less return has to be paid - yes they're all loans). Home mortgages and some other products are tied to these, so the interest rates should go down even further if it all works out. But, I think they take a hit on the front end sale and they'll take another on the purchase side (lower returns, remember). So, basically, they're hoping the investment will work produce a return in the economy.

I'm not sure why it's all that newsworthy except, I guess, because the Fed doesn't already have the money to do the buy down? It's somewhat of a push/pull except they could just keep the money from the maturing debts instead of reinvesting again. I think the Fed needs to stay out of the market for awhile.
Click to expand...

I am under the impression that when the Fed buys US Treasuries, in this case $400 billion, it means they print $400 billion in Federal Reserve Notes, and that would be new paper, $400 billion worth and we will end up selling something to someone overseas for that money, eventually. Now tell me who, specifically, is buying the $400 billion in short term notes that they want to sell.
 
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