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On The Usefulness Of Operation Twist, Straight From The Chairman's Mouth
We are surprised to find that there are still those who are naively on the fence about the functionality and efficacy of the upcoming, and if Wall Street is correct, imminent (less than two weeks now) Operation Twist. There is absolutely no reason for such confusion. After all none other than the Chairman himself, in collaboration with Vince Reinhart of Treasury put fame and Brian Sack, of Plunge Protection Team fame, described precisely what we can expect out of the second coming of Chubby Checker...
To wit (source):
"Operation Twist is widely viewed today as having been a failure, largely due to the classic work by Modigliani and Sutch (1966, 1967).12 Empirical estimates of the “habitat model” of interest-rate determination by these authors led them to conclude that Operation Twist narrowed the long-short spread by amounts that “are most unlikely to exceed some ten to twenty base points—a reduction that can be considered moderate at best (1966, p. 196).” However, Modigliani and Sutch also noted that Operation Twist was a relatively small operation, and, indeed, that over a slightly longer period the maturity of outstanding government debt rose significantly, rather than falling (supporting Tobin’s gloomy assessment noted in the footnote). Thus, Operation Twist does not seem to provide strong evidence in either direction as to the possible effects of changes in the composition of the central bank’s balance sheet."
h/t Tony Palotta
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I'll sum all of that gibberish up: Central Planning doesn't fucking work.
Now where is my PhD?
You get a PhD for the following: Central Planning doesn't fucking works.
They get scholarships, even!
plus guaranteed job for life .... as a central planner -)
not a bad idea in a bad economy ....
Indeed... Just believe the lies and you are set for life. That's a great solution for personal success. Not such a great solution for a successful civilization.
That's the problem with the "upper echelons" (lol) of society: it's a self-confirming ideology and narrative club. you scratch my ass and i'll scratch yours. but whatever you do NEVER QUESTION THE ILLUSION OF SELF-IMPORTANCE. that's why they call themselves "policy makers" and not useless bureaucrats.
They also call themselves "public servants" instead of "corrupt leeches", but what's in a name?
Yah, let's twist and shout....
Like we did last year...
Can I plan on that?
Slightly O/T, but I'd like to take this moment to trademark the phrase 'Fiatzi Scheme".
Carry on.
I think you should also Patent it as a business process.
How about a Fionzi scheme? Think leather jackets, shark jumping, and endless fiat.
Mine rhymes with Yahtzee, and everyone loves Yahtzee. Fiatzi!
Piled
High &
Deep
Must keep bond volume up and money flow velocity
From the very best schools!
In China, where Central Planning has been rather spectacular in the past two decades (though also rather environmentally brutal).
Getting rid of central planning was what unleashed the Chinese economy. The Chicoms were on the verge of collapse in the late 1980's. Now they have more of a mafia-type government. Let the private industries operate while keeping a boot on the neck of the population and collecting tribute.
For Pete's sake. You don't get a PhD for this, ya bozo. You get a Peace Prize.
Well ok.., as long as it's a big peace.
Only a matter of time before people starting lynching these red bastards from public flag poles. The bankers get all the money from their political friends, while the people suffer. Kill them all.
Conrad, while I appreciate your anger, killing tbem all is a little drastic perhaps. Some of these people are so stupid that even Texas would consider them too deranged for execution. These individuals should be spared to serve as manual labor in gold mines.
You would trust a bankster with gold?
Cavity searches every night.
Sure, as long as the people doing the searches have very large hands. We can use retired NFL offensive linemen. Get the long rubber gloves
I feel better about this now. These strong guys can open them up wide and get a real good look, unlike we could with their books. Now this is what I call transparency!!
Why so infrequently? ;-)
I don't see why the entire country's economy can't be micromanaged by one person. In fact, I think one person could easily control the world's economy. He would be smarter than the rest of the world and tell us what to spend our money on and so forth. I nominate 0bama
Back in the day, Cracker Jacks was giving away Pitiful Humility Discharge surprises free of charge. During that special ceremonial proceeding amongst your close friends. You would lick the dry paper and apply your unicorn tattoo to stage your official progressive graduation achievement. LOL
Lower expectations... check. Now watchem do it anyway. Whoa... The Chairman's mouth to Brian's Sack, there was a joke there somewhere, no?
They'll do / They're doing it because they're desperate.
The message: Results that are "moderate at best" and which carry significant downsides are better than what's in store otherwise.
Haha!
OT2 will be bigger, longer, and uncut.
Me so horny.
Are you a fed governor?
So... bigger will be better?
Operation Twist = a cook tinkering with the secret sauce
A fed masturbating on the markets?
The next QE will consist of direct transfers to the general public of treasury notes backed by a downloadable image of a $100 bill. The public will be able download and print this “JPEGed” currency from a Federal Reserves website ( www liquidity r us . org ). A fed spokesperson has explained the move as a cost cutting strategy. “ The rising cost of ink and paper is killing our bottom line.”
What has been the effect on 10s and 30s since Twist was "leaked"? Maybe it has already worked exactly as planned...
QE3 will consist of mailing each American a check for $50,000 USD, on the condition it not be used to purchase any PMs, and that it must be kept in a non-interest bearing account at BofA or Chase for a minimum period of 10 years.
Cool, by the time it matures it should buy you what a non copper penny can buy you now.
Perfect!
They already did that starting in 2008, but without the pesky middle(income)man
a few ideas to utilise the 50k:
1) use it as collateral to get a loan from BOA, and then default
2) become self-employed, and file your tax return without including a check, so that the IRS will have to garnish the 50k
3) give it to mother-in-law for birthday
4) give it to kid to illustrate the virtue of delayed gratification
5) donate it to charity and get a tax deduction
6) go on a vacation in a third world country, and flash the check to impress women
7) put up a "we buy your check for $50.00" billboard ad, buy a lot of them, then collect the money after 10 years. Chances of the dollar devalueing 1000 x are slim
8) If the dollar really becomes worthless in 10 years, sell the checks on e-bay like souvenir collectible zimbabwe dollars
9) wipe my ass with the check
6) go on a vacation in a third world country, and flash the check to impress womem"
Faber can't be wrong.. Passport to Pattaya. And Viagra. Never get caught long FRN's.
The ship's got a terrible list
It's time for a treasury twist
The Kleptocrat game
Is always the same
We get screwed without getting kissed!
You're a class act.
Clever - you have earned your avatar/alias
....wish they'd at least treat us to a dinner
You only get dinner when there is some modicum of respect.
dp.
"Operation Twist: because we can no longer afford to fill up the chopper with gas..."
Savers buy stocks, bonds and real estatefor yield. The higher the price gets pushed for either, the lower the yield gets.
What are people who are buying stocks, bonds or real estate now, going to buy with the money they make off of stocks, bonds or real estate ? Buy stocks again and push prices even higher (and yields lower) ? Buy real estate and push real estate prices even higher ? (and the rent as a percentage of price lower) Lend the money out to even riskier people ?
Gold is the only tangible asset that can still do its job, no matter how high the price gets. Stocks, bonds, farmland, commodities, deposits, or anything cant. Because gold doesn't increase in value by volume like every other investment, it increases value by weight.
One of my old bosses kept saying something to me about trying to hand him sacks of shit that only got progressively larger, but no better.
Same thing?
Gold is seeing a bubble right now though. Way overpriced and it will pop at any time. Buy gold now and you'll lose some value in the next 5 years.
You're being sarcastic, yes? Please tell me you are.
Keep buyin them 10 year treasuries......
As soon as interest rates start to rise, I will be right there with you. Until then ...
Why quote two economists to refute other economists?
"That's like..." [feel free to provide an appropriate analogy]
.... sucking on your mom's dentures
A humidifier and dehumidifier in a room fighting it out.
Eating pasta and antepasta in the same meal (instant annihilation)
What's the usefulness of the 50 year bond?
Get a few when you're born and sell when you turn 50 after another epic 30 year bond bull?
On The Usefulness Of Operation Twist, Straight From The Chairman's Mouth
There sure are a lot of "head" lines here at the hedge today.
rather then waste all that money contorting the yield curve via operation twist, why not something like operation bendover and just peg the SPY at 1400 until moral improves ?
It's Morale, scatterbrains, Morale.
As in the attitudes, outlooks, hopes and changes, wishful thinking and all that shit. You know, esprit de corps.
If you wait for morals to improve, you're gonna be standing alone in a one man line for a long time.
Somewhat OT, but what the hell...
As I was on my commute today, I was pondering the inflation V. deflation debate, and being able to see some of the validity of each, though still firmly in the eventual hyperinflation camp, I was considering holding some of my net worth in cash as well as PMs.
I just can't, for any reason, bring myself to hold paper dollars longer than one pay period right now- any excess liquidity goes to silver for the time being. But then it occured to me that coinage of all kinds is minted by the Treasury, and not the FED. While it's somewhat bulky and can annoy the hell out of cashiers, what do you all think of holding rolls of dollar coins as a deflationary hedge? I'm thinking 10-20% of new holdings, and if confiscation time ever comes for the PMs, I can play stupid and claim that the dollar coins are my "silver dollars" (Oh yes, there are people that dumb- I've met plenty.) A little impromptu acting might get me out of a jam if I were to proudly present a bunch of rolls of presidental coins as a PM stash and look dopey when doing it.
It's not too small a denomination to be useful for little purchases, like gas and groceries, and in the event of hyperinflation, there's a tiny chance it might decouple a bit from paper bills, since they cost the gov't about $.30 to mint. Local stores won't even notice, as I've been buying rolls of halves for a while, checking them for 40% Kennedys, and then spending them for coffee and the like.
Any thoughts?
Notably, nickels are the only modern coinage worth >= face value. Everything else is junk metal.
one nickel = $0.0592748 @ timestamp of this post.
Pre-1983 pennies are 2.6X face if you can find them.
Obviously, pre-1965 dimes + quarters + halves are where it's at, but these are hard to find free range. What's your hit rate on Kennedys?
Low hit rate on Kennedys.
I found two or three in the first couple of rolls, and nothing since. Recently, they started showing up with a little red sharpie mark on them, so my guess is that someone else in town has been doing the same, and marking them to make sorting faster. It's fun to put them in the spreadsheet, though- they show up as 1000%+ profit right off the bat, since the purchase price was only $.50.
The hit rate for pre-82 pennies in my area is about 50%. I was sorting them, but it got to be too tedious, and I just don't have the time. I have a couple of quart jars full just for the hell of it, but I'm tossing the rest back now.
And oddly enough, I own a pop machine. Even though it just sits in my backyard, it's set to accept change, so I use it as a sorter. Couple extra bucks from the neighborhood kids when they come over, and it's an easy way to sort and collect the nickels. They're a pain to deal with anyhow, so I just toss them in a jug.
I've got lots of pre-64 silver, but it wasn't found in the wild- I bought it from coin shops. Until May, it was always right at spot. Now there's a little premium, but not too bad. Also bought a lot off ebay, with a little patience and snooping, a guy can usually snag 10 or 20 halves or silver dollars at below spot.
Now, back to the original question. I'm aware that only pre-82 pennies and nickels are worth more than face value at the refiner, but that's not really the question at hand. What I am considering is that coinage is debt-free money, unlike FRNs which carry a 6% interest rate.
In my view, that makes coinage of any kind inherantly more valuable than paper. The real question is, does anyone else know or care? If FRNs become worthless, is there any historical example of a nation's coinage surviving as transactional currency even as the paper devalues? If not, why not a new meme to educate the general population about the Federal Reserve by holding and transacting in dollar and half-dollar coins?
Of course, the real motive here is to increase exposure to USD short-term, without supporting the Fed.
Pay off the national debt with 'em. Hope we don't get bombed.
It is heresy to say this on ZH, but I think in addition to PMs have FRNs as well. Not everyone will have PMs and there will be at least a "martial law" enforcement of the vaildity of FRNS when TSHTF.
Agreed, in practical terms. But why not treasury coinage rather than reserve notes? Aside from the bulk, of course- but there's silver and gold for larger denominations. I am, of course, not advocating using dollar coins to buy a house or a car- but there's nothing stopping anyone from using them for a tank of gas or a sandwich.
Though I'm not entirely sure that FRNs with be martially enforced. If things get to that point, I would expect ration cards to be the order of the day.
Well, it's not much of a thought but how about telling the fuckheads that come to take your personal property to fuck off? Perhaps pop a couple rounds of .223 into their asses? What the fuck? You think the gov't is your fucking dad? They are nothing but pissants who have annointed themselves keepers of your wealth. Fight like they are stealing your life, because they are!
After reading the first 40 or so pages of that paper, I am indeed inclined to believe The Bernank is going to go forward with the twist, because it is the ONLY other trick he understands, describes, and evaluates. Interesting to see how quick he is to point out why it didn't work without considering externalities. Classic failure of models. We are screwed.
If Op Twist was deemed not meeting it's objective in 60s (which there is credible argument that it did do it's job ..... but there was more than just Operation Twist back then which led to a mid-60s boom ....and Tobin's critique was debunked I recall) ) ..... then why is it being supposedly resurrected? This makes no sense ...... unless it is an attempt to masquerade something else ...
aha ..... volatility dulls the mind ....at least mine
Chairman Ben heard the GOP debate and the withering contempt some of the candidates expressed.
Since his tenure and reputation are at risk, ...
.... plus the appointments, staff and New York Wall Street crony capitalist controlling interest are threatened by such 'violent' and unseemly talk (if I recall the immediate blog response by NYTimes jornolister reporter when Perry was heard to tell a private group that Ben would not be welcome in capital punishment HQ (applause here to Brian Williams surprise) Texas) ......
...... then 'real' steps may just have to be taken to teach those stupid redneck rightwinger bastards, especially Texan Cong R Paul, a thing or two.
Keep It Simple Stupid .. the VP Biden or the AFL=CIO/Teamsters Trumka/Hoffa-way
Nobody seem to consider the unintended consequences of the FED increasing its duratiion risk.If interests rates rise quickly,the Fed will be facing huge losses on their balance sheets.When this happens the Treasury will be forced to bail them out.But when it comes to that point the Congress will be so anti Fed that the Fed will completely lose its independence.Another unintended consequence is the fear factor that the Fed will reinforce.By sending a message to the market that they will maintain low rates into the far future .people will assume that the Fed knows that the economy will have very little economic growth into the future.Therefore they will cut back on all discretionary purchases and hunker down.Low rates far into the future could easily be a self fulfilling prophecy of very low economic growth.Another unintended consequence will be the assumed rate of return by staet and local pension funds.ith the bondportion returning lowe and lower amounts into the future,assumed rate of returns will have to come down significantly.This will onlYaccelerate the insolvency of staets and municaplities.Ironically lower rates will also put a stake through the heart of the banking system.The Fed has destroyed one group in the economy,the savers.Are the consumers next?It is absolutely amazing that people think the Fed is going to pull a rabbit out of its hat ,when the Fed much more often than not is a major cause of our problems
I can't wait for the day that the Bernanke is led away in cuffs. What a sick twisted jerk. No one with an ounce of sense would conclude that more of the same stimulus(QE) will do anything other than create inflation and eventually hyperinflation. And that is the goal if no one has figured this out.
Group think and Princeton pats on the back all around. Assholes.
+1
Sure but......................'This time it's different!'
"operation twist" sounds like a term coined to appeal to the our country's younger generation of plebian patsy pawns.
.
they have to appear to be doing something....even if it's only playing with themselves
Onion style (makes more sense actually):
We iz surprised to chek dat dere iz still those who iz naively on da fence about da functionality an' efficacy hof da upcomin, an' if wall street iz correct, imminent (less dan two weeks now) operashun twist. dere iz fe real narr reason fe such confusion. afta all none uva dan da chairman himself, in collaborashun wiv vince reinhart hof treasury put fame an' brian sak, hof plunge protecshun massiv fame, described precisely wot we can expect hout hof da second comin hof chubby checka... to wit (source): "operashun twist iz widely viewed today as havin bin da failure, largely due to da classic wurk by modigliani an' sutch (1966, 1967).12 empirical estimates hof da “habitat model” hof interest-rate determinashun by dees authors led dem to conclude dat operashun twist narrowed da long-short spread by amounts dat “are most unlikely to exceed some tun to twenty base points—a reducshun dat can be considered moderate hat fittest (1966, p. 196).” howeva, modigliani an' sutch also noted dat operashun twist wuz da relatively small operashun, an', hindeed, dat ova da slightly longa blob da maturity hof outstandin government debt rose significantly, ratha dan fallin (supportin tobin’s gloomy assessment noted in da footnote). thus, operashun twist does not seem to provide strong evidence in eitha direcshun as to da possible effects hof changes in da composishun hof da central bank’s balance sheet."
Fuck Twist Let's Burn.
Methinks the Marriner Eccles Epsons are being oiled, lubricated and fresh ink catridges installed for what is coming next week.
Ned if you see this, I'd like to hear from you. You say deflation with a lot of confidence. Here you say they will print. Do you think they are going to try to print into the deflation and fail? Or?
"...described precisely what we can expect out of the second coming of Chubby Checker..."
"Let's fail again, like we did last Summer.
Let's flop again, like we did this Year.
Do you remember when, we fucked-up in 2008?
Do you remember when, Keynes or Krugman were ever Right?!!"
(Words revised by Reality Hurts)
The free market is the ultimate arbitor and regulator ...all Govt, Fed and Regulatory intervention in history is a shitcake of expensive failure (Benny proves this truth once again)
It is just a matter of time, for how long this Ponzi Casino can continue ??
Off topic, but man, listening to ACDC while reading zerohedge seems to go togetehr so well.
http://www.youtube.com/watch?v=Rw7w2b_FTC8&feature=related