Today, the Fed announced they are entering into another round of Operation Twist in an attempt to spur economic growth.
“The Federal Reserve said it was extending its “Operation Twist” through the end of year. It will add $267 billion more to the program in which the Fed sells some of its medium-term bonds in order to buy longer-term ones. In theory, that pushes down the interest rate on longer-term loans, especially mortgages.”
I’ve said it before and I’ll say it again – The Fed has already exhausted all its big weapons to ‘fix’ this economy and now they are down to BB guns which won’t have any measureable effect on the economy. Don’t get me wrong; I can’t blame the Fed for doing this today because they have to do something and this is all the ammunition they have left to shoot off. With short and long term interest rates at extremely low levels and very minimal inflation, there isn’t much more the Fed can do with their limited tool box.
But there is something the country can do to get the economy humming but sadly it won’t be possible until January 2013 and I’ll take this opportunity to redirect you to a blog post I wrote last September (the last time the Fed did the Twist) where I explained why we have to wait that long to see any real economic recovery. Go read the whole post but here are my last 2 paragraphs (and take it easy on me, I wrote that post with only 1 month of blog experience so the grammar sucks).
“So my contention is that all the added regulations, which were implemented by the Obama administration, is stifling the economy. The tools in the standard tool boxes have not worked because the increased regulation has dropped expectations so low that we can’t get out of our own way. It’s like we are in a car pressing on the accelerator but we don’t move because the parking brake is on and our other foot is pressing the brake pedal to the floor. It’s time to let the economy and the Free Market work but we have to release the brake. If we continue to stifle corporate growth through over regulation, the traditional tools will have no effect on the Market and we are seeing that play out right now.”
“My recommendation is to put down the tool I like to call ‘over regulation’ and pick up the tool I call ‘free market’ and watch the economy take off. We also need a President who will foster a culture of optimism but instead we have a community organizer who: is intent on confrontation, is unwilling to admit his failures and refuses to compromise. Unfortunately, we’ll have to wait until 2013 when we remove President Obama and have a Conservative majority in the Senate because the Democrats have shown that they are hell bent on punishing corporations with higher taxes and increased regulation.”