–The real twist on “Operation Twist”: A great deal of sound and fury signifying ignorance

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

People have asked me whether Ben Bernanke “really” understands Monetary Sovereignty, or whether he is playing ignorant because that currently is politic. Judge for yourself.

Time Magazine: Stocks Fall as the Fed Launches Operation Twist
Posted by Stephen Gandel Monday, October 3, 2011

On Monday, Ben Bernanke launched his latest effort to boost the economy. The stock market, for one, seems skeptical it will work.

The plan, which has been dubbed Operation Twist, is for the Fed to cash out of $400 billion worth of its short-term bonds and replace them with long-term debt. The first move came Monday morning when the Fed bought $2.5 billion worth of long-term U.S. Treasury bonds. The Fed has been buying U.S. Treasury bonds ever since the financial crisis in an effort to drive down interest rates and boost lending and hopefully the economy.

Note that line: “The Fed has been buying U.S. Treasury bonds ever since the financial crisis in an effort to drive down interest rates and boost lending . . . “

Is this classic debt-hawk ignorance, or what?. They want the federal government, which can afford anything, to borrow less. But they want the private sector, which is struggling to pay its bills, to borrow more.

Federal deficit spending creates money. Private sector deficit spending (aka borrowing) also creates money. But, federal deficit spending is far more stimulative than private deficit spending. (See: Is federal money better than other money? > In fact, there is a serious question as to whether private deficit spending is stimulative at all.

So, why would any sane person want the private sector to borrow more and the federal government to borrow less?

I award Mr. Bernanke one dunce cap for this effort. Why just one? Because he has been put in the impossible position of trying to grow the economy without having the tools to do so, while Congress, which does have the tools, is doing everything it can to shrink the economy.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings


6 thoughts on “–The real twist on “Operation Twist”: A great deal of sound and fury signifying ignorance

  1. Do you think this comes out of the grossly simplistic, and moronic, belief that government can do no good, and the private sector can do no wrong?


  2. Why award Mr. Bernanke a dunce cap?
    If he works for the Fed, a private bank, isn’t he achieving his goal of endebting as many citizens as possible?


  3. I would think you would like “operation twist” because, when the Fed buys the short term T-securities, those securities will not be available for purchase by others. Those who received redemptions of the recently expired short term T-securities (and still wanting short term investments) will need to do something else with their money. In essence, there should be more cash in the economy.


    1. Steve,

      All Operation Twist does is exchange shorter term bonds for longer term bonds. Meanwhile, there will continue to be plenty of short term bonds for sale. No “shortage” of short term.

      Rodger Malcolm Mitchell


  4. Do not be fooled,he may have a hidden agenda.
    Surely he is not the dumbest man in the room?
    Would a “twist” save his bosses tail?
    Would the holding of lshort and long term rates to very low rates
    help his large banks to survive just a little longer and hold off the massive collaspe of their gambling debts,commonly known as derivates (over $700 trillion)?
    Would it help them to “double down” and maybe make enought to “wind down” some of it.


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