Operation Twist
The global economy is faltering and the world’s monetary system is looking exceedingly precarious, yet the price of gold has plunged in the last week. Soon after US Federal Reserve chairman, Ben Bernanke, announced Operation Twist, a policy intended to reduce borrowing costs, global markets plunged. The Fed's $400 billion plan, named "Operation Twist” is the latest in a series of steps aimed at reviving an economy that has very sluggish growth and high unemployment. In this new strategy, the Fed said it intends to sell shorter-term notes and then use those funds to purchase longer-dated Treasuries. It will also reinvest proceeds from maturing mortgage and agency bonds back into the mortgage market, in hopes that it will help an already battered housing sector.

Frankly, I think this latest strategy will fail miserably. You don’t have to be an award winning economist to understand that if people do not have a source of income, no matter how low the borrowing rates, they are not going to embark in making a new house purchase. And, this policy is going to do absolutely nothing to stimulate the economy and generate new jobs.

Source: The Delaire Report - Sept. 27, 2011