'Operation Twist': Should the Fed do more to jumpstart the economy?

The central bank extends a modest program designed to stimulate growth, causing many analysts to bemoan the lack of more robust action

Major equity indexes on Wall Street fell throughout Ben Bernanke's 45-minute speech on Wednesday, in which he announced the Federal Reserve's modest extension of efforts to stimulate growth.
(Image credit: John Moore/Getty Images)

This week, the Federal Reserve extended the lifespan of "Operation Twist," a program designed to encourage economic growth by lowering the cost of borrowing for consumers and businesses. Over the next six months, the central bank will buy $267 billion worth of long-term Treasury securities, using the proceeds from an equivalent sale of short-term securities already on its balance sheet. (Buying up such a huge volume of Treasury securities will lower interest rates not just for Treasuries, but for other assets and loans undergirded by Treasuries, too.) The latest move comes amid signs that the recovery from the Great Recession is stalling, but despite Operation Twist's impressive price tag, it is being viewed by many analysts as only a modest response to the country's dire unemployment situation. Should the Fed do more?

Yes. The economy needs a bigger boost: Extending Operation Twist "was only just barely more than doing nothing," says Mark Gongloff at The Huffington Post. The Fed must "take the more radical step of" printing new money to buy up Treasuries and mortgage-backed assets, a process known as quantitative easing. That would "pump more cash into the economy," and jumpstart our faltering system. By bankrolling Operation Twist with the sale of short-term securities, the Fed is "simply running in place."

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