The Dow Jones Industrial Average dropped 391 points today after being down as much as 500 points during the day. I believe this can be seen as a negative vote of confidence on the Fed’s latest move to lower rates on long-term loans. Since the Fed’s announcement, the market has dropped 675 points in 2 days.
The Federal Reserve announced yesterday that, as a way of reducing yields further, they will be selling bonds at the short-end of their portfolio and buying bonds at the long end of their portfolio. In other words, they are “trading” $400 billion dollars of short term debt for long term debt, or taking the long term debt off the market in what has been called “Operation Twist.”
Perhaps “Helicopter” Ben should get his head out of the banks’ backsides and start focusing on a plan with Congressional leaders to create long term jobs.
That is a solution that would be a real twist.
