Operation Twist

Come on baby, let’s do the twist!!… at the Fed.

I’ve nearly stopped listening to the Fed because Ben Bernanke’s beard creeps me out.  It’s bigger than his face, and he is so unanimated when he speaks you find yourself focusing in on the beard, it’s many hues of brown, black grey and white… Eww… it’s just gross.  It reminds me of the Family Guy episode where a bird nests in Peter’s beard and he has to leave it there because it’s endangered.  I feel like if I pay close attention, I will see something come out the beard (other than QE shenanigans and boring nonsense… blah blah blah… OMG there’s a baby kangroo!) Only lumberjacks or Canadians should have beards like that.  AND, it never goes away, it’s not a seasonal beard.  I’m pretty sure he was born with that beard.

Let me break down the Fed announcement process in pictures:

Ominous Fed

Ominous beard

Redbeard (Arrgh me hopes no one missed the official talk like a pirate day on Sept 19!)

Operation Twist

So the latest in monetary policy is the Operation Twist. The Fed has proposed selling short term bonds and using the proceeds to purchase long term bonds (7 to 12 years).  This will bend the yield curve and serve to reduce long term interest rates.  This is different than the quantitative easing over the past 3 years that has focused mostly on keeping short term interest rates low.  No one expects it to have a significant impact, it could make it easier to borrow for longer terms.  I doubt I will even notice if it eventually takes place.  The only “stimulus” that has directly impacted me was Obama’s payroll tax holiday, the 2% off the 6.2% we pay to Social Security (your employer pays 6.2% on your behalf as well).  That will expire at the end of the year.  I didn’t really consider it a “stimulus” as it was basically letting me keep $$ that “theoretically” should come back to me in retirement.   But I live hard and fast so I don’t plan on collecting much social security anyways.  Not to mention in my annual statement from the Social Security Administration they remind me that I should only expect to collect 66% of what I put in.  As such, I’m planning to live 44% less.

Maybe I’m getting old, or didn’t pay attention until recently, but I feel like “back in the day” when the Fed made an announcement some people listened and cared.  Now, it’s almost like the Fed is another political party, and when there is an announcement we just get slathered with another layer of pandering and more beards.  When Ben Bernanke did a press conference back in April (the first in the Fed’s history) it was hyped like a super bowl.  I didn’t see any cheer leaders for the beard.   The best thing the Fed has done recently was when they warned Congress about their approach to the national debt and insinuated (the Fed never actually says anything) that they are responsible for much of the uncertainty that could be holding the economy down. I agree with Beardnanke on that front.   In the future when we look back on the financial crisis and the “great recession” I don’t think anyone will say “we didn’t have enough monetary policy support, that would have been the difference maker!”.  In fact, the Fed is running out of ways to fulfilling its full-employment mandate without violating the other half of its mandate: price stability.

QE1, QE2, now the twist.  Ben, if you really want to make a difference in the economy get rid of your beard!  Investors will not know what to do but the optimism created from not having to look at it on CNBC may spill over into other parts of the economy and people will be more willing to open up their wallets!