What is #operationtwist?

The Federal Reserve changed the game with #operationtwist in hopes to jump-start our struggling economy. It’s the same good ol’ economy that can’t decide if it is going to “double dip” some American rocky road, or just scoop up some plain Jane vanilla. #ToughTalkingTroy thought you might want to know a little about how the game is going to be played… at least for the next several weeks.

This #operationtwist strategy is something like watching a TV remake of a show that wasn’t that popular the first time around. “You mean it’s been tried before?” SHOCK… yep! And, it didn’t work too well that time either (2004). With Operation Twist the Federal Reserve sells off its short-term bonds and buys up longer-termed ones. Tough-talking Troy does not think this is what most of us know as the “buy low, sell high” strategy. Actually, the effect is designed to compress or collapse the long-range yield curve.

Unemployement Rates in Charleston and SC

So, why in the world (or at least why in the United States) would the Fed try something like this? We are desperate folks and desperate times call for desperate measures. For four straight months Charleston County has had an uptick in the unemployment rate, which is consistent with the state as well as the nation. There are just too many people looking for jobs and too few new jobs being created. There are only two ways that Tough-talking Troy can think of to lower unemployment: (1) more jobs, or (2) less people. It would be a good idea on this one to take Door #1; the other option is too scary to consider. How do you think the government might go about imploring that strategy? Danger. Danger.

Just to put things in perspective, while attending a financial conference last week, a noted economist used this example. To return unemployment to the traditionally comfortable 5-6% range would take, on average, a whopping 300,000 new jobs to be created monthly for the next 18 months, or a modest 100,000 new jobs on average for the next 7 years. Yep, that is seven very long years. Want to guess how many new jobs the country has netted in the past 3 months. Nada. Nil. Zip. Zilch. That means unemployment is not even on the path to recovery.

Now Tough-talking Troy is not intending to be uber negative, and it’s not in his nature to criticize without offering a solution … so, here is Tough-talking Troy’s Operation Twist. Try putting people to work instead of making it easy to collect unemployment for not working at a job that the person most likely hated anyway. Why couldn’t the individual, who obviously doesn’t have a career at the moment, and if one had been reading all along would understand the data speaks for itself, be required to perform some service on a part-time basis at least? And, don’t even try to comment with some tough speech that it takes 40-hours a week to find a new job. Bogus. Naïve.

What about this idea? The next time the government wants to employ Quantitative Easing, how about they control gasoline prices so all the stimulus money can get into the economy and not into the pockets of the oil companies? Here’s another SHOCKER for you … the government can control these prices, if it wanted to open up its own oil reserves. By adding more supply into the market, prices would be held at bay. This may not be the longest-termed strategy in the card game, but let’s face it; there is a chance it could work. Unless of course, you want to bet on another round of Quantitative Easing, or better yet, how about #operationtwist?

There you have it. These views and opinions are those of Tough-talking Troy. Rally your comments, he can take it.