With the decision of “Operation Twist” by US Federal Reserve to rotate 400 billion dollars
from short maturity T-bills to longer maturities and no new printing, the economic recovery
can no longer be sustained. The Keynesian policymakers are out of bullets as we descend
into post credit bubble economic depression. Operation twist was not what the market
anticipated, the market anticipated QE3. Without further printing or stimulus we anticipate very
rough waters ahead for the economy and the markets. The economic indicators point that a
second recessionhas already started.
I expect that even gold could be vulnerable to a further correction, although, compared to other
indexes it should be mild.
To support a stronger economic recovery and to help ensure that inflation, over
time, is at levels consistent with the dual mandate, the Committee decided today to extend the
average maturity of its holdings of securities. The Committee intends to purchase, by the end of
June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years
and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.
This program should put downward pressure on longer-term interest rates and help make
broader financial conditions more accommodative. The Committee will regularly review the size
and composition of its securities holdings and is prepared to adjust those holdings as