‘Operation Twist: What is it, and why will it fail?’

22nd September 2011

It's true that something needs to be done and inflation restricts the options open to the Fed but the strategy has a poor track record in terms of effectiveness. We will be in a lower growth environment for longer and should prepare accordingly.

The Economy Struggles: Something Needs to be Done

The US remains driven by consumer spending (~70% of GDP), but weak consumer confidence and limited access to financing are severe headwinds. Unemployment is stuck at 9% and even more worrying are the ‘under-employment' figures which include those that have been forced to cut their working week rise as far as 18.5% of the population. In addition to discouraging spending, the longer this continues, the more skills are being eroded. Therefore the US government is under an immense pressure to act.

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More from Mindful Money:

Just as the US Federal Reserve and the Bank of England disagree over monetary policy fiscal policy has problems too

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