What is Twist Operation?
Operation Twist is an economic plan implemented by the United States in September 2011. It was inspired by a similar event that the country used with some success in the 1960s. The basic objective of the Twist operation is to promote economic growth and investment by reducing long -term interest rates. The government attempts to meet this goal by selling a large amount of short -term debt and reinvesting this money into long -term debts or investment instruments. Using this strategy, the United States Government believes that it is possible to stimulate investments in business and industry, while maintaining long -term investments such as homes, the finest as possible for the average American.
The United States first implemented the Twist operation in 1961. This event was named for the dance madness known as Twist, which was extremely popular over this period. Long -term analysis shows that this original operation was relatively successful in evoking economic growth and confidents. In September 2011 VLThe United States announced that they would repeat the operation in an effort to support economic investment and launch a slow economy.
The assumption for the Twist operation is relatively simple. Within this plan, the government sells its short -term investment tools and purchases long -term investments such as bonds. In a balanced economy, this event would flood the market with short -term investment opportunities, which would result in a reduction in short -term interest rates. With interest rates close to zero at the end of 2011 in the United States, this operation should have a small or no effect on short -term rates.
By purchasing a large number of long -term investment instruments, the government hopes to reduce long -term interest rates. As a result, mortgages, bonds and other long -term investment vehicles are more affordable and attractive for potential investors that can encourage them to invest. This strategy is to proposeENA to help the average citizen better afford to buy a house by inserting confidence and keeping low mortgages. The purpose is also to encourage investments of enterprises, which is an important part of long -term economic growth.
Operation Twist allows the government to encourage investments without making official interest rate changes. It also eliminates the need to print more money, resulting in inflation. This strategy simply includes the exchange of short -term debt for long -term debt, which means that the total level of debt that the government is taking is the same. This means that there is a small added risk and the cost of repaying debt remains practically the same.