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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (103149)	10/20/2011 3:31:03 PM
From: RetiredNow	Read Replies (1) \| Respond to of 149317

I don't know if the yield curve would be much steeper, but it would most certainly be higher across all maturities. The interest rates at each maturity are lower than what a free market would price them at, precisely because the Fed has been buying them up as part of QE to drive those rates lower with their massive, artificial demand. Now with Operation Twist, they are selling shorter term Treasuries and using the proceeds of that along with the run off from existing holdings to buy up the longer term Treasuries. This has the impact of flattening the yield curve, which is intended to push banks into lending more since they will have to find yield elsewhere rather than siphoning off our wealth by borrowing at 0% and buying Treasuries at 2-3%. However, my point is a simple one. All of these maneuvers are designed to centrally manage the economy. The very premise of a centrally managed economy is that a small group of intelligent people can make better decisions than the wisdom of millions of independent actors in a freely floating market. Study after study after study has shown that freely floating markets are far superior at allocating capital where it is needed most, at removing the excesses of market dislocations, and at speedily arriving at an equilibrium price than any coordinated, centrally planned economy. Another way to look at this is when you have the Fed manipulating things, they create the mother of all unintended consequences and bubbles down the road. I'm not speculating. The 2008 implosion was the result of a housing bubble and purposefully lax enforcement by regulatory agencies that was caused by earlier Fed intervention to create the housing bubble to replace the Internet bubble. Bernanke is now in the process of creating another financial bubble, this time a sovereign debt bubble, that will blow up even more spectacularly. Predicting the outcomes has become exceedingly easy. The hard part is to predict WHEN the outcome will occur, but the outcome is certain. You mess with a free market and you can delay the inevitable, but the inevitable eventually catches up with you. I've seen it with my own eyes too often to believe this time is any different.