Basically Operation-Twist all over again

Operation Twist has been run twice by the U.S. Federal Reserve in modern history.

1. 1961–1965 (the original)

• What it was: The Fed sold shorter-term Treasuries and bought intermediate-to-longer ones (initially up to about 10 years). The Treasury simultaneously shifted its own issuance toward the short end. Goal: lower long-term rates to stimulate domestic investment while keeping short rates from falling too much (to defend the dollar under the Bretton Woods gold standard).
• Scale: Relatively modest by today’s standards.
• Outcomes:
  • Contemporary studies (e.g., Modigliani-Sutch 1966) judged it largely ineffective.
  • Later high-frequency event-study work (Swanson, San Francisco Fed 2011) found it lowered longer-term Treasury yields by roughly 15 basis points cumulatively — statistically significant but moderate.
  • The yield curve did flatten modestly. Effects spilled over only weakly into private credit markets (mortgages, corporates).
  • Overall economic impact was limited; other factors drove the recovery.

2. 2011–2012 (Maturity Extension Program)

• What it was: Explicitly labeled “Operation Twist.” Fed sold ~$667 billion of short-term Treasuries (under 3 years) and bought an equal amount of longer-term ones (6–30 years). First $400 billion announced September 2011, then extended. Explicitly designed not to expand the Fed’s balance sheet or the monetary base.
• Outcomes:
  • Stronger announcement effects: long-term yields (10-year and 30-year) dropped tens of basis points on the initial announcement.
  • Helped push the 10-year yield to multi-decade lows in 2012.
  • Supported some recovery in housing and risk assets via lower term premia and cheaper long-term borrowing.
  • Effects on growth and employment were modest and hard to separate from concurrent QE and fiscal measures.
  • The compression of long yields was partly temporary; ongoing Treasury issuance and other forces worked against it over time.

Key takeaways that apply to today’s situation

• Both versions produced modest, temporary downward pressure on long-term yields mainly through portfolio-rebalancing and signaling channels.
• Neither expanded the money supply or reserves (unlike QE).
• The biggest durable risk both times was the same one you have been discussing: shifting more of the debt stock to the short end increases rollover frequency and makes interest expense more sensitive to future short-rate moves.
• Effects were clearer on Treasury yields themselves than on the broader private credit markets that actually drive investment and housing.

The current Treasury-led version (buying longer coupons while leaning harder on bill issuance) is the closest modern analogue, just with the roles reversed: Treasury is doing the twisting instead of the Fed. Historical precedent suggests it can deliver a short-term relief on long yields and risk assets, but the relief tends to fade unless the underlying supply of long duration is reduced for a sustained period — and it front-loads the interest-rate and refinancing risks we have already covered.

It is not QE. No new reserves are created, the Fed’s balance sheet does not expand, and the monetary base stays the same. It is pure maturity transformation: the Treasury is removing longer-duration paper from the market and replacing it with near-cash instruments.But because a much larger share of the debt now rolls over every few weeks or months, the interest-rate risk and refinancing pressure arrive sooner. In a world of large ongoing deficits:

• Interest expense is realized more frequently.
• That expense itself must be borrowed.
• Any rise in short rates (or even a soft patch in bill demand) immediately widens the deficit further.
• The volume of short-term paper that must be continuously placed grows.

This shortens the time between a confidence shock, a rate spike, or simply sustained high deficits and the point at which private markets may struggle to absorb the supply at tolerable yields. At that moment the pressure on the Fed to step in—whether through outright purchases, aggressive use of facilities, or other forms of accommodation—rises sharply. That is the channel through which today’s non-QE maturity shift can accelerate the path toward eventual QE-style monetization.It does not make QE mathematically certain tomorrow, but it compresses the timeline and raises the odds that fiscal dominance forces the central bank’s hand sooner than a longer-maturity debt profile would have.

The petrodollar empire is unraveling.

Just as the British Pound lost global dominance to the USD when the British lost control of the Suez canal.

Now USA has lost control of Hormuz.

The petrodollar empire is facing imminent insolvency.

There is nothing @coffeebadger or anyone else can do to stop it.

End of empire.