Let's do the twist!

With growth slowing markets are expecting the Federal Reserve to do something. Many is expecting another round of quantitative easing, a QE3. Meaning the Fed will start buying government bonds with freshly printed money. This has the obvious downside of pushing up prices.

There is however an alternative that won't lead to inflation. The Fed could do what is called a twist, selling its maturing bonds and using that money to buy long term debt. This should drive down the yield on long term government bonds making them less attractive as a safe hiding place when the future looks uncertain. This should force investors to return to the stock market and boost share prices. Making everyone who owns stocks a little richer, boosting demand in the economy, creating new growth. At seemingly no real cost.