Let's twist again!

  • 21 September 2011
  • From the section US & Canada
  • comments
Archive image from 1962 BBC dance competition for the Twist
Image caption Let's twist again, like we did last summer....

"Do you remember when, things were really hummin'?" sang Chubby Checker in his 1960s hit.

Not really, no.

It seems a while since the US economy hummed, buzzed or otherwise shows signs of fizzing towards a full and meaningful recovery.

So the Federal Reserve, America's central bank, are twisting again like they did in the years of Chubby's hit, The Twist.

Then they named their cunning manoeuvre - Operation Twist, during the Kennedy administration - after the hit song.

Unlike the song, the policy wasn't much of a hit then.

Nevertheless, the Fed hopes the dusted-off 40-year-old plan will work now and they are spending $400bn (£258bn) to keep inflation low.

Read my colleague Stephanie Flanders to understand how the mechanism works.

As she points out, keeping interest rates low when they are already very low may not do much harm, but it is unlikely to do much good either.

The trouble is that the Fed, and everyone else, seems to have run out of things they can do.

President Obama has a plan. It might make things better or worse. But his American Jobs Act is more like a posture than a policy.

It has no realistic chance of getting past Congress.

Of course, Republicans have their own ideas. They would slash taxation and regulations. But they are not in a position to implement their ideas either.

For the Fed, some sort of motion is apparently more appealing than hanging around the edge of the dance hall, propping up the wall, doing nothing.

So it's: "Heeee, and round and round and up and down we go again!"