Monday, October 03, 2011

BrandTags Express Edition #9 :: Troika, Operation Twist, QE

While we are in midst of a financial crisis once again after the 2008 fiasco, several terms have emerged which definitely need a mention on this blog as I work in the very center of this trading business. 

Troika - This is actually a Russian Bulgarian word which essentially means the number three or three of a kind. In the current financial crisis this refers to the combination of European Central Bank (ECB), International Monetary Fund (IMF) and European Commission. This is special conglomerate which is formed to rescue Greece from the debt crisis which is causing a global contagion

Operation Twist - This is a slightly complex "operation" by Federal Reserve to understand. In the past, Fed was buying a lot of short term government securities in the market to infuse dollars in to the economy. But with this Operation Twist, Fed would actually be trading the Short term securities like US treasuries for the Long term bonds. Its expected that such operation will lower the rates associated with the long term securities like mortgage or auto or other long term loans. 

QE: QE stands for Quantitative Easing. This was one of the operations of the US Fed to pump in additional money into the ailing economy and foster growth and create employment. There were two rounds of QE 1 and 2. A third QE3 was expected but Fed instead decided to do a Operation Twist.

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