“Come on, let’s twist again, like we did last century,” writes Floyd Norris in today’s New York Times.

“Alan Greenspan this week brought back memories of ‘Operation Twist,’ the last time the Federal Reserve he now leads set out to manipulate long-term interest rates.”

“Testifying on Capitol Hill, Mr. Greenspan was reminded that the federal funds rate — the short-term rate the Fed controls — is down to 1.25 percent. What could the Fed do if it needed to ease monetary policy when rates were already near zero?”

“It could buy long-term Treasuries, the chairman replied. ‘As a consequence, there’s virtually no meaningful limit to what we could inject into the system were that necessary.’ “

“Mr. Greenspan gave no hints he was planning to do any such thing. But it is an interesting idea and may come back if the current ‘soft spot’ in the economy, as Mr. Greenspan described it, turns out to be quicksand.”

“The original Operation Twist was conceived in 1961 by the Kennedy administration, which felt a need to lower long-term rates to stimulate business investment, while at the same time raising short-term rates to deal with a current account deficit that was putting pressure on the dollar. Thus the ‘twist’ on interest rates.”

“The twist was not wildly successful, but neither was it a clear disaster. The dollar survived another decade before it had to be devalued as the era of fixed exchange rates ended. And a long period of economic growth began in 1961.”

“But it is not hard to understand why Mr. Greenspan would be thinking about long-term rates. The current economic recovery, choppy and tentative as it is, is dependent on long-term rates’ not rising, and it may even need further declines. Since businesses overinvested in the boom and are still looking for ways to cut costs, the housing market has become the engine of growth. Rising home prices make consumers feel wealthier and willing to spend, and refinancing mortgages gives them the cash to do so.”