and other risk assets. What comes after Operation Twist may be, if anything, slightly better for risk assets. Operation Twist keeps the size of the Fed's portfolio constant, as they sell a dollar of short-term debt for every dollar of Treasuries they buy. After Twist expires the Fed may well simply print money and buy Treasuries, not only driving down yields but also creating more money which can support equities. With the Fed already spending $40 billion a month to buy mortgage bonds, we could see about $85 billion of new money being pumped into the markets every month in 2013. WILL IT WORK? What would happen if the Fed allowed Twist to end? While interest rates might not spike higher, they would certainly drift, and risk-asset investors would then face a poor outlook for profits and the risk of a fiscal-cliff-induced recession. The market would tumble. Since the Fed has tied its policy more explicitly to unemployment, it is not going to allow that to happen, so QE4, or, if you like, QE4ever here we come. The inevitability of continued Fed easing is supported by the discussion, in the minutes and recent speeches, of so-called quantitative thresholds. Under such a threshold, the Fed would commit itself to buying so many Treasuries until a specific level of unemployment or nominal GDP growth were met. That's still controversial, both inside and outside the central bank, but the very discussion is a fat signal that we won't see any passive tightening when