Greenspan put

[7] In Q4 2019, Fed chair Jerome Powell recreated the Greenspan put by providing repurchase agreements to Wall Street investment banks as a way to boost falling asset prices;[5] in 2020, to combat the financial effects of the COVID-19 pandemic, Powell re-introduced the Bernanke put with direct quantitative easing to boost asset prices.

[7][11] By late 2020, under Powell's chairmanship, the perceived everything bubble had reached an extreme level due to unprecedented monetary looseness by the Fed,[12][13] which simultaneously sent most major US asset classes (i.e. equities, bonds, housing, and commodities) to prior peaks of historical extreme valuation (and beyond in several cases),[14][15][16] and created a highly speculative market.

[23][24] The main tools used by the "Greenspan put" were:[1][4][3] Repurchase agreements (also called, "repos") are a form of indirect quantitative easing, whereby the Fed prints the new money, but unlike direct quantitative easing, the Fed does not buy the assets for its own balance sheet, but instead lends the new money to investment banks who themselves purchase the assets.

[6][3] The Fed first engaged in this activity after the 1987 stock market crash, which prompted traders to coin the term "Greenspan put".

However, the collapse of Long Term Capital Management in 1998, which coincided with the 1997 Asian Financial Crisis, led to such a dramatic expansion of the Greenspan put that it created the dot-com bubble.

[41] Bernanke's actions were similar to the "Greenspan put" (e.g. reduce interest rates, offer repos to banks), with the explicit addition of direct quantitative easing (that included both Treasury bonds and mortgage-backed securities) and at a scale that was unprecedented in the history of the Fed.

[41] In 2018, Fed Chair Jerome Powell attempted to roll-back part of the "Bernanke put" for the first time and reduce the size of the Fed's balance in a process called quantitative tightening, with a plan to go from US$4.5 trillion to US$2.5–3 trillion within 4 years,[43] however, the tightening caused global markets to collapse again and Powell was forced to abandon his plan.

[54] As markets waned in mid-2019, Powell recreated the Greenspan Put by providing large-scale "repurchase agreements" to Wall Street investment banks as a way to boost falling asset prices[5] and a fear that the Everything Bubble was about to deflate;[55] this was seen as confirmation that a "Powell Put" would be invoked to artificially sustain high asset prices.

"If market functioning continues to improve, then we're happy to slow or even stop the purchases," Powell replied, never mentioning the possibility of selling off the bonds already bought.

What Powell knows better than anyone is that the moment the Fed makes any such announcement, it will trigger a sharp sell-off by investors who have become addicted to monetary stimulus.

And at this point, with so much other economic uncertainty, the Fed seems to feel it needs the support of markets as much as the markets need the Fed.In August 2020, Bloomberg called Powell's policy response to the COVID-19 pandemic "exuberantly asymmetric" (echoing Alan Greenspan's "irrational exuberance" quote from 1996) and profiled research showing that the Fed's balance sheet was now strongly correlated to being used to rescue falling share prices or boosting flagging share prices, but that it was rarely used to control extreme stock price valuations (as the US market was then experiencing in August 2020).

[65] Niche assets such as cryptocurrencies saw dramatic increases in price during 2020 and Powell won the 2020 Forbes Person of the Year in Crypto.

[69] In December 2020, Bloomberg noted "Animal spirits are famously running wild across Wall Street, but crunch the numbers and this bull market is even crazier than it seems.

And for that, you may thank the Federal Reserve.By early 2022, rising inflation forced Powell, and latterly other central banks, to significantly tighten financial conditions including raising interest rates and quantitative tightening (the opposite of quantitative easing), which led to a synchronized fall across most asset prices (i.e. the opposite effect of the Everything Bubble).

[76] Financial historian Edward Chancellor said "central banks' unsustainable policies have created an "everything bubble", leaving the global economy with an inflation "hangover".

[77] The Fed cut rates by 50 points, which Powell referred to as a "recalibration" in emphasis on labor market strength compared to lowering inflation.