Greenspan Put


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Greenspan Put

A term coined in the late 1990s describing Federal Reserve chairman Alan Greenspan's loose monetary policy. Throughout this period, Greenspan and the Fed kept interest rates rather low to encourage growth in the stock markets. Investors assumed from this policy that stocks would continue to rise and, thus, they could enter long positions and sell them at a higher price on or before a certain date, creating a put option in practice, if not in contract. While this was likely not the intent of the Federal Reserve at this time, investors used this investment strategy anyway. See also: Irrational exuberance.
References in periodicals archive ?
So there was a "deep conceptual issue" involved in New Keynesian analysis: its failure to explain how banks might come to "underprice risk worldwide," as Alan Greenspan put it.
This perception of a Greenspan Put aided the ensuing stock market recovery after Black Monday, which turned out to be the greatest bull market in American history.
Whatever the immediate motive, this late-cycle inflationary injection to sustain asset price inflation is the antecedent of what later became described as the Greenspan Put.
Even so, it cannot be precluded in principle that a Greenspan put could have some success, especially if a big new story emerges coincidentally.
The Greenspan Fed responded to the economic downturn of 1990-1992 (in the wake of the bust to the Volcker asset price inflation of boom-type as extended by the first Greenspan put of late 1987 and early 1988) by holding rates at abnormally low levels for an extended period (1992-1993).
This phenomenon became so entrenched in investors' minds, that it got a name of its own: the Greenspan Put.
In doing so, it has replaced the Greenspan Put with a Bernanke Put.
As Federal Reserve Chairman Alan Greenspan put it in congressional testimony in early 2004, "The problem that exists is because they have a subsidy, granted not by the Congress but by the expectation that government will bail them out in the event of a crisis.
Federal Reserve Chairman Alan Greenspan put in a pitch for the nation's small businesses Thursday, calling them critical in determining whether a community prospers or not.
After months of warnings extending back to his December talk of ``irrational exuberance,'' Greenspan put a positive spin on Monday's wrenching, 554-point decline followed by Tuesday's 337-point rebound in the Dow Jones industrial average.
David Greenspan puts the play back in playwriting in this clever lark of a comedy about life in the theater, or life and the theater.