something you may hear about in the news
I also wanted to add something, because some of you may hear about this in the news. So in the next few days, Federal Reserve Chairman Ben Bernanke has to set a course between market mayhem and the "Greenspan put."
The Greenspan put is the idea that, in times of crisis, the Fed will step in to bail out financial-market participants with lower interest rates, as it did in response to the Russian debt crisis in 1998, when Alan Greenspan was at its helm. The term was coined in early 2000 by Credit Suisse trader Steve Kim, then a derivatives analyst at Merrill Lynch, and popularized by Pimco economist and fund manager Paul McCulley. A put option insures investors against losses. Both men felt that the belief the Fed would similarly insure investors against losses whenever markets got rocky encouraged risky investment behavior.
With markets again in turmoil, there's been a cry from some Wall Streeters and corporate head honchos lately for the Fed to lower short-term interest rates to settle frayed nerves.
Just an FYI http://forums.babypips.com/images/smilies/smile.gif
15 months ago....
Have we been witnessing Chr. Bernake writing naked "Greenspan Puts" lately?
The following was posted exactly 15 months ago today:
Both men feel that the belief the Fed would also guarantee investors against market risk whenever gets rocky encouraged risky investment behavior.
The problem is when and at what price level the market turmoil that otherwise have entered a crisis level.
© Forex Factory