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the association of deregulated markets with modernization as he does here, “As we move into a new century the market-stabilizing private regulatory forces should gradually displace many cumbersome, increasingly ineffective government structures.”28 Greenspan also played the technological innovation card to gloss over overinflated asset prices or market bubbles. He established a trend for central bank policy called the “Greenspan Put.” The basic strategy of the policy is to deny the existence of speculative bubbles, but when they inevitably burst, express a politically correct amount of surprise then calm the markets by tossing unlimited amounts of cheap cash into the banking system. Greenspan set the plan in motion by asserting on the day after the crash that, “The Federal Reserve, consistent with its responsibilities as the Nation’s central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system.”29 Everyone on Wall Street understood the subtext of Greenspan’s message that the Fed would build into the system a market floor to stop the downward spiral that results from bursting price bubbles of risky assets. The process of financialization was sent in hyperdrive because investment banks could build mountains of speculative assets that are inherently unstable without the fear of collapse. The policy was called the Greenspan Put as a metaphor for “put” options which is a contract that allows a speculator to profit from a price decrease of their securities. With Greenspan firmly established as their dutiful servant, Wall Street could not be more pleased. For two decades, Greenspan led the Federal Reserve with a conviction that financial innovation and maintaining the bubbles when they become overinflated was more important stability. The Greenspan Put is a classic expression of neoliberalism and has been emulated by central banks everywhere. Outwardly the central bankers their belief in confidence in the efficiency of markets and innovation. If bubbles occur, markets will automatically correct themselves. But inwardly always being ready to have the public sector push through policies directed at keeping the bubbles from collapsing at all costs. One of the reasons for they do this is to perpetuate bubbly illusions of paper prosperity to create a “wealth effect.” The assumption is that as people in general feel wealthier after looking at the returns in their portfolios,
