“If you’re going to take a bath . . . fill the tub.”
–old business(?) advice
Under previous Federal Reserve chairmen Alan Greenspan and Ben Bernanke, the Fed quite clearly conducted monetary policy so as to support the 
stock market (many commentators — myself included — think they overdid it; see, “2013 Person of the Year: Federal Reserve Chair Ben Bernanke”).
The short-hand for that policy was “the Greenspan put” and subsequently “the Bernanke put” (a “put” is an option that goes up when the underlying stock or index falls; in essence, it acts as an insurance policy).
Now that Janet Yellen has succeeded Bernanke, it seems timely to ask, “is there a “Yellen put?”
Getting the Bad Stuff Out of the Way
With the Fed tapering its stimulus and global stock markets (especially emerging ones) falling, at least so far the answer appears to be “no.”
However, there’s a precedent for (smart) incoming leaders prescribing any needed corrective medicine — and inflicting the corresponding pain — early in their tenure, so that when they’re up for reelection (or reappointment, in the case of the Fed chair), things are already trending up.
FDR certainly did that; so did previous Fed Chair Paul Volcker in the early ’80’s (however, Volcker’s medicine was so distasteful it seemingly disqualified him from a 2nd term).
Is Yellen doing the same thing?
Stay tuned . . .
P.S.: Guess which current leader should have done that but didn’t? Hint: it rhymes with “O-shmama.”
