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Everything bubble

Powell defends his first major monetary easing at a press conference, September 2019.[1]

High up on his [President Biden's] list, will be dealing with the consequences of the biggest financial bubble in U.S. history. Why the biggest? Because it encompasses not just stocks but pretty much every other financial asset too. And for that, you may thank the Federal Reserve.

Richard Cookson, Bloomberg (February 2021)[2]

The expression "everything bubble" refers to the correlated impact of monetary easing by the Federal Reserve (and followed by the European Central Bank and the Bank of Japan)[3] on asset prices in most asset classes, namely equities, housing, bonds, many commodities, and even exotic assets such as cryptocurrencies and SPACs.[4] The policy itself and the techniques of direct and indirect methods of quantitative easing used to execute it are sometimes referred to as the Fed put.[5] Modern monetary theory advocates the use of such tools, even in non-crisis periods, to create economic growth through asset price inflation.[a][4] The term "everything bubble" first came in use during the chair of Janet Yellen, but it is most associated with the subsequent chair of Jerome Powell, and the 2020–2021 period of the coronavirus pandemic.[3][6]

The everything bubble was not only notable for the simultaneous extremes in valuations recorded in a wide range of asset classes and the high level of speculation in the market,[7] but that its peak in 2021 occurred in a period of recession, high unemployment, trade wars, and political turmoil – leading to a realization that the bubble was a central bank creation,[3][8][9] with concerns on the independence and integrity of market pricing,[10][9][11] and on the Fed's impact on wealth inequality.[12][13][14]

In 2022, financial historian Edward Chancellor said "central banks' unsustainable policies have created an 'everything bubble', leaving the global economy with an inflation 'hangover'".[15] Rising inflation did ultimately force the Fed to tighten financial conditions during 2022 (i.e. raising interest rates and employing quantitative tightening), and by June 2022 the Wall Street Journal wrote that the Fed had "pricked the Everything Bubble".[16] In the same month, financial journalist Rana Foroohar told the New York Times, "Welcome to the End of the 'Everything Bubble'".[17]

  1. ^ Cox, Jeff (25 September 2019). "The Fed will be growing its balance sheet again, but don't call it "QE4"". CNBC. Retrieved 16 February 2021.
  2. ^ Cookson, Richard (4 February 2021). "Rising Inflation Will Force the Fed's Hand". Bloomberg. Retrieved 4 February 2021.
  3. ^ a b c Cite error: The named reference Bloomberg2 was invoked but never defined (see the help page).
  4. ^ a b Summers, Graham (October 2017). The Everything Bubble: The Endgame For Central Bank Policy. CreateSpace. ISBN 978-1974634064.
  5. ^ Metrick, Andrew (6 January 2021). "Interview with Sir Paul Tucker". Yale Insights. Retrieved 21 January 2021. It's no longer a Greenspan Put or a Bernanke Put, or a Yellen Put. It's now the Fed Put, and it's everything
  6. ^ Cite error: The named reference Lachman1 was invoked but never defined (see the help page).
  7. ^ Cite error: The named reference Bloomberg6 was invoked but never defined (see the help page).
  8. ^ Cite error: The named reference Bloomberg4 was invoked but never defined (see the help page).
  9. ^ a b Cite error: The named reference NeueZurcherZeitung1 was invoked but never defined (see the help page).
  10. ^ Derby, Michael S. (20 May 2020). "Fed's Mester Isn't Worried Central Bank Has Broken Market Pricing Ability". Wall Street Journal. Retrieved 17 February 2021.
  11. ^ Cite error: The named reference FinancialTimes5 was invoked but never defined (see the help page).
  12. ^ Cite error: The named reference FinancialTimes2 was invoked but never defined (see the help page).
  13. ^ Saravia, Catarania (29 January 2021). "Low U.S. Rates Exacerbate Racial Wealth Gap, Paper Shows". Bloomberg. Retrieved 17 February 2021.
  14. ^ Cite error: The named reference Reuters was invoked but never defined (see the help page).
  15. ^ Cite error: The named reference Fortune was invoked but never defined (see the help page).
  16. ^ Cite error: The named reference WSJJune2022 was invoked but never defined (see the help page).
  17. ^ Cite error: The named reference NYTForoohar was invoked but never defined (see the help page).


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