Well, I know about the Special Liquidity Facility, which was announced in October of 1999, and coincided with the start of the last blowoff in the stock market (what I consider the true bubble). But from what I understand the SLF was never used. It was there in case of problems, which never happened. I had always assumed that it was the mere existence of the SLF which made everyone so giddy.
How else did money get into the system? Did it show up in the funds rate? We were still in a strong dollar policy, which isn't associated with easy money. My guess is a lot of overseas money came here as part of the "safe haven" effect.
How else did money get into the system? Did it show up in the funds rate? We were still in a strong dollar policy, which isn't associated with easy money. My guess is a lot of overseas money came here as part of the "safe haven" effect.The Fed creates money by buying Treasuries from banks. The banks then have to lend out this new money. It probably wouldn't show up in the funds rate, although they could have dropped the funds rate too. I don't recall. Safe haven could have played a part too, but most was Greenspan.