As a result of the steepening market sell-off, the Fed, Trump administration, and other central banks panicked. They knew what that signal meant – make no mistake about that. If action wasn’t taken, the market would have experienced a waterfall-style decline. On Christmas Eve, Treasury Secretary Steven Mnuchin called the Working Group on Financial Markets or the “Plunge Protection Team” to ask for their help to shore up the U.S. financial markets. Next, Fed chair Jerome Powell did an about face, suspiciously going from hawkish to dovish regarding future interest rate hikes in a very short period of time (clearly as a result of being threatened by the Trump administration and, likely, by Wall Street banks and investment firms). In addition, central banks outside of the U.S. started expanding their balance sheets again in order to pump more liquidity in the markets.
