Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Jim Willie CB who wrote (3965)	4/8/2004 4:39:38 PM
From: CalculatedRisk	Read Replies (2) of 116555

Jim, I think there might be a way out (call me an optimist). The first step is to tighten credit requirements. This will slow down some of the RE mania (zero down loans are an invitation for rational speculation; a classic moral hazard). At the same time, we should repeal the Bush tax cuts (at least the top end cuts). We will need this money to fiscally stimulate the economy as we ease off the monetary stimulation. The second step is to raise rates a little (as Roach has suggested, although I would do it in 50 to 75 bp point moves - not 200 bp at once). When this reaches the point of slowing inflation AND starts causing more job loss, I would stimulate demand with fiscal policy. It would be a tightrope act, but I think it is the rational approach to the current situation. Best to you.

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