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Strategies & Market Trends : The coming US dollar crisis
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To: Real Man who wrote (3936)2/6/2008 12:41:14 PM
From: carranza2  Read Replies (2) of 71406
 
2) Addressing the fallout from the credit mess through reflation without blowing new bubbles. Try to keep housing prices stable, while mopping up the mess. Press a money pedal whenever it drops, stop it whenever it gets bubbly.

I am not sure this is possible given the leverages involved. They will multiply small defaults into big losses for lots of entities, precipitating things going south. I don't think the Fed has the equipment to prevent this in a recession, when defaults will happen regardless of any sensitive pedal pushing BB might do.

The only solution that would restore faith in the credit markets is to nationalize the bad debt in a partnership with debtors and creditors. The government assumes a part, the debtors pay some, and the creditors take less. Everybody bitches, a sign of a good deal.

An enormously complicated thing to do, especially in the middle of a presidential election cycle. Plus, it would require global agreement and participation. I have no faith that the present administration is capable of such a huge initiative.

As you pointed out, a G7 meeting of sorts was taking place, so perhaps something is being planned before it well and truly hits the fan.

In my estimation, something along these drastic lines absolutely has to take place if a global financial meltdown is to be avoided.
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