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: Claude Cormier who wrote (83353)	8/17/2008 10:03:43 PM
From: SouthFloridaGuy	Read Replies (2) of 116555

Claude, it's really quite simple. People will lend when they feel the ROI is acceptable. If assets are overvalued, the ROI is unacceptable. The best way to get the economy going is to let assets revalue and given the depth of our capital markets, investors will surely come in - it's already happening for instance in parts of California. The Fed need not do anything to 'prop' up assets and I don't think they plan to either. The Fed's job is to ensure the solvency of the banking system and Bernanke is doing a decent job there though I think he screwed up with the extreme rate cutting (he should have focused on the things he has been doing since Bear Stearns). All that did was put fire onto the commodities bubble. If he so chooses, he can put more fire onto it again. Only time will tell what the playbook is. But to give more power to countries like Russia and Venezeuala through Fed "printing" is not acceptable to any administration, IMO. America is already differentiating itself from Japan in many ways, but in many ways it is not (the Fannie debacle for instance). So we'll see what the future holds, I guess.

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