I disagree. I think a strong dollar is what could save the economy. With oil falling, a lot of trading money will go to currency(cash), the dollar being the most attractive. Europe is in the same financial boat we are, except they have no confidence in their currency. This is another reason the dollar is doing well. We should utilize that strength to help the credit markets. We need a tight money policy to make this happen. The Fed needs to raise interest rates and soon. I know the stock market won’t like this, but it doesn’t seem to like much lately. Cheap money is what got us into this mess. Banks will have to charge higher interest rates; making it harder for people who can’t afford credit to get it. Removal of this risk could instill confidence in banks to start lending money again. Banks would pay higher interest rates on savings and CD’s instilling that ancient principle known as the “propensity to saveâ€. Increased savings is capital for the bank, and another shot of confidence as trust between banks and the public is restored. But if the Fed doesn’t tighten the money policy....I agree with the author’s bleak assessment. The iron will be hot only for so long, and the Fed’s opportunity to do this will only last so long.
There is no chance of the Fed raising interest rates in the face of a recession and stock market collapse unless someone slips LSD into their water.
And it was not “cheap” money which got us here but the provision of credit for political reasons to those who could not repay it. Those mortgages were then bundled into derivative securities without the flow of revenue to allow them to profit.
This is a recession caused by Political Correctness.
Refusing to give credit to those who can repay it without dealing with the political issue would be idiotic.