- He genuinely believes the subprime real estates woes will spill over into the prime real estate market, at some level.
- Although there is no evidence, yet, the poor real estate market will slow the overall economy, perhaps, into negative territory.
- He believes the primary problem the Federal Reserve should be addressing is economic growth and not inflation.
- If the Fed waits for core CPI to fall to the comfort level before starting to cut rates, they risk letting recession take hold.
- A time to "break the rules" is at hand. The Fed must have the boldness to start cutting rates when the economy appears to be growing at its optimal level and core CPI is above the comfort level.
- He is doing this because he does not believe there is a consensus for this action either in the market or at the Fed.
- Finally, heaven forbid, that the Fed should hike rates to fight inflation in the face of the coming economic slow down.
Mr. Bernanke and his fellow members of the Federal Reserve are meeting this week. We'll listen carefully to their official statement. If it is primarily aimed at fighting inflation, I have the strong feeling that Mr. Greenspan will stay on the offensive. If they emphasize that economic growth prospects appear to be dimming, I think Mr. Greenspan will stand down.