Oct. 27, 2008

Averting a Major Global Economic Meltdown

If two things are implemented, I am positive the world's financial markets will rebound, and the global economy will stop slipping.

The foremost is to have a credible plan that puts a floor on housing prices. I have suggested that the US Government offer a buy back program for existing homes below the median price, at the market price as of October 2008, calculated as the original purchaseprice plus or minus a percentage reflecting the price change since then, as indicated by the national housing price index or local price index, subject to minor reappraisal for fine-tuning.

The second is to have a joint effort to bring the exchange rates in line with growth sustaining levels. Currently the Yen is too strong for exporters to survive. The Yen has appreciated 30% against a basket of currencies since Jan. 1 2008 according to my figures. If the Japanese economy falters, the world suffers. The central banks can sell Yen together.

Once these two plans are announced, global financial markets will certainly rebound, confidence will revive, as gloom for US’s financials and for Japan’s manufacturing will disappear over night.
These two are worrying investors the most.

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