It seems that many economists are now echoing Nouriel Roubini's prescriptives...(BTW Nouriel Roubini, aka "Dr. Doom" masks can now be purchased in time for Halloween)...
Last week, I suggested the need for a coordinated monetary policy rate cut. That cut arrived yesterday, with the Fed, the European Central Bank and other central banks cutting their policy rates by 50 basis points (bps).
This action is necessary, but only cosmetic, and it is too little too late.
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Policy rate cuts will have a limited effect as they don’t resolve the fundamental problem in markets--massive counter-party risk--that is keeping money-market spreads relative to safe rates so high. Yesterday’s plan to support the commercial paper market is a step in the right direction, but other, more radical policy actions are also needed now. Here are four suggestions for such additional policy action.
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