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Posted by: Michael Mandel on February 05
Here’s how to understand what comes next. Think about the credit crisis in terms of core and periphery. The core includes those markets which are at the heart of the crisis: The mortgage markets, and secondarily, consumer credit in general. The periphery are the markets which are being hit by the side-effects.
The Fed has to cut rates deeply enough to stop a full-time unravelling at the core of the crisis. But in doing so, it will pump life into the periphery. So the mortgage and consumer credit markets will be dead for a few years, but corporate credit and the rest of the economy will recover pretty quickly.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.