by Calculated Risk on 10/24/2007 01:11:00 PM

Mark Thoma says Tim Duy is losing sleep.

Fed Watch: Runaway Rate Cut Train?. Excerpts

... housing is bad. This morning we get existing home sales, which, considering the local reports I have seen, are almost certain to be simply dismal. I did a road trip to Bend last week, and can confidently report that close to half of central Oregon is for sale. Housing of course was the big topic; when will the downturn end, will prices fall, etc. My story of how bubble markets generally end badly, and don’t bounce back for years (look at the NASDAQ, I say), does not make me many friends.

But when I pressed the business community (not realtors – they only tell you to wait two months, prices will be on the rise again) on the environment outside of sectors directly tied to housing, I continuously received the same story – no problem.

Although Dr. Duy sees spillover from housing into the general economy, it is not enough to concern him. He is more worried about the Fed cutting too much:

My expectation remains that the US economy will weather the housing rout better than expected, especially given the global pull, particularly from emerging markets. That leads me to believe that we are not on a runaway rate cut train in the US. Indeed, from an inflation standpoint, the last thing the global economy needs is a runaway rate cut train placing further downward pressure on the dollar.

I'm not as sanguine as Tim, but his piece is an excellent overview.