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The Subprime Solution: Containing Global Contagion

Tough issue. For one, I expect the Fed to be proactive rather than reactive here. The housing bubble has not burst in the dramatic fashion that, for example, the Economist was saying it would a year ago. As far as effect on the carry trade goes, I can't see much just yet - Japan's overnight call rate is still 0.5% and doesn't look to go anywhere above that until after upper house elections this summer, due to political pressure. That might not be as appealing as the 0% rate last February or the 0.25% rate two months ago, but it's still low enough, and should last long enough, to make some aspects of the carry trade still appealing to the non-risk averse. Japanese equities still look very appealing from Stateside, from what I'm hearing, though I wonder about some of the picks I often hear of...