What did and world should do to avoid deep recession?

An article by Shri N K Singh in ToI explores today ( oct 27) explores other options to deal with current economic crises.

One wonders why Govts must wait for economic data to take action. Simple theory and availability of good performing macro econometeric models would confirm the direction of indian economy under "no action or limited action' scenario" and hence need for pro active action

fiscal imbalance is a real concern but it is not going to get any better with economy on a slower growth path. It makes good sense to follow counter cyclical budgetary policy that one often reads about and this situation is ideal for practicing that.

Has RBI erred in not cutting rates? Many think so and delaying such a decision may worsen matters.

It is not clear if some kind of market stabilisation fund as suggested in article above would have desired effect. FIIs may be selling due to presure back home and trying to stabilize the market may not be of much help . Market has tanked so much that significant wealth effect must have kicked in and a further fall of 1000-2000 points would not make much difference to market sentiments or wealth effect. Stabilizing markets could mean just that- buoyancy and wealth effect could take a long time to return. However market experts should to table to discuss further measures to strenghten markets such that indian and foreign pension funds which are long term investors have a greater stake in Indian markets rather some high flying hedge funds out to make quick money.

It is time to revisit incentive structures in financial instutions that may contribute to asset bubbles. After all there must be micro economic measures that could help to turn the money tap off when asset prices begin to become "uncomfortable"( please wait for a incentive game structure problem that if successfully constructed might be put up on this blog).

As stated in an article on this blog about the beginning of this year (click here: subprime crises and dollar deluge) that surplus dollar available with countries like China and India ( may i add - possibly petro countries ) could be incentivized to buy in to beaten down real estate prices in US. That would require more knowledge of US economy and its regulatory measures. Restoring confidence in US economy and its financial system is something that is both urgent and for the greater good of all.