The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.
Although low inflation is generally good, inflation that is too low can pose risks to the economy - especially when the economy is struggling.
The best approach here, if at all possible, is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset-price bubble bursts in the future.
I don't think that Chinese ownership of U.S. assets is so large as to put our country at risk economically.
The risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately in the absence of countervailing monetary policy action to further upward pressure on inflation.
