Beyond his public statement in support of the budget package, Mr. Greenspan is expected to offset fiscal tightening with some monetary ease.

He notes that there is a risk of too much monetary ease, primarily in the fueling of a still-overheated stock market.

He favors more aggressive monetary ease now, while the inflationary risk is low.

If the Federal Reserve continues its policy of monetary ease and support of financial institutions, there will be no such panic.

"It's our view that the process of monetary ease is indeed working in the economy," he said.

"We expect that the amount of monetary ease in the pipeline is adequate to turn the economy onto the path of sustained recovery," he said.

"We are, of course, continuing to evaluate whether some additional insurance in the way of further monetary ease would be appropriate."

The standard remedies are monetary ease and fiscal stimulus.

Indeed, Michael Cayton, an international economist with the Treasury, is closer to the mark in his letter when he suggests greater monetary ease.

Q. You don't think that the weak dollar causes inflation, but rather that it is an indication of too much monetary ease.