Fun While It Lasted

So much for our vast fortune.

Many investors also are expecting the Fed to lower the federal funds rate today at the regularly-scheduled meeting of its monetary policy committee here in Washington. At 2 percent, the short-term rate is already below the rate of inflation and delivering plenty of economic stimulus. And with the Fed always reluctant to appear that it is manipulating markets, it is more likely that it will merely deliver a promise to cut if economic conditions deteriorate further.

And make no mistake, they will deteriorate. The developments of the last two weeks, while dramatic, are simply part of the process by which the markets and the economy are adjusting to the bursting of a massive credit bubble. That bubble, which artificially inflated the value of stocks, bonds, real estate and commodities, diverted too much talent and resources to the financial sector and encouraged households and governments to live beyond their means. The process for correcting these excesses is never neat or even fair. The challenge for policymakers is to keep that process as orderly as possible without trying to protect failing companies or prevent the inevitable decline in incomes and asset prices.

Stop that whining.