How Low Can You Go?

Isn't it nice that we've learned the lessons of the Great Depression? The notion espoused by those notables at The New York Times that because the government is now frantically scrambling to restore confidence somehow the crisis of confidence in the financial systems--somehow the psychology of credit markets--won't run its course is just silly. Also, the idea that no one saw this coming is ridiculous. The Atlantic featured a cover article a few years ago with a view looking down from the window of a Wall Street building as someone prepared to jump.

The real question people should be asking is when will things bottom out, and then what do we do. Of course we should be trying to slow the fall and mitigate the effects, but at the end of the day credit is going to continue to tighten, and the markets are going to continue to fall. It is October, after all.

Well, the Dow has lost something like 13% of its value since its peak last year. If we use history as a guide, it wouldn't be unreasonable for it to fall 40% or even more. We have a ways to go.