A $43 Trillion (as in Thousand-Billion) Bet Gone Sour

Caught in a Downdraft and Starting to Panic

By Steven Pearlstein Wednesday, January 16, 2008; D01

Are we having fun yet?

Okay, so maybe the economy has fallen into recession. Maybe house prices are going to decline 12 percent by the time it's all done, as Fannie Mae's chief executive said last week. Maybe this won't be the year for that 13 percent stock-price rebound that Goldman Sachs's crack investment strategist, Abby Joseph Cohen, predicted only last month. Maybe nearly a million workers were added to the unemployment rolls in the past nine months and a million more will be added before it's all over. And maybe there's really not much that the Federal Reserve can -- or should -- do to prevent this painful adjustment.

But, hey, look on the bright side: The country and Wall Street have already made great progress in moving through the stages of economic grief:

• Willful blindness. ("Bubble, what bubble?")

• Denial. ("House prices never fall. It's only those speculators in Las Vegas and th…