Goodbye to the Bulls?

On fears about the economy: In this case, it is certainly the prospect of stagflation in the United States. A recession combined with high inflation would create a very difficult policy challenge, especially when the U.S. budget is not in very good shape. A mild recession can be corrected but if this is stagflation, the room to maneuver will be very limited.

Mulyani is the Finance minister of Indonesia.

'Now We Have a Mess on Our Hands'
Robert Reich
On investor sentiment: The Fed is clearly becoming aware of the serious potential of an economic meltdown. The size of the cut is larger than anyone expected because the Fed usually moves in [increments of] .25 or .50 percentage points. But the danger of a cut this size is that it may panic the investors. Credit markets are still uncomfortably frozen and the housing slump continues to worsen. [But] the fact is that no one knows anything. Even experienced Wall Street hands have no idea whether we're near the bottom. We can expect even more violent swings in the stock market. The reason for all the uncertainty is that the big banks and lenders simply have no idea how many bad loans they're holding. I wouldn't be surprised if the Fed cut another quarter point this week, or within the next month or so. It is clearly worried. [And while lowering rates may cause] inflation, it is far less threatening now than a recession or perhaps—and I cringe at using the word—a depression. Several managing directors on the Street, whose opinions I trust, have said to me that the chances for a depression are 20 percent. That matches my sense. Even absent a depression, it seems likely that the coming recession will be deeper than the last several.

On Finding a Solution: The scale of the problems is so much larger than any stimulus package or Fed rate cut can readily deal with. The stimulus package now being considered on the Hill is in the range of $140 billion to $150 billion. But at the rate housing prices are dropping, consumer purchases are likely to be hit by $360 billion to $400 billion. Similarly the Fed rate cuts, under normal circumstances, would free up money, but lenders are afraid of lending because they don't know how much risk of default they face, even at lower interest rates. It's a little like offering a lobster dinner to someone who is so constipated he can't take in another mouthful.

On oversight: The housing bubble and the Wild West credit markets of the last few years came about not because the Fed kept interest rates too low, but because the Treasury, the comptroller of the currency, and the Fed, in its regulatory capacity, failed miserably to use their authority to oversee credit markets and assure that they were not unduly exploiting those low interest rates with irresponsible lending practices. Now we have a mess on our hands. Bernanke has the only pooper-scooper in town, but it is too small for the job.

Reich, secretary of Labor in the Clinton administration, is the author of "Supercapitalism: The Transformation of Business, Democracy and Everyday Life"

'Now the Illusions Are All Gone'
Masaaki Kanno
On the market's steep decline: Japan's stock prices moved in line with other developed economies until July of last year. Since then the subprime has become one of the major issues. The irony is that Japanese banks didn't suffer from exposure, but Japanese share prices fell more sharply than average stock markets. There are a couple of reasons. First, global investors sold shares on all the stock markets, including Japan, the United States and Europe. In Tokyo, if my memory is correct, two thirds of the turnover is by the foreign investors. Second, the July election was a very big turning point, when Shinzo Abe became a lame duck and was later succeeded by Yasuo Fukuda. Since then there has been no strong message on reform.

On leadership: Japan has had no [perspective], not only from politicians but from firms, senior management and foreigners. Overseas stockholders who proposed a different management style in firms were unfortunately rejected. Japan disappointed the rest of the world in terms of governance.