Further, we have put ourselves in a position of being completely at the mercy of foreigners. Thanks to our trade deficit, we are dependent on foreigners to be willing to accumulate an additional $1.5 billion every single day, just to keep the dollar where it is.

This period that we have experienced since the market peak has really been a period about denial, and it's gone on longer than I would have guessed possible. But it is what it is. Initially, folks were in denial about the fact that stocks had peaked and that we were in a bear market. Then, all of our economic and stock-market problems were blindly pinned on the attacks of Sept. 11, even though that wasn't the market or the economy's problem. And now, all the problems of the last six months have been pinned on Iraq.

Thus far, Greenspan and the Fed have basically been issued a pass after going 0 for 12 on the rate-cut front. Folks still have faith in the Fed, I believe, because the housing bubble has kept the consumer feeling more or less OK, even as people lose their jobs or know someone close to them who has lost his job.

However, I believe that later this year, people will finally be forced to realize that our problems are a result of the mania and are long-lived. That psychological readjustment will come about when the economy and the stock market don't come back (excluding some minor postwar relief bounce).

Along with that realization, folks will start to contemplate what happened in the '30s, even though things are different now, especially in terms of our currency regime. They will contemplate what's gone on in Tokyo for the last 12 years, where now 60% of the stocks on the Tokyo Stock Exchange sell below book value, contrasted to the three-times book value that stocks sell for here.

I think that at some point, the exact moment being unknowable, folks will recognize that the Fed has ruined the financial system, the Fed is powerless to stop the bear market, and the Fed is powerless to fix an economic bust precipitated by the misallocation of capital that occurred in the mania.