Global Markets, Federal Reserve Can't Be Wrong Almost overnight, the masters of the universe have converged on a consensus that the U.S. economy is headed for -- or already in -- a recession. U.S. markets were closed yesterday for the Martin Luther King Jr. holiday as major indexes fell 7.2 percent in Frankfurt, 7.4 in Mumbai and 5.5 in London. The Dow dropped 400 points in the first hour of trading today. This despite the Federal Reserve's announcement at 8:30 this morning that it was lowering the prime rate to 3.5 percent, from 4.25 percent. The move, made on an emergency basis in advance of the scheduled Fed meeting next week, represented the biggest single cut in interest rates in 25 years. Further, Fed Chair Ben Bernanke has given his blessing to a fiscal policy stimulus package to complement his expansionist monetary policy: "I agree that fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary policy actions alone." So, apparently, it's all agreed -- this thing is real. Markets, rational and not given to panic or irrational anything, reflect fundamental realities. The Asian contagion of a decade ago proved that; similarly, the link between U.S. subprime mortgage foreclosures and the capital markets in the otherwise booming Chinese and Indian economies is obvious to everyone. No one disputes the Fed's stellar record in forestalling recessions -- the last time the Fed cut rates as drastically as it did today was in August, 1982, when the U.S. was in month 13 of a 16-month long recession. If nothing else, circumstances have fostered a rare spirit of bipartisan cooperation in Washington, with the White House and Capitol Hill in kumbayesque agreement that time is of the essence." President Bush, worried enough about the impact on his legacy of having a recession named after him to endorse a reasonably progressive redistributive approach to such a package, must think it's real, too. And he can't be wrong, can he?