Forget the dollar, the sky is falling.

Well, I sat here this morning pontificating how much money I could have made had I shorted Bear Stearns (I'm not an investor, though, and I don't have any money to play with). I also am so frustrated at having been sure over six months ago that the dollar would fall, yet being too chicken (or conservative?) to act on it.

Well, now I'm done with the dollar. I'm done with house prices. What I'm talking about is the collapse of the US economy. I am Chicken Little and I would like to let you know that the sky is falling.

The U.S Federal Reserve has officially thrown it's hat into the ring of the 'credit crisis' and is behaving like just another investment firm. Sure the Fed would be the biggest investment firm out there, but the moment it began acting like a puny bank and not the Federal Reserve of the richest and most powerful country on the planet, it began the decline to its own demise. And when the Fed goes, we all go.

Sorry for this doom and gloom. But there was hope even with a weak dollar. There was hope even with $10 a gallon gas. But there is no hope when the Fed goes down.

Sorry.

One could almost hear the panic in the Fed's announcement yesterday, that it was taking extraordinary weekend action ahead of today's resumption of trading in Asia to "bolster market liquidity and promote orderly market functioning." First, the Fed board unanimously authorized the Federal Reserve Bank of New York open its bank-lending facilities to non-bank securities firms, starting today. For at least six months, these securities dealers will be able to borrow from the Fed using "a broad range of investment-grade debt securities" as collateral [ed.- aka b.s. paper-backed nothingness], and they will benefit from the same discount rate charged to banks [ed. - sounds just like the 0% mortgages that started this craziness]. Secondly, the Fed lowered the discount rate by a quarter percentage point to 3.25% -- just one quarter point above its target federal-funds rate, which affects a broad field of mortgage and other consumer loans. Those decisions mark "one of the broadest expansions" of the Fed's lending authority since the 1930s, The Wall Street Journal notes, adding that the sharp market downturns in Tokyo, Hong Kong and elsewhere that ensued suggest "additional steps might be needed to calm markets." [ed. - there are no steps left. You can only go to 0%, and you subsequently will run out of money 'bailing' people out] The Fed's next scheduled meeting is tomorrow, when it is expected to again lower the federal-funds rate by at least half a percentage point [ed.- HOLY $HIT!!!].

Almost as an afterthought, the Fed statement adds that "the Board also approved the financing arrangement announced by J.P. Morgan Chase & Co. and The Bear Stearns Companies Inc." But as the New York Times reports, that amounts to approval of a $30 billion credit line that engineers the takeover [ed.- nope. It's not a credit line. JPMorgan borrowed the funds needed for the purchase from the Federal Reserve to buy Bear Stearns at a firesale price. Shouldn't the funds have come from non-governmental sources? WTH is going on? The Fed is supposed to lend for basic overnight transactions, not long term buyouts!!]. This sum is aimed at helping J.P. Morgan deal with the mortgage-backed investments and other soured debt that no one wants to buy and that got Bear Stearns -- and so many others -- in trouble [ed. - so let me get this straight. Rather than let Bear Stearns pay for it's own bad business deals, the US Federal Reserve is financing the purchase of those very same bad business deals. Again, WTH?]. It sure isn't needed for the acquisition itself. J.P. Morgan is paying about $236 million, compared with Bear Stearns's stock-market value of about $3.5 billion as of Friday, after its initial bailout, and the $20 billion it was worth in January 2007, as The Wall Street Journal reports. Once customers and trading partners started fleeing Bear Stearns last week, it was left with what the Journal calls "a horrible choice: sell the firm -- at any price -- to a big bank willing to assume its trading obligations or file for bankruptcy." Or as one person involved in the negotiations tells the paper: "At the end of the day, what Bear Stearns was looking at was either taking $2 a share or going bust."

My recommendations? Dig a hole and crawl into it.