How quickly we have moved from "slower growth," to "zero growth," to "mild recession," to "recession," to "worst recession since World War II." Now Paul Krugman's prophesy: "big bailout coming."Before surrendering to March Madness, one might ponder his conclusion in today's Times:

[T]he big bailout is coming. The only question is how well it will be managed.

As I said, the important thing is to bail out the system, not the people who got us into this mess. That means cleaning out the shareholders in failed institutions, making bondholders take a haircut, and canceling the stock options of executives who got rich playing heads I win, tails you lose.According to late reports on Sunday, JPMorgan Chase will buy Bear for a pittance. Thats an O.K. resolution for this case but not a model for the much bigger bailout to come. Looking ahead, we probably need something similar to the Resolution Trust Corporation, which took over bankrupt savings and loan institutions and sold off their assets to reimburse taxpayers. And we need it quickly: things are falling apart as you read this.

Update:Today's Wall Street Journal features an editorial which places a fair amount of blame on Federal Reserve Policies.It opens with this:

In the credit market panic that began in August, we have now reached the point of maximum danger: A global run on the dollar that could become a rout. As the Federal Reserve's Open Market Committee prepares to meet tomorrow, this should be its major concern.

And here is its close:

Which brings us to tomorrow's Fed meeting. The markets are expecting another cut of 50-75 points in the benchmark fed funds rate, and if recent history is a guide will immediately price into futures another 50-point cut down the road. The stock market may rally, until it once again decides that easier money can't remedy what is fundamentally a problem of bank solvency. That problem can only be resolved by financial institutions and regulators coming to grips with the losses, raising more capital to cushion the blow, and closing or selling those banks that can never recover. That will require a more aggressive, and pre-emptive, regulatory role for the Fed -- and that we would applaud.What the U.S. and world economy don't need is a Fed that continues to insist that inflation expectations are "well-anchored" when everyone else knows they aren't. The Fed needs to restore its monetary credibility, or today's panic could become tomorrow's crash.

Did the man say "crash?"