Decoupling Debunked

Mauricio Lima / AFP / Getty Images

Brazilian traders at the Mercantile & Futures Exchange in Sao Paulo as turmoil struck world stock markets for a second day, Jan. 22, 2008

A former chairman of the U.S. Federal Reserve Board famously described his job as "taking the punch bowl away just when the party is getting good." Current Fed chief Ben Bernanke wishes that description still applied. With stock markets reeling worldwide and recession looming in the U.S., the world's largest economy, Bernanke's Fed is frantically ladling out punch in the form of interest-rate cuts — even though almost everyone already has a brutal hangover.

An emergency rate cut on Jan. 22 shows just how anxious the Fed has become. The reduction by three-quarters of...

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