The masks are coming off. It’s the end of the party, now we get to see what people really look like.

And it’s not a pretty sight.

You’ll recall that one of the fairest of the Bubble Era’s revelers was the idea that, over the long run, you would make money in stocks. All you had to do was ‘buy and hold.’ Who didn’t like her? She seemed so easy...so willing...so fetching and attractive.

Yesterday, the Dow lost another 203 points. Investors are down 44% so far this year. Worldwide, they’ve lost $10 trillion this month – far worse than the crash of ’29.

The most successful economy of the 20th century was the United States of America. The second was probably Japan. It rose from the bombed-out ruins of WWII to become a worldwide export powerhouse, dominating the auto and electronic equipment industries.

But yesterday, stock prices in Japan fell to more than a quarter-century low. Investors in Japanese stocks – including your editor (who is better at giving advice than taking it) – have made nothing in 26 years.

Here’s the press report:

“Tokyo’s Nikkei 225 index closed down 6.4 percent to 7,162.90 – the lowest since October 1982 – with exporters like Toyota Motor Corp. and Sony Corp hit hard. The losses came despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.”

“Decades of pain and still no relief,” adds the Financial Times , noting that investors in Japan have been waiting for a recovery for the last 18 years.

With the mask off, stocks in Japan are giving investors a Halloween fright.

But what other masks are coming off?

How about the sweet mask worn by housing? ‘Housing always goes up.’ And, ‘you can’t lose money in property.’ Remember those beauties? Those masks hit the floor a year ago. Since then, the whole world has looked at the property market and gasped in horror. How could houses be so ugly, homeowners have wondered; they look like they just woke up.

Oh and there’s oil...down to $63 yesterday. Oil was supposed to go up forever. At least, that was one of the favorite masks of the late Bubble Era.

But there are still a few Bubble Era masks that have not yet come off. In fact, the belle of the ball is the mask on ‘progress.’ People still believe that the world grows and improves – if not steadily, at least episodically. It’s certainly true that long periods of history show what appears to be economic progress. Things get better. But occasionally, something terrible happens – plagues, wars, revolutions, Great Depressions and Dark Ages. Then, the world turns backward. The bull market in progress turns into a bear market of progress turns into a bear market of backsliding.

Today, people are losing faith in stocks and housing...but they still have faith in progress. Just a few months ago, they thought capitalism would make them rich. But wicked capitalism has disappointed them badly; it didn’t guarantee rising asset prices after all. So, now they turn their sad eyes to the feds. ‘Oh ye all-knowing, all-seeing, all-powerful ones...hear us. Save us – from capitalism!

They figure the feds will do the trick... And sure enough, all over the world the federales are playing along. The G7, the IMF, the central banks, the finance ministers and Treasury Secretaries – all have put on their own masks...strutting around, pretending to know what they are talking about. Curiously, France’s president Nicholas Sarkozy is a leading strutter. He’s trying to organize a New World Financial Order...based on something other than the dollar.

These poseurs don’t look too bad – as long as they leave the masks on. Take them off, of course, and you will see the same silly clowns who CAUSED the crisis in the first place.

That is what is so amusing about this stage in the collapse of Western Civilization. You see, most of the world’s financial press has come around; they see things much the way we do. They see, for example, that the U.S. Fed erred – big time – by fixing the price of credit too low for far too long.

Of course, there’s nothing in the Manual of Capitalism that allows the feds to fix the price of credit or support the housing market. This was the government at work, not the market. With the misleading signal coming from the credit markets, the capitalists just did what they always do – they overdid it.

Still, the world’s press, pundits and politicians have convinced themselves that the fault lies not in themselves...but in capitalism. And now, they expect the feds to do something about it.

But that’s just the way it works...one hallucination gives way to another. One delusion on the way up; another on the way down.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.