You remember the ‘plumbers?’ That was the name given to a special government committee – known as the Plunge Protection Team. When the drains get clogged and the water starts backing up, this group is supposed to put on its waders and get to work.

And yet, now we have the water rising all over the world...and whole towns in California already submerged. Where are the plumbers?

Who knows? Maybe they had something to do with yesterday’s rally. The Dow rose 552 points. The dollar went down hard – with the euro up to $1.28. And gold rallied $16 too – to $734.

The feds are doing all they can to bail out the economy. If they wanted, they could give the stock market a little boost from time to time. But probably not much more than that – and a great cost. And for all their bailing, the water is still rising...

Foreclosures are increasing at a 25% rate. GM is on the verge of bankruptcy; it’s stopped talks with Chrysler. Joblessness is at a five-year high – and rising.

But there is good news too – prices dropped 65% at a wine auction... White truffles are down 84%.

This just in from colleague Ingrid Labuzan at MoneyWeek :

“In England, the housing slump is catching up to the U.S. Prices are officially down 14.6%. The average U.K. homeowner is losing money faster than he makes it. The housing bear market is reducing house prices by about 27,000 pounds per year – while the average bloke earns only 24,000. And every day, 121 houses are repossessed.

“The unemployment lines are getting longer too. There are expected to be 2 million people in Britain without jobs by the end of this year. Next year, the number is supposed to reach 3 million, above 10% of the workforce.”

The OECD, meanwhile, says the floodwaters are rising all over the world. They expect the soggiest year in a long time...with negative growth in the developed world in 2009. Germany says it already faces the worst recession in 12 years.

For us, here at The Daily Reckoning , the crisis comes as no surprise. Heck, we saw it coming years ago. Of course, even we didn’t think it would hit so hard...and so wide. We thought Japan, for example, would be spared. The poor Japanese are already black and blue from having been beaten up for the last 18 years; we figured they’d had enough. Instead, the Tokyo stock exchange got whacked again – taking stock prices down to levels last seen in 1986.

India, too, we thought would stay out of it. After all, Indians are pretty sober people. Almost party poopers. But the same stiff, moronic regulations that kept India from participating in the global credit expansion also meant that India’s banks and consumers were less exposed to the global credit contraction. No party; no hangover. Still, that didn’t stop investors from selling Indian stocks along with everything else.

We’re surprised at how violently the downturn hit commodities too. Rightly or wrongly, investors are expecting a long, deep, deflationary correction.

“We are all Japan, now,” says Albert Edwards at Societe Generale .

Of course, we know how it works: the correction must be equal and opposite to the shenanigans that preceded it. But which shenanigans? What, exactly, is this correction going to correct?

So far, the financial industry and the housing industry have had their fannies paddled. Just as you’d expect. They deserve it. Go ahead, Mr. Market, let ‘em have it!

The U.S. auto industry too deserves a good spanking. It failed to hold down costs and continued making inefficient, gas-guzzling vehicles long after the market had turned away from them. It should be allowed to fail. Get it over with. Make room for new blood. There are a lot of automakers in the world; we don’t need these dinosaurs.

America’s retailers...and shopping malls...and fast-food joints... Well, the list of industries in need of a good whack is long and obvious.

But right now, it’s the consumer who’s bending over. In fact, from MarketWatch we get the news that “retail sales plunge a record 2.8% in October.”

*** “Consumers stop shopping,” is the stark headline at the Chicago Tribune . We know that that is just what he should do. He’s got to pull himself together, get on the wagon, clean up his balance sheet.

But here come the feds – determined to stop him. They pull up to his house in a shiny convertible. “C’mon...it’s happy hour all night long... No money? Don’t worry, I’ll lend you some...”

Here’s the report from the New York Times :

“... with a little more than two months left before President Bush leaves office, Treasury Secretary Henry M. Paulson Jr. is hoping to put in place a major new lending program that would be run by the Federal Reserve and aimed at unlocking the frozen consumer credit market.

“The program, still in the planning stages, would for the first time use bailout funds specifically to help consumers instead of banks, savings and loans and Wall Street firms.

“Treasury officials said they hoped to invest about $50 billion from the bailout fund into the new loan facility, with the aim of helping companies that issue credit cards, make student loans and finance car purchases.”

Paulson’s new plan is simple enough. Borrow money from savers all over the world and give it to spenders in the United States of America. Put things back to ‘normal’ – or at least to what they were a few years ago. To a thinking man, of course, this plan is absurd. It merely encourages Americans to continue making the same mistake – spending money they don’t have on things they don’t need. Rather than cleaning up their balance sheets, they’d be making them worse.

But you couldn’t put together a chess team with the few people who have their thinking caps on. This is a crisis; everybody says so. And in a crisis, you don’t stop to think – you act! You act like a jackass, usually.

Paulson was the front man at Goldman up until 2006. You’ll recall that that was when Wall Street’s party was completely out of control...when financial shenanigans reached their crazy apogee. Now, the very same Henry Paulson is working his magic on the whole U.S. economy – good luck to us all!

But it really depends on how much correction Mr. Market has in mind. Is he correcting the excesses of the 2002-2007 period? That would take the Dow back to 7,000 or so...and cut housing down a few more percentage points.

But it would leave the fundamentals of the economy intact. Or is he correcting excesses of the entire bull market from 1982-2007? Or is he aiming to correct the whole, grotesque dollar-based post-’71 money system? That is, is he merely trying to correct the bubble or the pump? The speculative hyperbole of the last 5 years...or the source of so many bubbles...and so much economic distortion – the paper money system created by Richard Nixon in 1971?

We don’t know. But judging by the way things are going...our guess is that he has bigger fish to fry than just the stock market...or the housing market. This looks like the big one to us – the “Greater Depression,” as our old friend Doug Casey puts it.

Our guess is that he aims to take America down a peg or two. Its money. Its standard of living. Its power and its prestige. It won’t be pleasant for many Americans...but in the end, they will be standing on more solid ground.

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