Is this it? Is this the beginning of the end?

In the beginning there was the word. And the word was ‘subprime.’ When investors spoke the word in 2007, markets quaked. By the autumn of 2008, Lehman Bros. had gone broke and stocks were falling all over the globe.

The end of the beginning came on March 9th, 2009. Stocks had lost about half of their value…a loss of about $25 trillion, worldwide. The first stage was over.

The next stage was the rebound…the bounce. It boosted stock prices everywhere – particularly in the emerging markets. Worldwide, stocks recovered about half of what they had lost in the first stage.

Now, we are either near the end of the middle stage or at the beginning of the final stage. Last week, it looked like the final stage had begun. The Dow fell 4 out of 5 sessions…with a big drop on Friday, of 216 points.

Fear is back. Oil is trading under $75. Gold dropped $13 on Friday. Proportionally, gold lost less than stocks. At least a few smart investors see gold as a refuge, rather than a threat.

Commentators are providing plenty of ‘reasons’ for the wobbles on Wall Street. The Chinese are tightening credit. Obama is getting tough on the banks. Take your pick. But the noise coming from the financial media merely provides a way for investors to understand what is going on without really understanding at all. On the surface, markets react to the news. But their primary direction is determined by deeper currents.

Obama is losing the confidence of the nation. His health care reform plan is a rat’s nest of corruption and confusion. His handling of the wars against the Iraqis and the Afghans is a disgraceful mixture of claptrap and cupidity. And his treatment of the banks is one half publicity stunt and the other half relatively unimportant.

Too bad. He seems like a likeable fellow. He just didn’t realize that he came into the presidency on the downside of the credit cycle. Fish gotta swim. Birds gotta fly. And credit cycles gotta correct. That’s why the stock market – at present – is unfinished business. It is a work in progress. A bear market began at the beginning of the ’00s. It was held off by a final, reckless increase in cash and credit from the feds, following the pseudo recession of 2001. Then, after a spectacular bubble in the financial industry and in residential real estate, the bear market resumed in 2007. In 2009, stock prices reached a temporary bottom and bounced. And now the end stage for the bear market may be beginning.

None of this is Obama’s fault. He didn’t create the credit bubble. And he can’t be faulted for not fixing it. It’s not a fixable thing; at least, not by politicians. Markets have to do their work. They have to take prices down to levels where it makes sense – considering the risk of loss – to buy assets again. They have to get rid of the mistakes. They need to punish stupid…arrogant…and imprudent investors. They need to move money from weak hands to strong ones. All of that takes time. Offering the market more phony money only blurs the picture…making the decisions more difficult.

You can’t really fault Mr. Obama for doing the silly things he has done, either. He’s been too busy to think deeply about how an economy works. That’s why he has advisors. Unfortunately, his financial team is made up of mostly jackasses, fools and opportunists – such as Larry Summers, Ben Bernanke and Tim Geithner, not necessarily in that order.

Only “Tall Paul” Volcker has any clue what is going on. To his credit, he’s made some brave critiques of the banking industry. He’s probably giving Mr. Obama some decent advice, here and there.

But what can he say? Obama is president of all the Americans. He needs to “do something” to make the pain go away. His party is counting on it. The voters demand it.

Mr. Volcker knows you can’t really make the pain of a correction go away. It has to run its course. It has to do its job. All you can do is to try to control the banks so it doesn’t cost so much to bail them out.

Mr. Volcker may also realize that feds are only making things worse – with their bailouts, deficits, subsidies, and boondoggle spending. But so what? Fish gotta swim, remember. Democratic governments gotta play to the voters. And the voters want solutions! They want leadership! They’d rather have a bunkum, harmful solution than no solution at all.

And that’s what they’ve got.

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