Just got done having a conversation with a friend of mine about the economy. He's quite liberal, and he works in business, and reads everything he can get his hands on. So he's got some pretty strong opinions about the situation we find ourselves in.

He suggested that it was going to get worse before it gets better.

I want to not believe this. I want to believe that at least a part of this situation is about confidence - consumer confidence, investor confidence, etc etc. I want to believe that in some way our economy has needed a bout like this to remake itself and come out of it stronger when it does come out of it.

He suggests that a lot of big money is on the sidelines in this market downturn. More money than is in the market, he said. This would mean that at some point, this money has to do something. What is it going to do? I didn't ask him but I'd guess that it is likely to go back into the market.

I suggested in return that yes, the market is going down, but for every seller there's a buyer (almost by definition, I believe) and those buyers are the smart people looking for bargains and likely getting them. I've been continuing to buy as this market has slid downwards. But lately I've been wondering if I should hold off a bit, just stick the money in today's version of "under the mattress", also known as your local branch of whatever bank you happen to use.

He suggests that a major part of the problem is that these big banks roll every loan into a security, and sell them off, these days. A relatively small bunch of defaults can hurt these securities. Then the hedge funds are selling, selling, selling, as they have to find the money for their investors who are pulling out. All this puts too much downward pressure on the market.

What can we do? Just pay our loans? Spend so that businesses remain somewhat profitable? Save like a madman?

It's probably the first time I've really looked at this situation pessimistically. I saw this market downturn as an opportunity to buy cheap. But what if it never gets back to its heights? What if I'm just dumping more money in at too high a cost?

Everyone talks about money lost, but it used to be all on paper. But now, with the market at the worst levels since 1997, it IS real money being lost, real wealth being destroyed.

Okay, I'll quit whining now.