The goal is to encourage lending and to keep rates low, and the plan seems to be having the desired effect. First thing Tuesday morning the average rate on a 30-year fixed-rate mortgage was almost 6.4 percent, but within hours it had fallen to an average of 5.5 percent. That was the biggest one-day drop in rates in seven years.

So how do we check deflation? Inflation is typically fairly easy to fight assuming demand remains relatively constant; you raise interest rates to discourage borrowing, and governments issue bonds to encourage saving. Hence you have fewer people and their dollars chasing the same amount of goods.

As I’ve said in past few weeks, the financial sector remains interesting for investors with a fairly high risk tolerance, and it’s time to wait for the sector to turn around. Ironically, there are two mutual funds out there that focus on the financial sector and are outperforming the S&P 500 in a pretty impressive way.

The stock market couldn’t hold its gains after an election day rally, sliding into its biggest two-day slump since 1997. Higher-than-anticipated jobless claims amidst an already weakened economy and disappointing earnings across the market simply took the wind out of the market’s sails.

 Judging by the market’s performance this week, investors seem to be adjusting to the fact that we’re probably facing a fairly prolonged recession. The US economy contracted at a 0.3 percent annualized rate in the third quarter as personal consumption nosedived at the fastest rate in 28 years, falling 3.1 percent. But despite what most would take as bad news, the major indexes actually gained more than 2 percent yesterday.

The markets took massive losses this week, as all three major indexes plunged with little support from any sector. The Dow Jones Industrial Average sank 5.4 percent for the week; the Nasdaq Composite shed 9.3 percent; and the S&P 500 knocked off 6.8 percent.

I don’t think “dramatic” is quite a strong enough term to describe this week’s market action--from the phenomenal Columbus Day rally, the largest one-day points gain ever for the Dow Jones Industrial Average, to Wednesday’s crater, the largest decline since 1987. But, thankfully, we’re closing on a positive note, as Google reported solid earnings and energy stocks rallied almost 3 percent. An op-ed piece by the Oracle of Omaha touting the US as the place to be certainly didn’t hurt, either.

At this stage of the game, there’s no denying that we’re in a recession. The only real question that remains is how deep it will be and how long it will last. Global markets are in a downward plunge, prompting several countries such as Russia and Indonesia to close their exchanges. Oil has dipped below $80 a barrel, hitting a new one-year low, and the prices of a broad range of commodities have been in rapid decline on demand concerns. All three of the major US stock indexes have fallen to levels we haven’t seen since the nation’s last recession earlier in the decade, though this is setting up to be worse.

Despite the fact the House of Representatives passed the economic recovery bill earlier today, continued problems in the banking and credit markets generated an across-the-board loss for all three major indexes. The Dow Jones Industrial Average shaved off 7.4 percent for the week; the Nasdaq Composite shed 10.8 percent; and the S&P 500 bled out 9.4 percent.

With the seizure of Washington Mutual yesterday and the continued foot dragging on a federal bailout, all three indexes once again posted sizable losses for the week. The Dow Jones Industrial Index, including its newest component Kraft Foods--which replaced AIG Sept. 22--gave up 2 percent for the week, the S&P 500 took a loss of 3.2 percent and the Nasdaq Composite plunged 4 percent.