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MELISSA BLOCK, host:

We're going to review this past week of economic news with two columnists. Sebastian Mallaby, who writes for The Washington Post and is a fellow at the Council on Foreign Relations. Welcome, Sebastian.

Mr. SEBASTIAN MALLABY (Columnist, The Washington Post; Fellow, Council on Foreign Relations): Good to be with you.

BLOCK: And Newsweek columnist Daniel Gross, who joins us from Davos, Switzerland, where he's attending the annual World Economic Forum. Daniel, thanks for being with us.

Mr. DANIEL GROSS (Columnist, Newsweek): Glad to be here.

BLOCK: And Daniel, I'm going to start with you. In your upcoming article for Newsweek, you call this the great global market freakout of 2008. That's a scientific term, I assume?

Mr. GROSS: Oh yeah, I think Keynes made that one up.

BLOCK: How do you measure this — the freakout that you're talking about, there where you are in Davos? What are the signs?

Mr. GROSS: The sign was that, you know, everybody comes here from around the world. A lot of business people, I think, they're going to kind of check out from the, you know, daily part of their life and focus on things like malaria and these really big picture issues, maybe do a little skiing. But basically, all everybody was doing was looking at their BlackBerrys, calling portfolio managers, looking at stock charts. In other words, they couldn't really leave the office because things were moving so quickly in their absence.

BLOCK: They couldn't decouple, I guess. And that's what I wanted to turn to Sebastian Mallaby with. We keep hearing this word, decoupling, referring to whether economies in Asia or Europe can keep on growing even if the U.S. economy slows down or is in a recession. Do you think, Sebastian, that this week provides an answer to that question?

Mr. MALLABY: Hmm, I'm not sure it really does. I mean, this week, quite separately to the financial markets, did produce a growth statistic out of China, which was that China is still growing at a rate of more than 11 percent a year. So a pretty healthy growth there. But I think what we really learned from last week is more that the focus of the concern is not so much on the real economy, not so much on whether house prices are going to go down by five percent or 10 percent or what. It's really on the financial market reverberations from that real estate market bust and whether things blowing up in the financial markets will then feed back on to the real economy.

BLOCK: Daniel Gross, what do you think?

Mr. GROSS: Well, I think, here in Davos, the vibe I've been getting, especially from Indian and Chinese leaders and business people, is that the decoupling has already happened. There is this sort of presumption that the U.S. may have stalled. They look with us at a little bit - with a little bit of pity and scorn at the way we've mismanaged our financial affairs. And there's a great deal of optimism among these emerging market economies that they will continue to do well even if demand from the U.S. drops off.

BLOCK: Sebastian Mallaby, we saw the global market chaos this week tempered, at least in part, by an aggressive interest rate cut by the Fed on Tuesday. Some are seeing this as a very smart move by Ben Bernanke to try to save the global economy, and others say this was a move of desperation. Well, what do you think?

Mr. MALLABY: Well, there was a famous amendment in Alan Greenspan's tenure when the markets were also swooning and there's a meeting of the Fed where Greenspan said, we have a choice here, if we cut very aggressively, we risk making it obvious that we are setting up a policy as a tool to stabilize financial markets. What if that fails? I would rather cut by less, get the blame myself, and people can say that policymakers don't understand. That's better than saying that the policy tool is broken.

And I think Bernanke's risk was he held this very, very dramatic meeting which was not a scheduled meeting, he offered the biggest interest rate cut in one fell swoop that we've had in a quarter of a century. And so if it hadn't worked, he was risking the perception that the Feds interest rate tool was too weak to fix the problem.

BLOCK: And Daniel Gross, your perspective on that interest rate cut from there in Davos, what are you hearing?

Mr. GROSS: Well, again, I think that's what makes this the great market freakout. From here, it looks as if Bernanke saw the Dow futures were down 600 points, about 5 percent, and came out with the 75 basis-point cuts. Now, we're getting word that it may have been inspired - this whole downturn - by the unwinding of some trades in France due to a fraud perpetrated by a trader…

BLOCK: This is the $7 billion worth of fraudulent trading at Societe Generale, the French bank.

Mr. GROSS: Yes. And had the perception that the activities of a midlevel rouge trader in Paris are in effect triggering really dramatic actions by the most powerful central bank in the world. And I don't think that reflects well - certainly not on Societe Generale, not well on France, and not particularly well on the Feds.

BLOCK: This week, there was an economic stimulus deal worked out here in Washington - tax rebates, tax breaks for businesses. Do you think this will work in easing concerns about the U.S. economy and where its headed? Sebastian Mallaby?

MR. MALLABY: Well, this stimulus package is not going to take effect immediately, even if Congress can pass it fast and the president signs it fast. It won't be until May that the first checks go out, and it won't probably be until the summer, July, although bad, until the last ones reach people. So the effect on the economy is going to be bunched pretty much into the second half of the year. Of course, there could be a psychological effect before that, but I don't think we should expect too much from this stimulus.

BLOCK: I'm curious, Daniel there in Davos, are people talking about the stimulus package? Are they seeing this as a sign that the United States is moving back on track?

Mr. GROSS: Well, again, I think the striking thing for me is the sort of absence of really intense discussion about U.S. fiscal policy. It's more exciting to talk about the places that are growing rapidly than to talk about the places that you think might be slipping into recession.

BLOCK: You're saying we've become last year's news or last decade's news?

Mr. GROSS: I think we were last forum's news.

BLOCK: Daniel Gross and Sebastian Mallaby, thanks to you both.

Mr. MALLABY: Thank you.

Mr. GROSS: Thank you.

BLOCK: We were talking with Daniel Gross, who writes about business and finance for Newsweek and Slate. He's at the World Economic Forum in Davos. And with Washington Post columnist, Sebastian Mallaby, who's also with the Council on Foreign Relations.

MICHELE NORRIS, host:

And you can follow a timeline in the past week's economic trouble and learn about the steps to allay investor worries. That's at npr.org

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