Allen Greenspan once coined the phrase “irrational exuberance” about the 1990s stock market rise. The opposite can be said about the current stock market and the economy. I call it irrational despair.

No, I’m not trying to be a “bag of downers,” as my old friend John Houlihan used to quip. To the contrary, I’m trying to give us some realistic guideposts.

Think about this. Just as we once thought real estate prices could never stop rising, we now believe they can’t stop falling.

We’re like my new puppy; his name is Nike. He’s a six months old Malti-Poo. (I call him a six month old multi-poop.) When we leave him in his kennel to go to work, he yelps and cries. We come home a few hours later — every time. Yet, the next time we leave he still cries and yelps like he’ll never see us again. He is so frightened he can’t remember.

The economy will come home. The fundamentals are there: only five percent of the work force is unemployed; and productivity is still up.

Sure, the economy stinks right now. Nothing lasts. The credit markets have everyone wondering where’s the capital to get business activity moving again. I’ve spoken to people who have jobs, credit, and cash who can’t get mortgages or business loans. The truth is no one wants to lend to anyone right now.

Well, what did you think after the bender we just went on? After a night of heavy drinking would you guzzle a bottle of scotch when you first wake-up? We were giving mortgages to people who couldn’t afford a porch. We were like the bartender who gets paid by the glass he pours. The credit markets and their investors are not just hung-over; they’re going through the D-Ts and the dry heaves. Give them time. They’ll be back.

The problem is not necessarily the mortgage-back securities that are so under scrutiny. Sure, they did their damage. But these instruments are great ideas. They offered more chance at home ownership by spreading the risk. The problem was the lack of oversight by government and industry. The Economist had a great piece on this. There are lessons to learn the next time. And trust me; the next time the credit market comes back they will be guarded. In other words, to get a loan be prepared for the equivalent of a colonoscopy.

Until then, it seems the credit market is refusing to partake in any sustenance whether it’s booze or just plain old water. At some point, they have to take some nourishment. Things will improve. Sure, the government may have to step in and offer mortgage relief. Right now, a recession is far worse than inflation or government over-spending.

Also, look at the price of oil. It’s still around $100 a barrel. That’s horrible, yes. But wouldn’t you think if we’re in a recession (who knows?) that the price of oil would start dropping? Surely it would go down to $80 a barrel. But no, it hasn’t. That means two things: first, there is some economic activity happening around the world to keep the price up; or two, the price of oil is not coming down. I think it’s both.

Here’s why. Despite all the hatred we have toward OPEC, there is only so much the oil ministers can do to drop the price of oil. Increasing production will only drop the price so much. The problem is this: the worldwide demand for oil from China and India will keep oil prices high. The only way prices go down is by reducing demand. And we are doing very little here.

We have to do one of these three things: 1.) stop driving our cars; 2.) raise gas prices by an additional $1 a gallon and use those revenues to find alternative sources; 3.) start drilling in the United States including ANWAR, the Gulf of Mexico, and start producing oil from shale in the Mountain West.

If we don’t do one of these three things, then let’s stop complaining about oil prices. If we want our economy to continue pumping, then we need to sacrifice our pristine lands – not the coast lines and mountains of Third World countries.

I’m as much an environmentalist as the rest of you. But I’m also a realist. And to stop drilling in our backyards is arrogant.

So despite this despair there is something we can do about it. And guess what? We’re going to have a new president and a new Congress. Gulp.

I’ll have more on that not so irrational despair in the next post.