It was as if the party had been thrown to mark the end of an era. It was last weekend, on Park Avenue, and the sort of bash middle aged adults like to throw to show they are still on top of their game, still capable of getting up on the dance floor and gyrating to recapture their lost youth.

Click Image to Enlarge Paramount Pictures DANCING LIKE THERE'S NO TOMORROW A party scene from 'The Great Gatsby' (1949).

My fellow guests were mostly money people, hedge fund managers, bankers of one sort or another, investors in commercial real estate, people who until the last couple of weeks thought nothing of shelling out on a faster boat or renting a large house in the Hamptons for the summer and hang the expense. As they bopped up and down to the band, it was as if they were enjoying one last summer.

The men were mostly putting a brave face on it. Whatever their personal circumstances, and no one was letting on how badly they were affected, the bad debts and junk paper that had clogged the economy like a bad program frozen on a computer screen became an excuse for gallows humor. But for the first time I noticed a restrained hysteria in the air.

Some of the wives, used to spending a whopping annual bonus one Christmas after the next, could barely hide their nascent anxiety. It was as if they felt the wolf prowling outside the door. For once they knew people  not just friends of friends, but friends  who had been turned out of a job, or who had put their homes on the market, or were wondering where the school fees were coming from.

The meltdown in the financial markets spells the end of an epoch, and not just for Wall Street. The age of Reagan is winding up. The 30-year period born of the hyper inflation and national malaise of the unlamented Carter years has come to an abrupt end. The age of unfettered markets, cheap money, low inflation, low public expenditure, low taxation, and low unemployment has hit the buffers.

There are few defenders of the old system. President Bush has abandoned economic policy to the Treasury Secretary, Henry Paulson, and the Fed chairman, Ben Bernanke, and whatever they say goes. When the pair took the president their $700 billion plan to buy the banks' bad debt with taxpayers' money, Mr. Bush made no attempt to push back. As one official recorded, "The president said, 'Let's do it.' There was no hesitation."

Both presidential candidates are taking it in turns to blame the "greed" and "excess" of the financiers who caused the markets to gum up. Both insist what is needed is tighter regulation. Never mind that the last panic driven regulations, the Sarbanes Oxley rules, rushed into law in the wake of the Enron scandal, have burdened small businesses into bankruptcy and frightened public offerings across the Atlantic to London. John McCain even thinks a Democrat, Andrew Cuomo, son of the Democratic grandee Mario Cuomo, would be the best person to police the market.

Barack Obama offers more than regulation. He has lined up a team to spend vast amounts of taxpayers' money to stimulate the economy. Nothing has been suggested on this profligate scale since Lyndon Johnson's Great Society hosed dollars at the nation's problems, to little avail. The days of Ludwig von Mises, Friedrich von Hayek, and Milton Friedman have been put on hold; the advocates of unabashed, big spending Keynesianism are waiting in the wings.

Take this wish list, from the former Clinton Treasury Secretary Larry Summers to Charlie Rose: "Getting out of this recession, reforming the health care system, achieving a better set of outcomes on energy efficiency and reduced vulnerability from abroad, responding to inequality." The projects may sound like good ideas  rebuilding our out-dated infrastructure, switching to solar energy, "investing" in public education  but they all are to be paid for out of funds borrowed on the international bourse.

The inevitable result will be inflation, an even weaker dollar, and the nation digging itself deeper in debt to the Chinese and the Middle Eastern "sovereign wealth funds."

There is a second, important element of the age of Reagan that has also been lost. After the collapse in national will that followed our defeat in Vietnam, Reagan discovered a renewed sense of American purpose that was soon evident both at home and abroad. When he increased defense spending and put the missile defense shield on the fast track, the Soviet leadership rushed to the conference table laden with concessions.

Now Russia is back. The Soviet empire may be gone, but Vladimir Putin's Russia is on the march, spurred by hurt pride and soaring oil revenues. Despite Nicolas Sarkozy's blustering attempt to invoke the Franco-Russian special relationship, Russian troops remain permanently stationed in Georgia.

The government of Ukraine is in turmoil in the wake of Russian threats. Moldova endures Russian occupation. The Baltic states, who have suffered Russian assaults on their communications, live in fear of being integrated back into Russia.

Yet America has little appetite for another war on another front. When Senator McCain says he is prepared to defend Georgia, just as soon as it joins NATO, his opponents point at Iraq and Afghanistan. This is the perception of Mr. Bush's legacy, as he prepares to retire to Austin, Texas. Two unpopular wars and a mismanaged economy have undone Reagan's good work and left us inhibited from doing what may be necessary and right.

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