You know things are bad when the president of the United States publicly employs words such as liquidity, previously the sole property of denizens of the globe's financial markets and a few academic economists.

When words from the global Wall Street make it to Main Street, it's because there's a problem, a big one.

Still, the stilted jargon Friday morning of the U.S. Federal Reserve likely meant more to shell-shocked global traders than the reasonable assur- ances of President George W. Bush about sound economic "fundamentals" underlying seized-up credit markets and declining equity prices.

The Fed said it is "providing liquidity to facilitate the orderly functioning of financial markets," adding that it will "provide reserves as necessary through open market operations. . . . " Music to the ears of those worried about the spiraling impact of global unease with all sorts of transactions that grease the daily, interlocked financial market flow.

Still, it is no panacea. We are to a large degree in the realm of imperfect human psychology here, and fear is the dominant emotion.

So even such Fed reassurances provoke this contrary thought among some: Things must be really bad if the Fed felt obliged to make such a rare statement, with open market actions to support it. Growing numbers think interest rate action will follow.

Tuesday, when the Fed acknowledged what was then less-fervent market tumult but held fast in its anti-inflation view, seems long ago from the vantage point of Friday.

Even lower short-term U.S. interest rates ahead won't make this week's issues entirely go away. There is a severe readjustment to risk going on, and it won't be without pain. Its dimensions aren't now known.

Beyond that is a more immediate issue: All sorts of institutions don't want to lend, don't want to sell, can't offload risk in ways that they so recently could. They will have a hard time finding financing for all sorts of transactions, including corporate acquisitions.

This was summed up nicely by the bond guru, William Gross of Pimco, as quoted in Friday's New York Times: "Our current system of levered finance and its related structures may be critically flawed. Nothing within it allows for the hedging of liquidity risk, and that is the problem at the moment."

Just about nine years ago, after the global market mayhem spurred by Russia's default, then-Fed Chairman Alan Greenspan said: "What is occurring is a broad area of uncertainty or fear. And when human beings are confronted with uncertainty, meaning they do not understand the rules or the terms of particular types of engagement they're having in the real world, they disengage."

Human nature and markets haven't changed much since then.

What further will be wrought by the widespread securitization of mortgage-related debt, its broad dissemination, and the upheaval that follows a severe re-evaluation of its creditworthiness? But that's not all that's going on. We read of hedge funds with long-short equity positions that are unwinding to a degree amid losses because of programmatic miscalculations of risk.

This harks back to that old chestnut that no one is ever wrong in financial markets, just early.

So you can replay the years of warnings from regulators, market seers and others that the mushrooming of hedge funds, the significant investment dollars they attracted, and the tendency for many to adopt similar trading strategies at some point would mean trouble.

Too many reaching for harder-to- obtain "alpha," or returns above general market averages, means more risk, often more leverage.

Too many imitating each other's strategies means a rush for the exits when things go awry, or worse, a rush if you have an inkling that things might turn sour because you know how many hedge funds are in the same room and the exit door won't accommodate nearly all of you at once.

Another thing about the kind of broad uncertainty we are now experiencing in global markets: Time gets compressed. Price movements usually reserved for months can happen in minutes, and a summer Friday holds a ton of anxiety.

Neal Lipschutz is senior vice president and managing editor of Dow Jones Newswires.