THOUGH WALL STREETERS love to denounce the government as a bothersome and inept intruder on economic affairs, they change their tune when the markets hit a rough patch. No finer example of this contradiction can be found than last week's initial reaction to the Federal Reserve's surprise cut in interest rates. Within seconds of the announcement, stock prices headed skyward and paeans to Alan Greenspan's magical powers issued from the lips of traders and money managers. Bruce Steinberg, Merrill Lynch's chief economist, was widely quoted as saying, "The Fed won't permit the U.S. economy to go down the tubes."

Actually it was the NASDAQ that was going down the tubes, but brokerage-house analysts sometimes have a hard time telling the stock market from the real world. But over the last month or two, there'd been a cascade of signs that the economy was stumbling. Employment growth, which had been strong from 1993 through the first half of 2000, slowed markedly at year end. Dot-coms were collapsing, retailers had a cheerless Christmas season, and surveys of corporate chief information officers showed that firms were sharply throttling back on their plans to buy new computers and other high-tech equipment -- the very gadgetry that had helped drive the expansion and fuel exuberant narratives about the New Economy.

Of course, one of the major reasons for that slowdown was the series of interest-rate hikes that Greenspan's Fed had engineered throughout 1999 and early 2000. Greenspan had been worrying publicly for several years about the dwindling "pool of available workers," as he frequently put it. Such a shortage might lead to -- gasp! -- wage increases, which could, Greenspan helpfully explained, bring "our growing prosperity to an end." So, to head off that dire fate, Greenspan & Co. pushed up interest rates, leading first to some serious stock-market carnage, and then signs of a weakening of the real economy. Dr. Greenspan's cure, it would seem, also threatened to bring our prosperity to an end. So now our economic physician comes in with another cure -- a reversal of the course that had seemed like just the right regimen only a few months ago.

Greenspan hasn't died yet, but it looks like nearly everyone is ready to canonize him. While we're all supposed to be celebrating the beauties of the unfettered free market, we're also supposed to revere a public servant -- a very well-paid one who runs a branch of government that earns an annual profit of twenty billion, but still a public servant -- as the wizard who keeps it all going.

A brief review of his record might inspire some second thoughts. During his term in office (which began in August 1987), we saw the great stock-market crash, the final years of the Roaring Eighties leveraging mania, the climax of the savings-and-loan debacle, a long economic stagnation (roughly coinciding with the first Bush presidency), the famous "jobless recovery" of the early 1990s, and several killer international financial panics (Mexico in 1994, Asia in 1997, Russia in 1998). If this is a godlike record, I'd hate to see what a mere mortal's would be like.

But all that is history (as that curiously American way of consigning something to insignificance puts it). The big economic question of 2001 is just how this little slowdown plays itself out. Wednesday's impassioned reflex rally in the stock market didn't survive into Thursday, and most of the gains were undone by Friday. Maybe Dr. Greenspan's medicine will take some time to work, maybe the patient needs a few more doses, or maybe it won't work at all. Friday's employment report had a hint of a nightmare about it for the Fed, with December's job growth weakening further from earlier months, but with wages showing surprising gains -- a combination that revived memories of 1970s-style stagflation. If the boom that seems to be ending was a bubble of truly historic proportions, then we might be in store for a version of what Japan has been living through since its great bubble burst in 1989: a stagnation that has so far proved fairly immune to some of the lowest interest rates in recorded history. But the Bank of Japan isn't run by Alan Greenspan, which may explain everything.