The next recession could be around the corner, and the Fed isn't ready for it

Around the world, markets are in chaos. Japan's stock market plunged 5 percent on Friday, while markets in France, Germany, and the UK all saw big losses on Thursday. The US stock market is doing better than most, but it is also down since the start of the year. Oil hit a new low on Thursday of $26 per barrel.

These declines reflect growing concerns that the world economy is headed for another recession. Before 2007 we’d say, "If things get bad, the Fed will cut interest rates." But with...