The stock market correction I've been expecting for several months is finally upon us. Thursday's 3.1% drop in the Standard & Poor s 500 index was the worst one-day decline since June of last year and the third worst in the bull market off the March 9, 2009 bottom.

Why the panic? There's the ongoing saga of Greece and Portugal, two troubled economies that are having a hard time financing their national debt. I'm not really sure what all the fuss is about. These are tiny countries with tiny debts.

There are plenty of wealthy individuals around the world -- people like Bill Gates -- who could solve their problems just by writing a check. We're not talking a really big-ticket item here, like bailing out Fannie Mae and Freddie Mac.

And is anyone really surprised? In their new book "This Time Is Different," economists Carmen Reinhart and Kenneth Rogoff demonstrate with hard data that, over many centuries, financial crises have always been followed by sovereign debt defaults. And besides, Reinhart and Rogoff say that over the last two hundred years, Greece has been in some kind of debt default about half the time.

Maybe the problem is that the European Central Bank -- Europe's equivalent of our Federal Reserve -- announced that they would be making no change in their official interest rate of 1% or any of their other policies. That would seem to be good news for Greece and Portugal. Yet many market commentators made it seem as though the ECB was moving to "tighten" policy. At the same time, the Bank of England -- the Fed of the UK -- also decided to leave rates unchanged. But it also announced it was not going to increase its purchase of government bonds -- at least not for now. That, too, was widely interpreted as "tightening." I have no idea why merely declaring that the central bank won't become more loose is the same thing as saying it is tightening.

The ECB and the BoE are not going to tighten. They're not going to make life harder for Greece and Portugal or other larger troubled European economies like Spain.

China isn t going to tighten, either. But there too, there have been many rumors of it. China is facing massive capital inflows from around the world as global investors throw money at the country they think has the best growth story in the world. So the authorities are clamping down a bit on the really stupid lending excesses. That's not tightening.

The Fed isn't going to tighten, either. Like the BoE, it's reached at least a temporary end in its bond-buying program initiated in late 2008. But that doesn't mean it's going to tighten policy by selling those bonds or raising interest rates. In my opinion, rates are going to stay at zero all year, and the Fed won't sell a dime of its assets. If anything, it will buy more.

Why? First, the global economy is just too fragile. Look what happens when there's a whiff of tightening expectations -- the global markets have a heart attack. The Fed doesn't want that when the recovery from recession is still so tenuous.

The Fed won't be deterred by last week's report that the U.S. economy grew at a 5.7% rate in the fourth quarter of 2009. That's a nice number -- at least if you don't look too far below the surface. If you look closely, it's good but definitely not great.

More than half the quarter's growth came from inventories. No, not manufacturers creating lots of new inventories because they expect sales to pick up and they don t dare miss out. Quite the contrary. All that happened last quarter was the businesses liquidated their inventories at a slower pace than they had in the prior quarter. That counts as positive growth, in the strange (but sensible -- trust me on this) way that they do GDP accounting.

Besides, there's nothing so great about inventories. The bigger inventories are today, the less we ll need to produce in the future. That's why, historically, quarters where there have been huge inventory gains have been usually followed by very weak quarters. Based on the size the inventory gain in the fourth quarter of 2009, using historical averages as our guide, GDP in the first quarter of 2010 ought to be about 1%. Pretty anemic.

And then there's the labor market. You might have seen the headlines this morning. The unemployment rate fell to 9.7%. At least it fell, but 9.7% is a huge number. A sign of progress to be sure but at the same time 20,000 payroll jobs were lost. It takes about 80,000 new jobs every month just to keep up with the growth of the labor force (from immigration and children reaching working age). Add to that the probability that people who left the labor force in disgust last year might come back once a little bit of recovery sets in, now you've raised the bar to something like 230,000 jobs a month just to break even. Let me be clear. We can add 230,000 jobs a month, every month, this year and the unemployment rate will still be 9.7% at year end.

Now, if you're Ben Bernanke, the chair of the Fed, you look at that stark fact and your life suddenly becomes very simple. You leave interest rates at zero. Period. It's not even really a serious question.

By law, the Fed has to try its best to deliver maximum employment and stable prices. Right now inflation looks under control, so the Fed is free to concentrate exclusively on jobs. How convenient. The Obama administration and Congress are suddenly concentrating exclusively on jobs, too. So for the Fed to continue its extraordinarily low interest rates for the rest of the year, that will fit right in with the spirit of the times. It's practically the Fed's patriotic duty.

OK, what does all this mean for investors? It means that this scary correction in stocks is only that -- a correction. Stocks got ahead of themselves mounting the fifth best rally in the history of the stock market. We're long overdue for a little discipline. But there's no way that we really break down and break -- or even really test -- the lows of last year. There are just too many safety nets now, such as the Fed's easy-money policies.

So now the art is picking the entry point. There's no science to it. It's all just art. My gut tells me that we're not done yet. I'd like to see another 10% decline in stocks, or even more, to really scare everybody and create a nice low base. The correction will be done when fear is maximized.

It's possible we're there already. Thursday was scary. But come on -- after last year and the worst days of 2008, it was a walk in the park. We can do better. But you never know, so maybe if your orientation is intermediate or long term you should consider starting to at least nibble at stocks.