Below The Beltway

President Bush said today that he sees a “tough” time ahead for the economy:

Trying to calm jitters about the economy, President Bush conceded on Friday that the country “obviously is going through a tough time” but expressed confidence about a rebound.

In a speech to The Economic Club of New York, Mr. Bush said this was not the first time the economy had been rattled and he is certain that it will ride out its troubles. “These are uncertain times,” he said.

The president spoke as evidence of an ailing economy piled up. The dollar fell, oil and gold hit record highs, the economy is shedding jobs, retail sales saw a big drop and the effects of a severe credit squeeze linger. Economic worries have replaced the Iraq war as the No. 1 concern of voters in this presidential election year.

“Every time, this economy has bounced back better and stronger than before,” Mr. Bush said, showing his optimism about the resiliency of the economy.

As if to underscore the precarious position we’re in right now, on the same day that Bush was speaking, the Federal Reserve and J.P. Morgan Chase joined together to save one of the country’s biggest investment banks:

Bear Stearns, facing a grave liquidity crisis, reached out to JPMorgan on Friday for a short-term financial lifeline and now faces the prospect of the end of its 85-year run as an independent investment bank.

With the support of the Federal Reserve Bank of New York, JPMorgan said in a statement that it had “agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days.”

For the next month, JPMorgan will work with Bear Stearns to reach a solution for its financing crisis. Options could include organizing permanent financing or, according to people briefed on the discussions, buying the bank for a discounted price.

“JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company,” JPMorgan said in its statement.

The rescue plan represents a devastating if not ultimately final blow for Bear Stearns, a scrappy and until now resilient investment bank that carved out a niche for itself by mastering the intricacies of the United States mortgage market.

But after two of its hedge funds that specialized in the subprime mortgage market collapsed last summer, Bear’s expertise became its Achilles’ heel as the plummeting market for complex securities tied to subprime mortgages severely damaged its core business.

Understandably, the Bear Sterns bailout has set the stock market on a roller coaster ride.

Meanwhile, the dollar continues to fall and gold reaches heights never seen before:

It was a historic day for a historic metal. Gold — pride of kings, undoer of men and one of the world’s earliest currencies — has gone through an immense price run-up in recent months. And on Thursday, the treasure of millennia finally ticked past the millennium mark.

The metal peaked at $1,005 a troy ounce before noon. It fell back by day’s end, with the June contract settling at $998.70, its highest nominal close, but below its inflation-adjusted peak, reached in the early 1980s after a series of wars, oil shocks and a deep domestic recession.

We’ve seen this before, it’s called a flight to quality.