As I predicted in this space four times earlier this year, October has begun with the sort of serious stock-market instability that could portend another financial crisis.

The difference between a mere “major market correction” and a true crisis is important, though. The latter scenario usually arises when the former situation causes panic. The key to riding this thing out will be to avoid that reaction. President Trump’s wild assertion Wednesday (about the nation’s central bank) that “the Fed has gone crazy” is exactly the wrong message. It only feeds a damaging panicky psychology.

To be clear, the markets are falling — the worst NASDAQ start to a fourth quarter of a year since 2008 — for very good reason. Rapidly-climbing bond yields and higher labor costs threaten to tighten profit margins considerably in the coming months. Both China and the United States are starting to feel the negative effects of trade tensions. (The recent, tentative agreement to update NAFTA ameliorates the damage Trump’s trade-war talk had been doing, but the Wall Street Journal is right that it still would on balance do more to hurt than help the U.S. economy.) Inflation, while still lower than many (including me) predicted, is seen as approaching a full gallop, with some key supply companies recently announcing price hikes.

Hurricane Michael sent share prices of insurance companies downward. Added web-security costs for tech companies are among factors worrying that industry. Big-box retailers like Sears continue to suffer as sales shift to online suppliers, and home and auto sales have been slowing (or slightly falling) for other reasons.

And yes, market-driven interest rate hikes, which the Federal Reserve’s own rate hikes are partly reacting to, hit “developing markets” such as Latin America particularly hard, which in turn has ripple effects on our own economy.

The biggest problem, though, is that if investors start losing serious money in a cascading market sell-off, both the U.S. and international economic systems are not in position to finance more debt. (This was the primary focus of my four warning columns mentioned earlier. And Sheila Bair, former chair of the Federal Deposit Insurance Corporation, warned about the same thing four weeks ago.) Both private and government debt, in the U.S. and worldwide, are at historically high levels.

The federal government just posted a whopping deficit of $782 billion for Fiscal Year 2018, an unprecedented level for a time of full employment, and is projected to tickle the shocking $1 trillion dollar mark in 2019. Congress just keeps spending in an out-of-control fashion, and Trump keeps signing their bills.

All of the reasons above explain why, after a very long period of stock market growth, a “correction” is now beginning. While at some point a correction is inevitable, this conglomeration of factors probably will make the market downturn a bit steeper than ordinary (even despite the countervailing, positive effects of this past year’s corporate income-tax cuts).

But the Federal Reserve is in a bind. Longer-term inflationary pressures are real, and interest rates remain quite low by historical standards. If the Fed doesn't follow through with its anticipated additional small rate hike later this year, it risks letting inflation take a big sudden leap that would catalyze even larger, more potentially punitive interest-rate hikes down the line.

Better to keep cool, follow the current plan, and perhaps announce when that last hike of 2018 is implemented that the series of hikes will afterward take a pause to allow markets to stabilize. After all, even a federal funds rate of 2.5 percent (where it would be after one more raise) is so far below the post-1960 norm as to look historically dove-ish versus inflation, and expansionary rather than economically contractionary.

But, as we saw in 2008, if people panic, a bad economic hiccup can turn into the financial equivalent of cardiac arrest. If people and businesses see even minor interest-rate hikes, from an already-low level, as a major threat to their investments or well-being, they might pull back from economically productive activity in fear, creating a vicious cycle that makes a serious downturn a self-fulfilling prophecy.

That’s why Trump is foolish to call the Fed “crazy” or “loco.” Just when markets need reassurance that the Fed’s actions are rather run-of-the-mill, and hardly something worth a significant fret, the president of the U.S. acts as if the sky is falling.

This economy is in legitimate trouble. But if Trump overreacts like Chicken Little, he could turn trouble into full-blown catastrophe.

Quin Hillyer (@QuinHillyer) is a contributor to the Washington Examiner's Beltway Confidential blog. He is a former associate editorial page editor for the Washington Examiner, and is the author of “The Accidental Prophet” trilogy of recently published satirical, literary novels.