Chronogtz, It is a bit old fahioned, but "why" is still in use as an interjection. Why is used as an interjection before a sentence to show suprise or annoyance, as Peachey stated. It also can be used to emphasize or call attention to the statement that follows. It is used in anticipation and opposes a possible objection or doubt. -WHY, “the people began to brace themselves upon the words of the King”! (Why would anyone think otherwise?) -Not a doubt. Why, it stands to reason. (Why would anyone think otherwise?) GLINDA Are you a good witch, or a bad witch? DOROTHY -Who, me? Why, I'm not a witch at all. (Why would anyone think that?) I'm Dorothy Gale from Kansas.

To add to what Peachey said: In these instances, you can usually substitute "well" for "why" and have the exact same meaning. Well, of course! Well, that's terrible! Well, the people began to brace themselves... I hope this helps you to understand the usage of "why" in your example.

It's an exclamation, usually meaning surprise or annoyance. Why, of course! Why, that's terrible!