Oh woe! Oh woe! O! Bama! Where is thy recovery? Yesterday, the world’s stock markets took a hit. The Dow lost 186 points… following a very bad showing in China. Is this the end of the rally?

Could be. We’re not betting one way or the other. But we’re pretty sure this rally is going to end… and end badly… sooner or later. So far, the rally surpassed the rally in ’29 by a few weeks… but has not quite reached its magnitude. It will need another few hundred points to reach the ’30 level.

But when the rally is over… then what?

Despite the fact that a majority (!) of economists polled by the Wall Street Journal say the recession is already over, there is no durable recovery.

Nouriel Roubini explains why:

“Data from the US—rising unemployment, falling household consumption, still declining industrial production and a weak housing market—suggests that the US recession

This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest.

• Andy Kessler (The Wall Street Journal): The Bernanke market, July 16, 2009, We won’t get real growth until Congress and Treasury get policy right.

• Irwin Stelzer (Times Online): American account: Barack Obama’s cures may just kill any recovery, July 12, 2009.

• Paul McCulley (Pimco - Global Central Bank Focus): What if?, So what should Washington do, if and when - and I stress “if and when”; I’m not making a forecast here! - private sector aggregate (nominal) demand growth looks like it’s going to languish in Japan style for the indefinite future? The answer: Take one cup of Krugman’s advice for Japan and two cups of Bernanke’s advice for Japan - responsibly