Double Dip threat is back?

A long while back, I wrote that I believed we would face a double-dip recession, though I certainly got the time-frame wrong.
Krugman just put up a post on the same issue, and it made me think about why we might still be facing this "W" shape recovery. It relates strongly to Brenner's paper below: we're running out of ways to stimulate business activity. There does not seem to be a bubble left to inflate. When government stimulus runs out (and I don't think we'll see another stimulus package - doesn't seem politically feasible right now) next year, who will spend? From Krugman:

Two stories this morning highlight the risks. The WSJ has a report on highway construction titled Job Cuts Loom as Stimulus Fades:

Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation’s weak employment picture.

Meanwhile, the ISM for manufacturing suggests that industrial growth is already slowing down.
I’d be more sanguine about all of this if there were any indications that private, final demand is taking off — consumers, business investment, whatever. But I haven’t seen anything suggesting that sort of thing.

Also, deflation is still looming. Japan is already there. America faces the prospect as well, though if the Treasury keeps pumping out dollars, we also face a risk of inflation down the road. Take a look at this, which has more on double-dip risk (emphasis mine):

The Fed has to do one of two things: They either have to pull $1.5 trillion out of the system by June, which would collapse the economy, or face hyperinflation. This is why the Fed has instructed banks to inform them when and how much of the TARP funds they can return. At best they can expect $300 to $400 billion plus the $200 billion the Fed already has in hand.
We believe the Fed will opt for letting the system run into hyperinflation. All signs tell us they cannot risk allowing the undertow of deflation to take over the economy. The system cannot stand such a withdrawal of funds. They also must depend on assistance from Congress in supplying a second stimulus plan. That would probably be $400 to $800 billion. A lack of such funding would send the economy and the stock market into a tailspin. Even with such funding the economy cannot expect any growth to speak of and at best a sideways movement for perhaps a year.

Their belief goes directly counter to my belief that we will not see a second stimulus plan. If we do not, as I believe, we face the deflationary threat and a true double-dip. If, however, another stimulus plan is passed (which seems more and more necessary, though I still think is too politically unacceptable in the short-term), we may be okay for a while yet.

I know this is a highly doom-and-gloom scenario. Hopefully, I'm wrong, and the world economy recovers more smoothly than I expect.

Also, I wanted to post a short follow-up to the Brenner post below. One thing his analysis does is completely destroy the China-decoupling theory. Note that it was a far more popular theory before the recession than it is now, but it does still get some mention. I think the Brenner write-up finishes it off in my mind, but here's some more on it anyway: The China Decoupling Myth.