This writer, so pessimistic about the outlook in 2008 and during the first few months of 2009, admits to being unnerved by the recent strong recovery in both equity and commodities markets.

Fortunately, being in Sydney rather than Canberra, self-doubt was possible as things took a turn for the better.

In fact, I have gone out of my way in recent weeks to be jolly, to look for all the good signs, cheer on the “green shoots” and nod in agreement with the bullishness of all those to whom one speaks.

After all, those thousands of retail investors, plus all those institutional whiz kids and “sophisticated investors” who have poured million upon million into resource company placements and share purchase plans couldn’t possibly be wrong, could they?

The analysts are chirpy. By 2010, we’ll all be off to the races, they say.

They are taking great heart from such data as China importing 399,883 tonnes of copper in April, up 66% year-on-year and a monthly record.

Almost everyone has taken great comfort from the synchronised action by central banks to pump liquidity into national economies. That was one lesson everyone learned from the 1930s.

So, everyone thinks, a repeat of the episode that began in October all those 80 years ago can be averted this time.

Apart from the perma-bears, the consensus is that things are going to be choppy but we’ll all come out intact. So let's open another bottle of cab sav and forget our problems.

But there are worrying signs. Maybe something could happen to threaten the prospects for near-term economic recovery and, by implication, metals and the mining sector.

After all, the much-watched Vix volatility index is on the rise and there’s scant sign of increased economic activity in the US.

Apart from the liquidity issue, the other big mistake in the 1930s was, as everyone now knows, protectionism. Yet we have seen the “buy American” move by the US Congress, the “buy local” instruction to NSW government departments, and now it looks like China is on the brink of imposing a similar policy – the most recent manifestation is the ban on European wind turbine producers bidding for a $US5 billion wind farm project in China, even if they have factories in the country.

But even more frightening is a study just completed by economics professors Barry Eichengreen (University of California at Berkeley) and Kevin O’Rourke (of Trinity College, Dublin).

They produce an occasional bulletin tracking what is happening. Their latest findings are:

 

World industrial production continues to closely track the 1930s fall, with no clear signs of “green shoots”

World stock markets have rebounded a bit since March and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression;

In industrial output, Germany and Britain are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse;

The US and Canada continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turnaround; and

Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was, however, a sharp rebound in March.

That sounds bad enough, but when you look at the charts they produce (at www.voxeu.org) the message is stark.

Nearly 12 months into the crisis, the fall in world industrial output is actually slightly worse than in the 12 months from June 1929.

In 1930, at this stage, the world stock markets had lost about a quarter of their value; now it’s about 40%.

But the volumes of world trade show the real problem. By June 1930, these were down about 10%; the projection for the 12 months to June 30, 2009, is for a fall of 15%.

Their conclusion: “The ‘Great Recession’ label may turn out to be too optimistic. This is a Depression-sized event.”

Things are different this time – and clearly the governments and central banks must not rest on the oars. If they remain active, then we could get through this without a disaster.

But you cannot escape the worry that these recent big bounces in equities and metals cannot be sustained.

We have all been gung-ho about the money flowing into resources companies, the revving up of exploration and drilling.

But are we fooling ourselves? Have investors set themselves up to take another bath?

For all our sakes, let’s hope not.