We seem to be at that fork. Our June U.S. payrolls number was far below analysts’ expectations, and after announced, resulted in shrill rhetoric from the talking heads about a "double dip recession" as well as a stock market drop. Yet following the jobs number, other data released solidified the weakness of the economy, which could be going into another recession. However, as economists have been discussing double dip recession since the last one, the fact it could happen shouldn’t be a surprise.

This month’s market outlook, Economy turns down and Treasuries turn up, by Assistant Editor Michael McFarlin, looks at the current U.S. economic outlook and how it will affect the interest rate markets. A main driver of this downturn is the continued weakness of the housing market. It just doesn’t seem to get better. Typically housing is a key contributor to growth, but in current times it hasn’t added anything. Again, economists have been saying early and often that the housing market had a long way to fall. This time it seems they were right. According to the Case-Shiller Housing Index, after the high of 2006, the index has dropped to a level close to where we were in 2003. The good news: It’s still above where we were in 1998.

So what’s a government to do? Well, that is a quandary because it seems like the government, especially with the ending of QE2 in June, can’t do much more. I realize we live in an age of instant gratification, but sometimes you need to let events take their course. As advisor Keith Springer noted in Mike’s piece, "The best way to get back on track is to let the economy settle into a new equilibrium. All quantitative easing does is create artificial demand and puts money into the system that shouldn’t be there." He’s probably right, but in this age of not wanting to deal with pain, even a scratched knee seems to require a hospital visit.

The answer is government and business need to work together, but this hasn’t been happening and is aped by how Democrats and Republicans interact. Just watching the Dodd-Frank proposals unfold (see Dodd-Frank: Why the holdup? by editor-at-large Steve Zwick), banks are fighting every regulatory proposal tooth and nail. I’m certainly not expecting them to take new regulations lying down, but I still am amazed they seem to forget the debacle of 2008 — and that they largely were at fault. The constant fighting isn’t accomplishing anything but putting us back to where we were before the bottom dropped out.

And at the risk of putting libertarians into cardiac arrest, is regulation really the enemy? Wouldn’t a stronger (and more importantly, transparent) financial system be better for business? In our cover interview, money manager Mark Rosenberg, a product of Wall Street, says, "Regulation has probably saved me more money than it has cost me in the long run." (See Mark Rosenberg: Innovative and consistently profitable, by Managing Editor Daniel P. Collins). Mark is as free-market-principled as they come, but as a smart businessman he understands the need for balance. And that’s what we are missing today.

Whether the economy will reverse in the next couple of months really depends on if American business cleans up its act. And both business and government need to quit looking for a quick fix, because it just won’t happen.

In Mike’s piece, Springer also notes that the good news is we’re still in a recovery, however small. "It’s going to be like a hangover," he says. "If you party for 20 hours, you might have 12 hours of a hangover. We partied for 20 years, so we might have four or five years of a hangover."