As the Senate slugs out the final version of President Obama’s fiscal spending bill today, the odds favor not only immediate passage but also another rescue package in 2010 if this one fails to halt the rapidly contracting economy.

Treasury Secretary Timothy Geithner will also announce a new version and overhaul of the bank-bailout rescue though it won’t require new taxpayer funds. Treasury is still debating how to put the remaining $350 billion dollars to work from the original Paulson TARP rescue package last October. The markets have staked a bundle on the new Treasury boss this week as hopes cling to an effective solution of the bad loans still plaguing American banks. Stocks have mustered strong gains over the last seven days and are now 15% above their November 20 lows as defined by the S&P 500 Index.

The $1,000,000 question on most investors’ minds is whether this round of government spending will be enough to jolt the economy – in recession since December 2007. Some areas of the vast American economy are in depression with job losses skyrocketing over the last three months, manufacturing deeply contracting and inventories at their highest levels in years. Consumer sentiment stands at its lowest levels since the early 1970s.

Yet despite the formidable size of Obama’s historical spending bill, probably north of $750 billion dollars, it won’t be enough to resuscitate economic growth beyond one or two quarters.

In the 1930s, FDR signed two New Deals into law. Roosevelt’s chief fiscal tool, deficit spending, proved to be ineffective in averting a series of renewed downturns in the economy following 1933. The size and scope of today’s crisis is far worse than anything seen in the 1930s with credit deflation, the most feared of economic evils. Banks in the United States and Europe are effectively insolvent.

I suspect stocks will continue to rally until spring and then head lower again.

The market has definitely made some constructive advances since late November accompanied by lower volatility and credit spreads narrowing for riskier debt securities while Treasury bond yields rise in the process. But other segments of credit, namely securitization has collapsed and shows no signs of recovering. Securitization was responsible for a big chunk of credit expansion prior to mid-2007 and has not been fully supplemented, even with billions of aid from the federal government.

November 20 was another in a series of market lows recorded since late 2007. But it wasn’t THE low for this cycle. Stocks are not particularly cheap, dividends are being sliced and corporate earnings won’t get help from domestic consumption until residential real estate and employment trends stabilize. Don’t buy into this rally.