What’s ahead? A “Lost Couple of Decades… ” says Comstock partners.

Yesterday, we estimated that it would take 19 years for the economy to complete its de-leveraging . It was not a very scientific estimate. But total debt has gone down about $2 trillion over the last 24 months. So, if it continued at that rate, it would take about 19 years to erase the extraordinary amount of debt built up in the bubble years.

Now, along comes the Comstock crowd with roughly the same guess – two decades. They figure that the savings rate will go up to 10% and that the effect of taking that money out of the consumer economy will be to put the US into a long, soft slump – just as we predicted in our first book.

And there’s another reason to expect a very long period of downsizing: that’s just the way economies work. Market

“It looks like things are finally turning around,” said a friend at Saturday night’s dinner. “Not at all… ” we replied. Paul Krugman says the world “avoided a second Great Depression.” He’s wrong too.

The stock market crashed in ’29. The market then bounced. After a few months almost everyone was persuaded that the “worst is over.” But the worst was just beginning. It wasn’t until 1932 that the stock market finally hit bottom. By then, it beginning to seem like a depression… and only years later did economic historians tag it as a ‘great’ depression.

This depression is still wet behind the ears… We’re still in the bounce phase. On Friday, the Dow went 113 points higher. And as the bounce continues, more and more investors will come to believe that stocks are in a new bull market and that the economy is back in growth

“It looks like things are finally turning around,” said a friend at Saturday night’s dinner. “Not at all… ” we replied. Paul Krugman says the world “avoided a second Great Depression.” He’s wrong too.

The stock market crashed in ’29. The market then bounced. After a few months almost everyone was persuaded that the “worst is over.” But the worst was just beginning. It wasn’t until 1932 that the stock market finally hit bottom. By then, it beginning to seem like a depression… and only years later did economic historians tag it as a ‘great’ depression.

This depression is still wet behind the ears… We’re still in the bounce phase. On Friday, the Dow went 113 points higher. And as the bounce continues, more and more investors will come to believe that stocks are in a new bull market and that the economy is back in growth

The future cometh…Cash for bankers! Cash for Detroit’s clunkers! From one scam to the next…But first, let us turn to the latest market update.

The Dow rose again yesterday – up 33 points, to close at 9,320. We set 10,000+ as our objective for this bounce. We’ll stick with it for a while longer.

Make no mistake though. No one knows how long this rally will last – certainly no one here at the Daily Reckoning vacation headquarters. It will continue until it runs out of gas. That could be tomorrow. It could be months from now.

It will run out of gas sooner or later, and probably this fall. A real, durable bull market would require an economic boom – a genuine recovery. We don’t see that happening…

But people must think it is happening…

“There are signs of a recovery in the US… ” was a popular line at

Is it time to buy a house? Depends…

If you need a place to live and want to own a house, why not? Prices in some areas are fairly reasonable. But if you’re speculating, our guess is that you’ll get a better deal if you wait.

Why? For the many reasons we have given you in these Daily Reckonings. House prices may be firming in some areas – that’s what the Case-Shiller numbers seem to show. But nationwide, they are probably headed down for quite a while longer.

Herewith, four reasons why:

First, as you know, this is a depression. It will probably be long. And deep. You wouldn’t know it from looking at the stock market or reading the news. The Dow went up another 114 points yesterday. Oil rose to $71. And the dollar – anticipating inflation – fell to $1.44 per euro.

But that’s what bounces are supposed to look like.

Rice rationing redux?  Chris Mayer on the return of rising food prices… Dan Amoss on what the Fed says versus what the Fed does… Russia sings dollar’s praises, dollar bulls stampede… Chuck Butler looks past the rhetoric… China’s latest resource grab… Iraqi oil… America’s best-selling car… with an MSRP of $60…

We begin a new week pondering the question that bedevils the conscientious market observer every day.Inflation? Deflation? Or as Agora founder Bill Bonner is wont to suggest, both?

“Inflation – rising prices, or a drop in the purchasing power of the dollar – will soon rise to the very top of economic concerns,” writes Chris Mayer. “I can’t understand why there are pundits who insist we can’t have inflation while the economy is weak. There are plenty of examples of weak economies with high inflation. After all, I don’t think they are hitting on

Stock Market Rally in Financial Horror Movie. Drag Me to Hell! That’s the title of the first horror movie with a credit crunch theme. No kidding. We just read about it in the Financial Times. The idea of the movie is simple enough. A young woman is a mortgage loan officer at an LA bank. She wants a promotion… but to get it she has to prove that she’s tough enough to say ‘no.’ So when a creepy customer comes in and asks for an extension of her mortgage, the woman rejects the proposal… perhaps a little too coldly.

Then begins the horror.

But just look around. There are plenty of frightening and unnatural scenes going on.

Broadly speaking, it’s a merciless war between inflation and deflation. But there are many different attacks, ambushes, counterattacks, feints, and massacres going on.

The Dow retreated 173 points yesterday. Typically, following a major fall

Risk Assets soar!  German Investor Confidence surprises!  High yielders kicking tail…  Who’s afraid of the SNB? And Now… Today’s Pfennig! OK… Speaking of patience… I think that’s what we’ll all have to possess a lot of going forward with these currencies and stocks… Here’s what I’m talking about… Yesterday morning it looked as though the recent rally in stocks was over, complete, pack up the bags, get on the bus, Gus… And with the trading theme of throwing all risk assets in the same bag and trading them alike that’s been in place since last July, this would seem to be

Both gold and silver had short, sharp rallies once Globex trading began in Sydney on Friday morning. Both were sold off immediately.

However, at 1:00 p.m. in Hong Kong [midnight in New York] a serious rally began which really accelerated to the up-side at 11:00 a.m. in London while North America slept. The rally ended at 9:00 a.m. in New York…shortly after floor trading began on the Comex. From there, both metals got sold off [for an hour] into the London p.m. fix [3:00 p.m. London - 10 a.m. New York]. Once the London gold fix was in, away they went again, with both metals being sold off hard once the gold price went vertical through $1,000…which occurred shortly before 1 p.m. in New York. Once that happened, profit taking dropped both metals back. Estimated volume on Friday was 152,368 contracts…with a switch effect of 9,898 lots.

Here’s the 2-year gold chart.

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Early August marked the first anniversary of the credit crunch. The infant that arrived unheralded and unwelcome on the doorstep of the financial world is now, believe it or not, just over one year old. While we all hoped that its unhappy life would be a short one, it now seems as though this unwanted foundling is going to be with us for a while yet. And, by all accounts, it is going to cause us a lot more sleepless nights before it goes away.

If the credit crunch were a storm we might now be in its eye – that expanse of uneasy calm in the storm’s centre, which whispers to the unwary that the worst is behind them. No chance, I’m afraid, if we listen to the utterances of