Yesterday, we were uncertain. But now, we’re not so sure...

What we were uncertain about was whether we were looking at a great buying opportunity for gold...or whether the correction will continue.

Today, we’re not so sure we should even be asking the question.

Gold shot up again on Wednesday – to $949. The dollar took a dive – down to $1.57 per euro. And the Dow fell 109 points.

It’s all guesswork, of course. But let us return to the big picture to try to figure out what is going on.

The economies of the West are clearly entering a rougher period. When the last great bubble popped – in housing and the financial sector – it seemed to take the wind out of the whole economy. Consumers have less to spend...and no obvious way of getting more. And Wall Street is less eager to lend. Even though the Fed is opening up the throttle, trying to make money easier to get, the banks are pushing on the brakes. They are afraid to lend.

Since the real economy relies on consumer spending and credit to keep going, it seems a good bet that it will slow down. Already, the United States is probably in recession.

Implication: sell U.S. stocks and property.

So far, the stock market and the technical outlook are not confirming this advice. What do they know that we don’t? Could they see another big boom on Wall Street? Or are people holding stocks merely a hedge against inflation and a falling dollar? Is it possible that the stock market intends to stay where it is while inflation does the work of reducing the real value of its shares? Over the last ten years, the S&P has gone nowhere. But inflation has trimmed 25% to 30% off stockholders’ wealth.

Financial shares have been hit especially hard this year – they’re down 30% to 50%. Speculators are wondering if it isn’t time to buy. Here at The Daily Reckoning , we don’t claim to know, but as we mentioned yesterday, it looks like the bubble in the financial sector has popped...and even if there is enough credit to pump up another bubble, it’s not likely to be in financial stocks. They’ve had their day; the next bubble will elsewhere.

So, now let us turn to the picture outside the United States. If there is a substantial downturn in the United States, we’d expect a downturn almost everywhere. The United States sneezes, as the saying goes, and the rest of the world gets a cold. But we’re beginning to think that this time it might be the other way around.

Growth rates in emerging markets have been running two to three times those of the United States. Overseas stock markets are booming – but skittish. And few are cheap. The only big exception is Japan – which is held in such contempt by global investors that we are buying it out of sympathy.

There is no doubt that a slump in the United States will hurt these foreign markets. Some export energy to America. Some export food. Others export finished products. A decline in U.S. demand will mean fewer sales at lower prices.

“I’m selling all my emerging markets stocks, except for China,” says our old friend Jimmy Rogers.

How bad will the foreigners be hit? How long will the slump last?

We don’t know, but for every American consumer who is slacking off, there are three or four foreigners eager to take his place. The problem is that the foreigners haven’t had the money. Or, they didn’t want to spend it (the Chinese are said to save nearly half of what they earn...savings rates are very high in other foreign countries too).

Making up for U.S. spending won’t be an overnight thing. Still, in India and China, wages have been rising about 10% per year. In Russia, they’ve gone up by a factor of 6 over the last 8 years. And bet to us that, sooner or later, demand from domestic sources will more than make up for spending by Americans. So you may want to use this current weakness to buy into foreign markets at good prices. Looking at the long sweep of things, many of these foreign markets look like they are ready to grow and prosper not just for a few more years...but for a few generations.

One of the most important of these growing markets is India. We got in touch with our friend Ajit Dayal, formerly running George Soros’ Quantum Fund, and now running his own shop in Bombay.

What’s going on in India, we asked. The 200 leading stocks on the Bombay exchange have fallen 32% this year. But over the last 12 months, they’re still up 45%. What gives? Is it still a buy?

“Yes,” he replied... “Very, very much a buy. India’s economy will grow by over 6% per annum in real terms for the next decade, giving investors ample opportunity to make sensible risk-adjusted returns of 15% to 20% per annum. That is a likely 4x to 6x increase in your investment in 10 years.”

Chris Mayer agrees: “In 2003, a study by Goldman Sachs made some bold predictions:

“That by 2020, its economy will be larger than Great Britain’s...by 2040, it will be the world’s third largest economy...and by 2050, its per capita income will have grown 35 times over.

“But get this...five years after those predictions were issued, India’s growth rate is actually higher than the study assumed.

“Investing in India today is very much like investing in China 13 years ago. Imagine how wealthy you’d be if you’d started investing in China in 1995!”

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.