Stocks came back a little on Wall Street yesterday, with the Dow up 34 points. Gold rose $6 too.

Dubai is still in trouble, as the local Bedouins said they weren’t putting their full faith and credit behind the Dubai World debt.

We wonder how long it will be before the next pin pricks the bubble. Yesterday, The Financial Times said Greece was up next. Our own magazine, MoneyWeek, concurred:

“Las and inept, Greece is on a slippery slope.”

But today, The Daily Telegraph Britain itself is sliding:

“Morgan Stanley fears UK sovereign debt crisis in 2010,” is the headline story in the Business Section.

“In an extreme situation, a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in UK government bonds. The bank of England may feel forced to hike rates to shore up confidence and stabilize the currency, threatening the fragile economic recovery,” said the Morgan Stanley report.

The situation is becoming clearer. Is it an illusion? Or is the fog really lifting?

We don’t know. But what we see is what we anticipated 10 years too early – a long, Japan-like slump, punctuated with crises, bankruptcies, and defaults. At the end of the ’90s it was said that Japan had lost a decade. Now, it is ten years later, and the Japanese are becoming remarkably forgetful; they’ve lost another decade!

The Japanese have spent the last 20 years trying to bring about a recovery. There were hopeful signs several times. But then, each time, the economy sank again into recession again…deeper than before. These stimulus efforts have been expensive, transforming Japan from a country with one of the world’s best public finances to one with the worst. Debt to GDP is already at 200%. It will soon be 300% if the government continues spending at the current rate.

What have the Japanese gotten for all this effort? Tokyo stocks have rebounded a bit…along with the rest of the world. But consumer prices are falling again. And now the Japanese are getting older, faster than any other group in the world. It is as if the whole nation had retired and the economy has been pensioned off.

But Americans lost that last decade too. No job growth. No income growth. No stock market gains. And now, it looks to us as though the US is on track to lose another decade – just like Japan did.

What was lost to the first world’s two leading economies was found by another part of the world that used to be known as the ‘second’ or ‘third’ world. India, China, Russia and Brazil have all grown by leaps and bounds – with income, stocks, GDP, prices, jobs…all up dramatically.

And now comes a report in today’s paper that our favorite emerging economy is still growing, more rapidly than was thought.

“India’s 7.9% growth spurt shatters forecasts,” says The Financial Times.

This is good news for those who are hoping that emerging markets will provide the ‘growth’ needed to pull the world out of depression. The idea is simple enough. US consumers have slacked off. British consumers are out of money. European consumers are just naturally tight. And Japanese consumers are in a coma.

So, who’s going to do the consuming? Where’s the growth going to come from to keep Chinese factories polluting the atmosphere and Indian call centers confusing the customers? Well, from India and China…and Brazil and Russia…and the rest of the emerging world.

And here’s an interesting bit of information. Nouriel Roubini recently commented that there is no way the Chinese can replace American consumers. US consumption is 10 times greater than Chinese consumption. But he must have different information from a French fund manager who calculates that Chinese consumption has more than offset American thrift. At their peak in 2007, Americans were spending 380 billion per month at the retail level. Now, the figure is close to $345 billion – or a reduction of $35 billion a month.

Meanwhile, Chinese consumer spending has jumped from $110 billion a month to $150 billion – $40 billion more, and more than enough to compensate for Americans’ new found frugality.

At this rate, China will soon be redirecting its productive capacity – as India always has – at its own domestic market. It will cease being a major exporter and, if you can believe it, will become a net importer.

If this were to happen as forecast, it would open an avenue for America and its crony economies to escape from their Lost World. They could turn their economies from import to export…from consumption to production…from taking to making…and from trade deficit to trade surplus.

Sounds simple enough. But wait…there’s more. In order to sell things to the Chinese and the Brazilians, you’re going to have to be able to compete either on price or on quality. It’s hard to see how the US could compete on price, unless inflation cuts the price of US labor substantially. As to quality, typically, it has been the Germans, Italians and French who have the upper hand. The Germans make the precision tools. The Italians make the handbags. The French make the yoghurt. What does that leave?

Well, there’s still some room. But it will take time to gear up for it. Your editor, for example, has planted his flag – not the Crash Alert flag…his company flag – in India. He would like to plant a flag in Brazil too. But he’s not counting on these foreign ventures to pay profits anytime soon. It takes 5 to 10 years before a start up business really gets some momentum.

Between now and then, there are bound to be booms, busts and blow-ups.

What is true for our business is surely true for an economy. It takes time…trial and error…mistakes and corrections…training…boom, busts and blow-ups before something really works. And another lost decade or two…

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