We have the grim task of attending a funeral near Pittsburgh, today. Our reckoning will be short and sweet.

The markets were enlivened yesterday by thoughts of the holidays. ‘Santa’s coming,’ said investors as the Dow rose 291 points.

The bright lights and garlands have started coming out all over Christendom.

The immediate focus of cheery thoughts was in Europe, where investors never seem to give up hope and never seem to grow up. Plan A didn’t work. Neither did plans b-z. But some people…no matter how many times you tell them Santa doesn’t exist…they keep believing anyhow.

The euro-feds are talking about a new fix. From press reports we can’t tell if this is the one Angela Merkel just rejected or just pledged to give fast-track handling. Nor do we care. Because debt is debt. You can shuffle it around. You can kick the can down the road. You can pretend it doesn’t exist and promise to deal with it.

It doesn’t matter what you say…too much debt is too much debt. And someone will have to pay for it.

All of the crisis and hoopla of the last 4 years has been just an attempt to avoid facing up to reality. Christmas comes but once a year…but investors have looked under the tree every day…hoping Santa paid an un-announced visit.

And what a time it has been for speculators! When Santa is seen heading for Rome or Athens, stock markets all over the world take off. When no Santa-sighting is reported, they sell. Up 200 points in a day…down 200 the next. Whee!

Wondering where it will all come to rest, dear reader?

We will tell you.

When all is said and done, the debt will still be there. Larger than ever. Every major government is running a deficit. The US, for example, only collects a bit more than $2 trillion in taxes. But it spends about $3.5 trillion. You can do the math later, dear reader. We’ll tell you what it means now — the US is headed for bankruptcy. The paltry and pathetic efforts of the super-committee and Congress notwithstanding.

In Europe, the situation is more fun to watch. They speak in different tongues but they all say the same things:

“Give me a bailout.”

“Drop dead.”

The authorities may or may not cobble together a stabilization program. If they don’t, the ride will get even wilder. If they do, markets will rise…possibly through Christmas.

Either way, the debt will still have to be reckoned with. And that means less government spending in Europe and less household spending in America. It is unavoidable. The European government can’t borrow more. And neither can US households. In both cases, less spending will lead to a slumpy, crisis-prone, Japan-like economy. In Japan, stocks and real estate lost 75% to 85% of their value. You can expect the same thing in the US.

Those 200-point upsurges will be rare. Two hundred points to the downside will be more common.

But what do we know? We’ve been right about some things…and wrong about others. So far, stocks have not dropped like we think they ‘ought’ to. But heck…we remember saying the same thing about the tech bubble. It didn’t blow up nearly as soon as we thought it should. Neither did the housing bubble. We urged Dear Readers to sell their houses and head for the hills back in 2005…when the housing bubble had two more years to run.

So, maybe we’re early again. Or dead wrong.

We’ll see.

But until we find out, we would stick to the program if we were you: sell stocks on rallies. Buy gold on dips.

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