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And while deflation is almost certain death, gold and silver remain steadfast.

This weekend, a reader sent me a Forbes article with one of the most clueless, disingenuous themes imaginable; i.e., “there is zero evidence (repealing Glass-Steagall in 1999) unleashed the financial crisis.” I have always been fascinated by Forbes’ flip-flopping around reality and delusion, especially as Steve Forbes is a notable gold bull; in fact, one of the most vocal advocates of a new gold standard. Then again, for a variety of reasons cumulatively depicting the flaws of human nature, even many of the financial world’s brightest minds refuse to acknowledge the most important factor driving them; i.e, the manipulation of markets by the “weapons of mass destruction” developed post-1999 by banks armed with modern technology, unlimited Federal subsidies, not a shred of regulation or oversight, and the often explicit guarantee that they are indeed “too big to fail.”

Why do I bring this up, as I write on what could turn out to be an utterly terrifying Monday morning? Because watching the, as Zero Hedge put it, “bidless” Euro open a cent and a half lower last night, amidst plunging oil prices and exploding fears of a Euro-killing “GrExit,” it truly horrified me to witness what derivatives have created. As first hinted at by the May 2010 “flash crash” – when the Dow plunged 700 points in minutes due to an overload of high frequency offers that created a vacuum of illiquidity costing hundreds of millions of instantaneous losses, derivatives have not only destroyed markets permanently, but driven retail and institutional participation to record low levels. The October 15th flash crash in Treasury yields – when the 10-year yield plunged from 2.21% to 1.87%, also in minutes, was a second blaring warning of what’s to come. And trust us, when “what’s to come” inevitably arrives – perhaps this year – if you haven’t already protected yourself, it will be too late to save yourself.

Deflation Cycle

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