"With the failure of Germany's Bund auction this week, we saw yet another degenerating step to the Eurozone crisis. But this appears not to be about Germany itself, but about the Eurozone banking system that could drag in the major banks of the developed world. We're seeing European financial institutions being part of the gold liquidation process, not through gold sales, but increased gold leasing. This means that they lend gold to the market, which can then sell it for cash. The central and major banks then receive the benefit of easier borrowing on better terms and the eventual return of their gold. Bond issues and short-term funding have been seizing up as the unease over government bonds has spread to banks, which themselves are big holders of government bonds.
"The initial reaction of us all is to say, "No, this can't be happening." It won't come to that. But step back five years -would you have believed we would go to where we are now? Go back a month -would you have thought that a German bond auction would have failed? So take this decay forward, and it be comes easy to see a situation that brings some order to the growing disorderliness we're seeing in the developed world's markets."