‘a week ago we said that 5000 was the final trapdoor to a virtually unlimited downside. We stand firm on that statement; stock markets may, for the time being, vacillate but the VIX is telling us that what has now formed is a decisive top for equities. Over the coming period we will look to raising our model portfolio’s exposure to the stock market’s bear side…’

The FTSE closed just 100 points above that level last night. The Dow was off 4%, and overnight the Nikkei fell 3.6%. Nobody ever knows for sure when a Bear market is about to take over: but the degree of correction likely is sometimes easier to calculate. In 2007, The Slog’s mother site was ridiculed for expecting a FTSE drop to 3,500. But it happened. They laughed when we said the housing market would drop 15%. But it did. We expect it to go to 3500 again (possibly further); and UK house prices will fall at least 25% over the next two years.

But like you and everyone else, we don’t know exactly when this will start. Goldman Sachs do of course, because they know everything: but they’re not telling. Some days they’re buying and some days they’re selling, and once in a while they think about their client base. But mainly ( and yes, it is a horrible word) they’re directionalizing.

The Slog thought they were done euro-directionalizing yesterday, but we were wrong. Or perhaps they read The Slog, and figured what they were up to was a tad too obvious. Anyway, the EU’s beleaguered currency rallied later yesterday,but real currencies -like the Swiss Franc and the Aussie dollar – stood firm. This gave the lie to the theory widely expounded yesterday that the Australian buck fell because nobody needs commodities in a world slump.

So what is going on? This is what a US banking source told us last night:

“The [euro] currency is, maybe, 12- 15% below where it started 2010 against the dollar. [Jim] O’Neill says it was overvalued anyway, and he’s right….and austerity in the EU and UK markets means weaker drive in the consumer space, so we’d expect to see it keep tumbling. But in recent weeks some big players at Goldman have started sending buy signals. And the euro has rallied. I still don’t get it. I think someone’s buying and selling big at the right time. But today there’s now way you can tell.”

Correct. One is left with suspicions and little more. But our broader view is that, um, the media and analyst view is far too narrow.

The Euro is a catalyst – nothing more. It is the biggest example anywhere of a currency based on crazy deficits, mismanagement and poor regulation….but the key factor is the connection of the European market and financing system to the global ‘vision’ longed-for by the likes of Theodore Levitt. If Europe stops consuming, both the US and China are in trouble…as are the BRICS. But the Americans stand to lose the most- because they have a costly infrastructure made more costly by a relatively naive Democrat President.

Thus will the power – and probably the glory – continue to head East (despite a big hiccup to come in China). So too will the gold: it is (literally right now) rising in the east and setting in the west. Gold corrected to $1180 over here yesterday….that’s about right – although the speed of correction continues to make me suspect manipulation by currency defenders.

Once the safe haven of the US currency and bonds looks less safe, there is only one way for gold to go: it will be at around $2000 before this is over. But again, I don’t know exactly when ‘over’ will be.

When it is – and it is when now, not if – there’s just a faint chance that a combination of decent reforming politicians and truculent citizens might finally clear all this nonsense out of the sytem, and give capitalism the new shape and goals it has so badly needed for at least two decades. But betting on that outcome really is a mug’s game. You might as well bet on Goldman Sachs telling somebody the truth before 2015 – it all depends on how much money and pressure are involved.