The US issued a terror warning to Americans traveling to Europe. “Watch out,” said the feds. There could be strikes in Europe similar to those in Mumbai last year.

In the Mumbai event, terrorists came ashore in inflatable boats…heavily armed. They headed for major tourist hotels – like the one where we had reserved a room…the Taj Mahal. Once there, they started shooting people.

“Hey, we’re from Baltimore,” we answered when someone asked why we would go to such a dangerous place.

So, here we are at the Paris airport.

We see no signs of beefed up security. In fact, there are no signs of any security at all.

But the reckoning must go on. And what we reckon with today is a whole world that looks dangerous. The airports are dangerous. The hotels are dangerous. And the markets – especially the markets – are dangerous.

But what the hell… We’re from Baltimore.

The Dow fell 78 points yesterday. Gold lost only a dollar.

Gold has been such an investment sensation that the banks are opening up old vaults, and building new ones, to store clients’ money. Investors buy gold. Then, they need a place to keep it. So the banks have a new way of earning fees – by safeguarding gold.

As Warren Buffett tells us, at the beginning of a bull market people buy for the right reason. At the end, they buy for the wrong reason. We can’t but wonder: why are people buying gold now?

Ten years ago, we urged dear readers to buy gold. Why? It was cheap. It was bound to become dear.

And it has. Every year, gold has gotten more expensive. And it appears to be on course again this year for another big gain. But why are people buying so much of it?

We know why we’re buying it. Because we think the people running fiscal and monetary policy for the US and other countries are lunkheads. We think they’re going to make a real mess of the dollar. Gold is the best alternative.

For example, in yesterday’s Wall Street Journal was an article about the Currency Reform and Fair Trade Act. Once you see something called “fair trade” you know it’s going to be bad news. “Fair trade” is code for “managed trade” – which, like managed paper currencies, is a fraud. You either trade freely…or you impose conditions in order to protect some special interest or promote some pet project. Then, it’s not free anymore. Whether it is “fair” depends on your point of view. But the only really fair trade is free trade – that is, trade that people willingly do without asking anyone else’s say-so.

In the present case, the “Fair Trade Act” has been ominously appended to the Smoot-Hawley Tariff Act…a previous experiment in managed trade. Smoot-Hawley was partly responsible for the depth and breadth of the Great Depression. In the ’30s, it was bad enough that people were going broke. It didn’t help that Misters Smoot and Hawley prevented them from buying and selling freely.

But all but five Democrats voted for the bill last week. So did 99 Republicans. If passed and signed into law, it will give the feds new ammunition in their fight to make the Chinese stop free trade with China. If they get their way, you’ll only be able to trade with China if it complies with certain restrictions and qualifications regarding the yuan (or renminbi). They fair traders want the Chinese to raise the value of its currency. How they know what China’s currency should be worth is a mystery…

But if the ’30s are anything to go by, this legislation will make the Great Correction worse. It will stymie world trade – just like Smoot-Hawley did.

This might be good for gold. It might not.

But real messes can take time to develop. We wonder if these new gold buyers are prepared for the wait.

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