Strange things are happening. Bats were born with two heads in Albania. Turkeys have been reported walking backwards in Transylvania. And in Pennsylvania, tiny mobile phones, found in the entrails of slaughtered lambs, say "sell Goldman" when you push the call button.

In the homeland, 16,900 people were gunned down, strangled, stabbed or beaten to death last year. That's an increase of 4.8%, the biggest jump in 15 years. No explanation has been offered.

And in the financial world, a curious mayhem seems to be increasing, too, while the "flight from risk" careens on, and still in the wrong direction.

All over the world, stock market investors are taking a beating - especially in emerging markets. Dubai is 58% below its high for the year. Saudia Arabian stocks are selling at a 43% discount from their highs. Indian stocks lost another 5% yesterday, while the Colombian stock market blew a fuse and shut down after stocks fell 10%.

Even sophisticated, first-world markets are dropping. Sweden and Germany are both down 17%. In the United States, the Dow lost nearly another 100 points yesterday and the S&P has now given up all its gains for the year.

The building stocks are getting knocked down. The index is off more than 40% for the year, with many leading stocks cut in half. And yesterday, we noticed something else: the financial stocks are taking some jabs, too. Lehman reported profits in the second quarter up 47%. But the stock still went down. So did Merrill and the world's richest financial house, Goldman Sachs, which fell $4.89 to $145.

We noticed this last number because our interest in Goldman is increasing by the day. The company earns almost three quarters of its money from "trading." How does it do that? What does it trade? How come it is so good at something at which goodness rarely counts?

We'll rephrase that. Trading is notoriously fickle. A large component of success in trading, says mathematician/trader Nicholas Taleb, is nothing more than luck. Over time and space - the more trades, the more time - you'd expect luck to spread itself around fairly evenly and the results to revert to the mean. Not only does Goldman earn a fortune from trading, but also its top men get picked for headliner jobs at the White House and U.S. Treasury. It is rated so highly by investors that it is worth more than any such firm in the world. How come Goldman is so lucky?
 
We don't know. But we're curious enough to ask questions, and we hope to have more answers as the week matures.

Meanwhile, we take it as only a cheerful coincidence that investors seem to have all of a sudden become worried just when Mr. Hank Paulson is called to the Treasury to reassure them. What they are worried about is the risk that comes at the end of a worldwide liquidity bubble. Easy money caused a series of bubbles. Tougher money appears to be causing those bubbles to deflate. Last week, central banks all over the world announced tighter credit conditions - led by Europe and Japan, and echoed in comments by America's Fed governors. Investors, anticipating an end to the bubblicious good times, retreat to the U.S. dollar and U.S. treasuries.

Even gold they still view with suspicion. Gold went up with lead, but not as much as copper. Now, it is selling off along with the base metals. The price fell again yesterday. In fact, our favorite metal fell below $600 - trading as low at $591 in Asia.

What does this mean, dear reader? Is gold no longer a safe haven for the world's worried money? Is it no more valuable than lead? Is it useful only for bangles at Indian weddings or as fillings in the mouths of old geezers or to line the walls of public latrines, as Lenin suggested? Is our faith in gold misplaced? Should we join the others aboard the "flight from risk," hoping for a very soft landing in the U.S. dollar?

We accept the complaint that gold is, over the long term, a very bad investment. It yields nothing. It just sits there.

On the other hand, it yields to no one. Ah, now there is the difference. America's faith-based dollar yields too readily...and to practically everything. Since 1971 when it was finally cut loose completely from gold, it has lost 80% of its purchasing power. Those who rush to it now must have faith that it will continue losing value at the same, reliable rate. But we're not so sure. Gold may be a terrible investment most of the time, but it is a spectacularly good investment occasionally. Mr. Paulson's arrival at the U.S. Treasury - from the richest, most speculative, most secretive, and most powerful finance company in history - tells us that this is one of those occasions.

*** Are we being offered a gift? One last chance to buy gold for less than $600 an ounce? Maybe.

But Richard Russell of the Dow Theory Letters suggests that this consolidation might still have a while to go. His conclusion? "Best to 'go away' and not look at gold for another six months to a year. As far as I can see, the first phase of the gold bull market is over. Accumulation time for the second phase lies ahead. And that's going to take time."

*** Remember back to February 2004, dear reader? That was when the maestro himself suggested to Americans that they may want to avail themselves of innovative new products from the financial industry - especially adjustable rate mortgages, which would allow them to take advantage of the lowest interest rates in 60 years.

Many people seem to have taken the advice. The Chicago Tribute reports that foreclosures are up 38% over a year ago. But the big increase in foreclosure rates are still, most likely, ahead. In the next 18 months, $2.7 trillion worth of adjustable rate mortgages are to be reset at higher interest rates.

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