Working theory on the real dynamic behind the great M+M selloff

I think I just figured out how to unify all of my observations on the broader markets in relation to M+M.  In short, the easy money was used first to pump up the markets (credit).  Why sell gold to fund stock purchase if you can do so using fake money?  But as credit has been running low, leveraged gamblers have been increasingly spending real money (gold) in order to game their long stock leveraged positions even further.  The game on this is to borrow gold and then sell it short.  Then take the cash and go leveraged long the other markets. 

But all the time this has been happening, China, Russia, India and everyone else has been buying the physical and setting up for a dramatic short squeeze in M+M as those who borrowed gold and sold it in order to buy stocks begin getting margin calls not just on their leveraged stock position but also on the borrowed (shorted) gold positions.

Furthermore, I think a lot of paper gold was loaned out in order to make this happen and it devalued the real metal that is out there.  So this was not just a case of legit short selling of gold.  No Ponzi ends at just rules abuse.  They have to get whacky about it before it peaks because as Chuck Prince told us, everyone will dance (be a fucking con man) until the music stops.  So I think gold was naked shorted in order to raise cash in order to go long the other markets.

Iff I am right about this then the conventional wisdom about gold going down because of deflation is wrong.  That means that M+M should take to the sky as the DJIA and $COMPX and SPX.X begin to collapse. This is just a working theory but it seems to fit with the data that I have.  Gold was accepted a few years back as reserves on trading accounts (I'll try to remember to look up a link on that but I recall blogging about it before so I know I had a link back the).  So they have been selling the gold to buy the markets IMO and thus when the markets go down gold will go up.

It will be interesting if this theory plays out but if it does then it likely means the if the stock bull is dying it will fall over  and land on the golden bear, killing it too.