Councils

• Must defend against Chinese colonial expansion and get the Nigerian oil: U. S. Boosts War Role in Africa (WSJ)
• BOJ nominee Kuroda sets out aggressive policy ideas (Reuters)
• China becomes world’s top oil importer (FT)
• Baby Cured of HIV for the First Time, Researchers Say (WSJ)
• Obama to nominate Walmart's Burwell as White House budget chief (Reuters)
• Wal-Mart Anxious to Combat Amazon’s Lead in Web Vendors (BBG)
• Nasdaq executing trades at a loss (FT)
• Spending cut debate casts pall over Obama's second-term agenda (Reuters)
• Russell Indexes to Reclassify Greece as Emerging Market (BBG)
• Bond Bears Collide With Swaps Showing Low Rates (BBG)
• Buffett Deputies Leaving Billionaire in the Dust Get More Funds (BBG)
• Brazil's leftist president fights to win back business (Reuters)
• U.S. Special Forces train Syrian Rebels in Jordan (Le Figaro)
• Carlos Slim Risks Losing World’s Richest Person Title as Troubles Mount (BBG)

• Geithner allegations beg Fed reform (Reuters)
• BOJ Adopts Abe’s 2% Target in Commitment to End Deflation (BBG)
• Bundesbank Head Cautions Japan (WSJ)
• In speech, Obama pushes activist government and takes on far right (Reuters)
• Atari’s U.S. Operations File for Chapter 11 Bankruptcy (BBG)
• Israel goes to polls, set to re-elect Netanyahu (Reuters)
• Apple May Face First Profit Drop in Decade as IPhone Slows (BBG)
• EU states get blessing for financial trading tax (Reuters)
• Indian Jeweler Becomes Billionaire as Gold Price Surges (BBG)
• Europe Stocks Fall; Deutsche Bank Drops on Bafin Request (BBG)
• Algeria vows to fight Qaeda after 38 workers killed (Reuters)
• GS Yuasa Searched After Boeing 787s Are Grounded (BBG)
• Slumping pigment demand eats into DuPont's profit (Reuters)

The personal freedom to indulge in 32 ounces of sugary corn-syrup-filled fizzy drinks left New Yorkers with a nasty libertarian taste in their mouths. Now, a few months later, as The Telegraph reports that UK council officials are cracking down on the freedom to choose how your burger is done, warning restaurants not to offer them rare or even medium-rare. Of course, this is proposed to be in the best interests of the eating public focused on "making sure customers are eating meat that is a not a threat to their health." This policy, set to the subject of a legal ruling shortly, leavs some to suggest it could destroy the gourmet burger industry (by mandating lengthy cooking times): "Not only that but you’re opening a Pandora’s box, because where do you finish? Steak tartare, runny eggs … the list is endless." Soylent Green anyone?

• Obama-Romney: Breaking the Tie (BBG)
• Fiscal cliff looms over campaign climax (FT)
• Tough Calls on Deficit Await the Winner (WSJ)
• Election Likely to Leave Housing Unmoved (WSJ)
• Regulator Investigating Rochdale Trading (WSJ)
• Greeks Plan Strikes On Eve of Votes (WSJ)
• China Communists consider internal democratic reform (Reuters)
• Wen urges Asia-Europe co-op to promote world economy (China Daily)
• Italy Said to Reject Bad Bank That May Boost Ties to Sovereign (BBG)
• IMF warning adds to French economy fears (FT)
• Europe, Central Bank Spar Over Athens Aid (WSJ)
• Unlimited Lending May Help Weaken the Yen, BOJ Official Says (BBG)
• PBOC Official Says U.S. Election Won’t Impact Yuan Level (BBG) - Just the USD level to which it is pegged

The coincidence of comments from Germany - both the Bundestag's Hasselfeldt "If a country is not in a position to fulfill its obligations, or is unwilling to, then it must leave the Euro zone"; and vice-Chancellor Philip Roesler (of the FDP) to the effect that the dangers associated with a Greek exit had faded - and the IMF (which has been suspect for a while in its 'steadfastness' with regard Greece, seem to suggest as UBS notes, that there is notable suspicion of collusion among the politicians to apply pressure to the Hellenic Republic. Against becoming too concerned there is the Realpolitik of the Euro area. Decisions about the direction of the Euro project are taken by a very small coterie of political leaders within the Euro area, and we should be concerned not necessarily because of the specifics of the comment or the associated “hardball” bargaining stance, but because politicians still feel that comments like this can be made at all without fear of repercussions. As silly season is set to begin, we should prepare for the impact of politicians need to hear themselves speak.

Two years ago, in January 2010, Zero Hedge wrote "This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied" which became one of our most read stories of the year. The reason? Perhaps something to do with an implicit attempt at capital controls by the government on one of the primary forms of cash aggregation available: $2.7 trillion in US money market funds. The proximal catalyst back then were new proposed regulations seeking to pull one of these three core pillars (these being no volatility, instantaneous liquidity, and redeemability) from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal would give money market fund managers the option to "suspend redemptions to allow for the orderly liquidation of fund assets." In other words: an attempt to prevent money market runs (the same thing that crushed Lehman when the Reserve Fund broke the buck). This idea, which previously had been implicitly backed by the all important Group of 30 which is basically the shadow central planners of the world (don't believe us? check out the roster of current members), did not get too far, and was quickly forgotten. Until today, when the New York Fed decided to bring it back from the dead by publishing "The Minimum Balance At Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market FUnds". Now it is well known that any attempt to prevent a bank runs achieves nothing but merely accelerating just that (as Europe recently learned). But this coming from central planners - who never can accurately predict a rational response - is not surprising. What is surprising is that this proposal is reincarnated now. The question becomes: why now? What does the Fed know about market liquidity conditions that it does not want to share, and more importantly, is the Fed seeing a rapid deterioration in liquidity conditions in the future, that may and/or will prompt retail investors to pull their money in another Lehman-like bank run repeat?

The debate around San Bernardino County’s proposed program to use eminent domain rights to seize ownership of underwater mortgages has continued to heat up since we first wrote about it here last week. As Barclays notes, the county (along with two other cities in the area) has formed a joint powers authority, which would not need permission from the respective city councils unless they need public money. There are conflicting reports of the path that such an authority would take and the role of private investors. However, the most likely path seems to be that the authority is funded by private investors and it uses this money to buy current loans that are underwater at a "fair price" and then refi the borrower into a new private or more likely into an FHA mortgage. So, this program, if implemented, is likely to be a transfer of wealth from existing investors in these loans to the city governments and the newer investors led by venture-capital firms. Barclays does note though that there are many challenges to such a program including the legal issue of whether eminent domain can be used to seize financial assets in this fashion, especially if the primary beneficiaries are private investors at the expense of existing investors, which include, among others, pension funds and mutual funds and the fact that new mortgage origination is likely to suffer with new mortgagees bearing the costs of such a program in the form of higher mortgage rates/less credit availability.

And it seemed like the most innocent case of detached retina ever. On Friday, newly elected Greek PM Samaras had to be rushed to the hospital due to the rather peculiar ocular complication, only to be followed promptly by the new Finance Minister Vassilis Rapanos fainting and also being given urgent medical care. Both are procedures that require a few hours of inpatient treatment. Yet judging by the implications these two freak occurrences have had, one would image that both patients are comatose and on the same ventilator that kept former Egyptian president Hosni Mubarak half alive, half dead a week ago. The punchline, however, is that this may be the only case of detached retina in modern history that costs a country €5 billion.... Tying it all together, however, and making sure that Samaras' cabinet is doomed before the ink of its formation documents is even dry, is everyone's favorite Schrodinger finance minister: Germany's Wolfgang Schauble who just told Greece for the final time: no mas.

The game continues.  Talk up the economy, talk down printing and pray. If the market heads into the Fed meeting at current levels it runs the risk of being disappointed.  If this is combined with continued economic weakness then the real set up happens between the June meeting and the August one.  It is in that interim period that the market could throw another one of its hissy fits and beg for more liquidity.  Money supply growth is extremely sluggish right now all over the world.  The velocity never happened and the global economy is rolling over.  The Fed is already behind the curve and so when they are forced to act the infusion will have to be huge just to stem the momentum. Mike Krieger suggests people go back and look at different asset classes from the prior two lows in China’s M2 year-over-year growth rate.  The first one occurred in late 2004.  The M2 growth rate then accelerated until around mid 2006.  In that time period gold prices went up around 65% and the S&P 500 went up 20%.  In the second period of acceleration from late 2008 to late 2009 gold was up 65% and the S&P500 was up 15%.  We are at one of these inflection points and considering the DOW/Gold ratio is still holding gains from its countertrend rally from last August of almost 40%, this is probably one of the best entry points to buy gold and short the Dow of any time in the last decade.

Last night it was uber-dove Janet Yellen, today it is uberer-dove, former Goldmanite (what is it about Goldman central bankers and easing: Dudley unleashing QE2 in 2010, Draghi unleashing QE LTRO in Europe?) Bill Dudley joining the fray and saying QE is pretty much on the table. Of course, the only one that matters is Benny, and he will complete the doves on parade tomorrow, when he shows that all the hawkish rhetoric recently has been for naught. Cutting straight to the chase from just released Dudley comments:"we cannot lose sight of the fact that the economy still faces significant headwinds and that there are some meaningful downside risks... To sum up, the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established.  But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.  On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012." Translate: NEW QE is but a CTRL-P keystroke away now that all the inflation the Fed usually ignores continues to be ignored.

• With a 2 Year delay, both FT and WSJ start covering the shadow banking system. For our ongoing coverage for the past 2.5 years see here.
• Trouble in shipping turns ocean into scrapheap (Telegraph)
• First-Quarter Home Prices Down 20.7% in Capital (China Daily)
• Bernanke Says Banks Need Bigger Capital Buffer (Reuters)
• Monti’s Overhaul Can’t Stop Pain From Spain: Euro Credit (Bloomberg)
• Spain Confronts Crisis Threat as Rajoy Seeks Deficit Cuts (Bloomberg)
• Japan’s Noda Announces Anti-Deflation Talks as BOJ Sets Policy (Bloomberg)
• White House makes case for Buffett Rule (CNN)
• Cameron to Make Historic Myanmar Trip (FT)
• 'Time for Closer Ties' With India (China Daily)

This is truly Orwellian: the latest and greatest Executive Branch/Federal Reserve power grab is labeled "consumer protection." I am indebted to correspondent Jim S. who seems to be one of the few Americans to have actually sorted through this monstronsity and gleaned its true nature: an unprecedented extension of Executive (i.e. Imperial Presidency) and Federal Reserve power. Let's start by recalling that the Federal Reserve is a consortium of private banks. Calling a private consortium of banks the "Federal Reserve" is the original Orwellian misdirection, for there is nothing "Federal" about the Federal Reserve. It is not a government agency. Now guess who will fund and control this vast new bureaucracy of "consumer protection"? Yes, the private consortium known as the Federal Reserve. "The Consumer Financial Protection Bureau (CFPB) will be an independent unit located inside and funded by the United States Federal Reserve. It will write and enforce bank rules, conduct bank examinations, monitor and report on markets, as well as collect and track consumer complaints." Since managing the money supply and interest rates is the ultimate "consumer protection," we can ask how well the Fed managed those tasks in the past 15 years: alas, their management has been catastrophic for the nation and the middle class, which has been gutted by their policies of serial bubble blowing, leveraged speculation and bank predation.

US Army General Wesleyl Clark stated one month after 9/11 that the US had already planned to invade Iraq, Syria, Lebanon, Somalia, Sudan, Libya and Iran. But could the real driving force behind these invasions not be about oil but about the almighty US dollar and gold?

All you need to read.