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Without doubt, Iceland was the canary in the coalmine for the sovereign debt crisis that is unfolding across the world right now. Today, Iceland is held up as the model of recovery. 'Famous' economists like Paul Krugman praise the government for rapidly rebuilding the economy without having to resort to austerity. This morning’s headline from The Telegraph newspaper sums it up: “Iceland has taken its medicine and is off the critical list”. It turns out, most of these claims are dead wrong. Despite being so widely reported by the mainstream financial media, Iceland is not a story of model economic recovery. It’s a story of how to fool people. And for now, it’s working.

• Earthquake Sends Kiwis Screaming From Wellington Buildings (BBG)
• China quake death toll more than doubles to 54, hundreds hurt (Reuters)
• In 2011, Michigan Gov. Snyder said bankruptcy wasn't an option for Detroit. Two years later, he changed his mind (WSJ)
• GlaxoSmithKline says Chinese laws might have been violated (FT)
• SEC Tries Last Ditch Move to Put SAC’s Cohen Out of Business (BBG)
• Detroit’s Bankruptcy Reveals Dysfunction Common in Cities (BBG)
• Obama to start new offensive on economy (FT)
• As WTI and Brent reunite, Gulf of Mexico faces squeeze, not glut (Reuters)
• Extended Stay Files for Public Offering (WSJ)
• Apple Developer Website Hacked: Developer Names, Addresses May Have Been Taken (MacRumors)
• Treasuries Not Safe Enough as Foreign Purchase Pace Slows (BBG)

• Bernanke Seeks to Divorce QE Tapering From Interest Rates (BBG)
• China launches crackdown on pharmaceutical sector (Reuters)
• Barclays, Traders Fined $487.9 Million by U.S. Regulator (BBG) - or a few days profit
• Barclays to fight $453 million power fine in U.S. court (Reuters)
• When an IPO fails, raise money privately: Ally Said to Weigh Raising $1 Billion to Pass Fed Stress Tests (BBG)
• Bank of England signals retreat from quantitative easing (FT) ... Let's refresh on this headline in 6 months, shall we.
• Russia's Putin puts U.S. ties above Snowden (Reuters)
• Smartphone Upgrades Slow as 'Wow' Factor Fades (WSJ)
• Snowden could leave Moscow airport in next few days (FT)
• New Egypt government may promote welfare, not economic reform (Reuters)

Bernanke today testifies on monetary policy before the House Financial Services Committee (formerly the Humphrey-Hawkins). The testimony will be released at 8:30 am NY with Q&A after his testimony. Tomorrow he testifies before the Senate Banking Committee but the prepared remarks are the same for both days. Indeed it’s likely that the Q&A will be where all the fun starts. As DB says, he will likely try to pull off the trick of continuing to prepare the groundwork for tapering but try to give bond markets something to help them fight off the pressure of higher yields. With no post-meeting press conference planned for the July 30th/31st FOMC, and Bernanke not scheduled to speak publicly until he appears at the Global Education Forum event on August 7th, this week’s testimony may well be the only remarks we hear directly from the chairman for some weeks.

"As Chairman of the Senate Intelligence Committee, I can tell you that I believe the oversight we have conducted is strong and effective and I am doing my level best to get more information declassified. Please know that it is equally frustrating to me, as it is to you, that I cannot provide more detail on the value these programs provide and the strict limitations placed on how this information is used. I take serious my responsibility to make sure intelligence programs are effective, but I work equally hard to ensure that intelligence activities strictly comply with the Constitution and our laws and protect Americans’ privacy rights."

As the mainstream American press goes after NSA whistleblower Edward Snowden and Guardian journalist Glenn Greenwald, Germany's Spiegel note that the leakers' revelations appear to becoming an afterthought. As the Guardian's American chief noted, their competition has a "lack of skepticism on a whole" when it comes to national security. Critical scrutiny, she said, has been considered "unpatriotic" since 9/11.

• An actual Bloomberg headline: Granny’s Gold Bars Are Key to Vietnam Push to Boost Dong (BBG)
• Gay delivers further body blow to troubled sport (Reuters)
• China Wealth Eludes Foreigners as Stocks Earn 1% in 20 Years (BBG)
• Bernanke Boom Signaled by Yield Surge as Market Recalculates (BBG)
• Portugal's Parties Set Deadline for Pact (WSJ)
• Corporate Spending Set to Surge in U.S. (BBG)... or not at all based on the actual corporate data
• Legal Fears Slowed Aid to Syrian Rebels (WSJ)
• A mega-camp adds to the Boy Scouts’ troubles (Reuters)
• GSK accused of being ‘ringleader’ in China probe (FT)
• 19 Hospitalized in US-Ukraine Army Exercise - Ministry (RIA)
• Egypt Islamists march as senior U.S. official visits (Reuters)
• German spies made use of U.S. surveillance data (Reuters)

Amid the turmoil in Portugal, the Barcenas-Affair in Spain had dropped to the back-pages of the European press... until now. The illegal party-funding that ex-Treasurer Barcenas is now whistle-blowing on has been linked directly to Spanish prime-minister - despite Rajoy's ongoing denial of everything - via text messages uncovered by Spain's El Mundo newspaper. The opposition leadership is demanding Rajoy's "immediate resignation," noting he "is incapacitated," amid the damage that the texts - which prove an ongoing and direct link to the man at the hub of the funding debacle for at least the last two years (when Rajoy has expressly denied any relationship). "You cannot govern well," another congressman noted, when there is "very clear data" linking Barcenas with the PP (Rajoy's party) and the alleged illegal funding. Only a few screen shots have been released of the dozens of texts that the paper has apparently received...

Looks like everybody was in on the act with complying with the National Security Agency’s spying around the world according to secret files. The Guardian newspaper of the UK has just obtained secret fails from Edward Snowden detailing the full extent of the affair. The affair was revealed just about a month ago now, but it now seems that Prism had everybody doing their dirty work.

Edward Snowden may be America's persona most non grata in the entire world, but he has an insurance policy against "accidents": a treasure trove of supposedly damaging secrets about the US that will hit the public domain if something were to happen to the 30 year old whistleblower. A trove is so damaging that according to Glenn Greenwald, Snowden "poses more of a threat to the U.S. than anyone in the country’s history." Well, maybe a threat to the "government" which now only represents the interests of various corporations and Wall Street, but certainly not to what the US was supposed to be before it was hijacked by special interests, lobbies and the creature from Jekyll Island.

NSA Spying Is the Kind of Thing Which Caused the Revolutionary War Against King George

• Bernanke Supports Continuing Stimulus Amid Debate Over QE (BBG)
• Portugal president wants 'salvation' deal, including opposition (Reuters)
• Egypt has less than two months imported wheat left - ex-minister (Reuters)
• A rise in long-term interest rates is creating challenges and opportunities for the largest U.S. banks. (WSJ)
• BoJ says Japanese economy is ‘recovering’ (FT)
• More Chinese cities likely to curb auto sales (Reuters)
• PC Shipments Fall for 5th Quarter (BBG)
• Property Crushes Hedge Funds in Alternative Markets (BBG)
• New aid gives Greece summer respite before showdown (Reuters)
• Rajoy Punishes Exporters Sustaining Spain’s Economy (BBG)

According to a recent report in the FT, the former treasurer of Spain's ruling Popular Party, Luis Bárcenas, has claimed in an interview that the party has been in breach of Spain's campaign finance laws for a minimum of 20 years. Presumably he was moved to talk because he was the one who got caught and is expected to fall on his sword. Now that he is facing a lengthy prison sentence, he no longer has a reason to clam up. Incidentally, no-one in Spain was surprised to learn what he had to say. What we are seeing here is actually a strong parallel to Greece. The EU has been complaining about the Greek government's inability to collect taxes, without considering that Greek tax payers may have very good reason to pay as little as possible to the corrupt apparatus installed by the ruling class. As a Greek shipowner told a journalist when asked why he thought it was fine that rich shipowners are tax-exempt in Greece: “Would you want to pay money to Al Capone?” Pause. “Me neither.” Finally, as the bankruptcy of the Western welfare/warfare states becomes more glaringly evident, even stronger growth of the informal economy seems likely to ensue.

• MSM discovers that soaring dollar hurts corporate profits: P&G to Apple Hurt by Strong Dollar Keep S&P 500 Profits in Check (BBG)
• China Posts Surprise Drop in Exports (WSJ) - lol: "surprise"
• Plan Reins In Biggest Banks (WSJ)
• European Commission Seeks Authority to Wind Down Banks (WSJ) - and Germany just says 9
• U.S. Banks Seen Freezing Payouts as Harsher Leverage Rules Loom (BBG)
• Brussels sets up clash with Berlin over banks (FT)
• EU to Toughen Creditor-Loss Rules at Failing Banks From August (BBG) - or September, or October, but definitely November... 2023
• China's crude, iron ore imports falter as demand cools (Reuters)
• Obama pushes economic case for immigration as House eyes next steps (Reuters)