Reuters

While all the focus has been on Greece in recent days, the global nature of the debt crisis came to the fore yesterday and overnight. This was seen in the further desperate measures by the BOJ and Moodys warning that the UK could lose its AAA rating. Some of us have been saying for some years that this was inevitable but markets remain myopic of the risks posed by this. Possibly the greatest risk is that of the appalling US fiscal situation which continues to be downplayed and not analysed appropriately. President Obama unveiled a massive $3.8 trillion budget yesterday and he is to increase Federal spending by 53% to $5.820 trillion by 2022.  The US government is projected to spend over $6 trillion a year by 2022.  Still bizarrely unaccounted for is the ticking time bomb of unfunded entitlement liabilities - Social Security and Medicare, which Washington continues to deal with by completely ignoring them. While Washington and markets are for now ignoring the fiscal train wreck that is the US. This will change with inevitable and likely extremely negative consequences for markets – particularly US bond markets and for the dollar.

• BOJ Adds to Monetary Easing After Contraction (Bloomberg)
• EU to punish Spain for deficits, inaction (Reuters)
• Obama, China's Xi to tread cautiously in White House talks (Reuters)
• Global suicide 2020: We can’t feed 10 billion (MarketWatch)
• Greece rushes to meet lender demands (Reuters)
• Obama Budget Sets Up Election-Year Tax Fight (Reuters)
• Foreign Outcry Over ‘Volcker Rule’ Plans (FT)
• Moody’s Shifts Outlook for UK and France (FT)
• France to Push On With Trading Tax (FT)

It seems like it was only yesterday [technically it was September] that David Bianco "departed" his latest employee, Bank of America, where he landed following his "departure" from UBS back in 2007. Today, courtesy of Business Insider we learn that following an extended garden leave, or just a rather choppy job market, Bianco his finally found a new happy place: right in the cave of joy and happiness, also known as Deutsche Bank (aka the bank whose assets are about 80% of German GDP and which recently 'magically' recapitalized itself). Here he will be joined by the two other pillars of perspicacity - Binky Chadha and Joe LaVorgna. What to expect? Who knows - but lots of twisted humor is certainly in store. For the sake of simplicity we present some of the salient soundbites from Bianco and his colleagues over the past 5 years.

While today's market session has been broadly calm for the time being, that has not prevented Oil from falling back to its old norm of being impacted by the merest rumor of geopolitical tensions, of which we have had quite a few of already, following car explosion attacks targeting Israel embassy officials in India and Georgia. While Iran has yet to make any announcement on these events, which oddly enough resulted in no deaths, Israel has already blamed Iran for everything. From Reuters: "Prime Minister Benjamin Netanyahu said Israel's  arch-foe Iran "stands behind" bombers who targeted Israeli embassy cars in India and Georgia on Monday. Netanyahu linked the incidents  to reports of foiled attacks in Thailand and Azerbaijan last month for  which, he said, Iran and its Lebanese guerrilla "proxy" Hezbollah were  responsible."Iran, which stands behind these attacks, is the  largest exporter of terror in the world," Netanyahu said, addressing his  Likud party faction in parliament." It appears that when it comes to car bomb assassination plots, Iran still has to learn from those which targeted its own nuclear scientist successfully a few weeks ago. Yet this latest escalation in attempted provocations is not unexpected: it comes on the heels of the announcement of a US Naval Official who said that "Iran is building up its forces in the Persian Gulf and has prepared speedboats loaded with explosives." Whether it actually has or has not is irrelevant: all that matters is that the US navy 'says so.'

Market focus tends to be almost solely on Chinese and Indian demand but demand is broad based throughout increasingly important Asian gold markets. Demand for gold remains robust in most Asian countries where consumers are buying gold as a store of wealth due to concerns about their local paper currency.  This phenomenon is happening throughout Asia including in Malaysia, Indonesia, Thailand and Vietnam and other large Asian countries (see news below regarding demand for gold by investors in Thailand).   AFP have a very interesting article on Vietnamese ‘gold fever’ which recounts how  “stashing gold at home rather than having cash in the bank is a generations-old habit in communist Vietnam”. And old habits are dying hard even if an ounce of gold bullion can now cost up to US $100 more in Hanoi than anywhere else in the world due to government meddling in the gold market. AFP quote 60-year-old retiree Truong Van Hue “I still like to keep my savings in gold. It's safe for retired people like me. I can sell the gold any time, anywhere, when I need cash,” he told AFP. Although the treasure has long been perceived as a safe haven, the recent gold rush has alarmed Vietnam's government, which is faced with an 18 percent inflation rate and an unstable national currency, the dong.

When discussing the Greek vote to pass a request for cash which is based on nothing substantial but merely more pledges to fix its economy in exchange for fresh billions in secured debt (aka bailouts) which will prime at least 136% of the country's GDP with a direct lien, we said all that matters is Germany's response. In which case ths following statement from German FinMin Schauble is likely indicative that this time around Greece will need to literally move mountains to convince Europe it will comply. From Reuters: "Greek promises on austerity measures are no longer good enough because so many vows have been broken and the country that has been a "bottomless pit" has to dramatically change its ways, German Finance Minister Wolfgang Schaeuble said. In a hard-hitting interview with the Welt am Sonntag newspaper, Schaeuble also said it is up to Greece whether the country can stay in the euro zone as part of its efforts to restore its competitiveness. "The promises from Greece aren't enough for us anymore," Schaeuble said. "With a new austerity programme they are going to first have to implement parts of the old programme and save." Yet one wonders just how will Greece first implement the measures from the first one if Europe has to vote tomorrow (or Wednesday, it is all a blur now), on ratifying the second bailout. Or was this weekend's entire Greek exercise merely one of complete irrelevance. In other news, we are fairly confident that February budget revenues are going to come in well below projections, and make the already disappointing January numbers seem like gangbusters.

• Greek Parliament Backs Austerity as Rioters Burn Buildings (Bloomberg)
• China CIC Wary of EU Government Bond Investments (Reuters)
• Spain Unions Decry New Labor Rules (WSJ)
• China Tells Banks to Roll Over Loans (FT)
• We're Not Greece: Italian Prime Minister Monti (CNBC)
• Bernanke’s Labor Pessimism at Odds With U.S. Growth (Bloomberg)
• Obama Budget Seeks Funding for Trade Unit (Bloomberg)
• Obama's Election-Year Budget to Target Rich (Reuters)
• China May Need to Fine-Tune Policy This Quarter, Wen Says (Bloomberg)
• China’s Xi Seeks Second Front for U.S. Ties in Return to Iowa (Bloomberg)
• Why Greece and Portugal Ought to go Bankrupt (FT)

Stocks are not the only thing enjoying the ECB's $800 billion balance sheet expansion (and just announced additional Bank of England Quantiative Easing) over the past 6 months. Lately a new and unwelcome visitor has also figured out the Euroean Central Bank's sneaky motives. No, not Germany, they still are hopelessly confused and still believe the ECB is not "printing" money. Nor gold. It did long ago, just as Roubini was calling for an imminent crash following the 200 DMA breach - it is headed over $2000 in short order.  No, this time it is that last entrant to any reliqufication party, who just happens to be the guaranteed party-pooper: gasoline.

Tonight's protest in Athens has all the makings of the vintage ones from May of 2010, and the nigh is still young. Here are some updates:

• FTW: Public order minister resigns in Greece as fires burn - BBC
  
• Rioting spreads across central Athens, at least 5 buildings set ablaze - AP 
• 2:02PM EST: FIRES ARE BURNING SEVERAL SMALL BUSINESSES AROUND ATHENS AS PROTESTERS CLASH WITH POLICE NEAR GREEK PARLIAMENT
• 1:52 PM EST: POLICE ARE CLEARING PROTESTERS FROM OUT IN FRONT OF GREEK PARLIAMENT BUILDING
• 1:50 PM EST: ATMS ARE REPORTEDLY EMPTY AROUND ATHENS... STILL UNCONFIRMED WORKING TO CONFIRM THIS 
• 1:48 PM EST: LARGE FIRES ARE REPORTED AROUND ATHENS... INCLUDING A BRANCH OF EUROBANK AND STARBUCKS
• Skai TV reports that police have run out of tear gas & have asked for more supplies to be brought

As a reminder, the final vote is not until midnight.

Under any collectivist society, the act of non-participation is always painted as an attack on the group.  In a fully interdependent system, refusing to contribute automatically hurts others, and therefore, makes you a criminal by default.  These systems are built this way deliberately, in order to control a population by exploiting their sense of innate guilt.  The DHS may claim a limited involvement in globalization, restricted to security issues, but the very process of integration with the international corporate framework as well as foreign institutions makes the agency a catalyst for forced collectivism.  Bombs in shipping containers (the bombs we’re supposed to believe are everywhere), do not warrant the massive shift of our security apparatus into a policy of global centralization.  In the end, this move on the part of the DHS has nothing to do with security, and everything to do with manipulating the attitude of the general public towards globalization.  It is much more difficult to challenge a methodology when that methodology is suddenly treated as a national security issue, and is defended by an army of bureaucrats and blue-shirted thugs.  When a world view is made violently essential to the very survival of a people, defiance is held tantamount to treason, and change, no matter how wise, becomes impossible.

As the headlines from Europe become more and more realistic (and ironically more and more Onion-worthy), Reuters notes one of the more interesting examples of just how the Greek people are feeling. The Federation of Greek Police have accused EU/IMF officials, in a formal letter, of "...blackmail, covertly abolishing or eroding democracy and national sovereignty". While violence erupts among the largely unemployed youth, the supposedly 'grown-up and responsible' segment of the Greek society, which for now at least appears not to be on strike, is recognizing the wholesale destruction of their society (as 22% cuts in minimum wage for instance are thrust upon them). The Greek police, who have stood against the protesters and done their jobs facing threats and anger, are seemingly expressing solidarity with the antagonists as they call out ECB, European Commission, and IMF leaders for their destructive policies. At what point do the police throw down their riot shields and follow the Greek people into their 'Bastille'?

• Eurozone dismisses Greek budget deal (FT)
• Germany Says Greece Missing Debt Targets in Aid Rebuff (Bloomberg)
• Germans concerned over Draghi liquidity offer (FT)
• Azumi Says Japan Won’t Be Shy About Unilateral Intervention (Bloomberg)
• Schaeuble Signals Germany Is Flexible on Revising Terms of Portuguese Aid (Bloomberg) - food euphemism for "next on the bailout wagon"
• Venizelos Tells Greek Lawmakers to Back Budget Cuts or Risk Exiting Euro (Bloomberg)
• Putin May Dissolve Ruling Party After Vote (Bloomberg)
• HK Bubble pops? Hong Kong Sells Tuen Mun Site to Kerry for HK$2.7 Billion, Government Says (Bloomberg)
• Gross Buys Treasuries as Buffett Says Bonds Are ‘Dangerous’ (Bloomberg)

Much has been made of today's Reuters story how "Iran turns to barter for food as sanctions cripple imports" in which we learn that "Iran is turning to barter - offering gold bullion in overseas vaults or tankerloads of oil - in return for food", and whose purpose no doubt is to demonstrate just how crippled the Iranian economy is as a result of the ongoing US embargo. Incidentally this story is 100% the opposite of the Debka-spun groundless disinformation from a few weeks ago that India was preparing to pay for Iran's oil in gold (they got the asset right, but the flow of funds direction hopelessly wrong). While there is certainly truth to the fact that the US is actively seeking to destabilize the local government, we wonder why? After all as the opportunity cost for the existing regime to do something drastic gets ever lower as the popular resentment rises, leaving the local administration with few options but to engage either the US or Israel. Unless of course, this is the ultimate goal. Yet going back to the Reuters story, it would be quite dramatic, if only it was not the case that Iran has been laying the groundwork for a barter economy for many months now, something which various other analysts perceive as the basis for the destruction of the petrodollar system. Perhaps regular readers will recall that back in July, we wrote an article titled "China And Iran To Bypass Dollar, Plan Oil Barter System." Specifically, we wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant." Seen in this light the fact that Iran is actually proceeding with a barter system, something that had been in the works for quite a while, actually puts the Reuters story in a totally different light: instead of one predicting the imminent demise of the Iranian economy, the conclusion is inverted, and underscores the culmination of what may have been an extended barter preparation period, has finally gone from beta to (pardon the pun) gold, and Iran is now successfully engaging in global trade without the use of the historical reserve currency.

Mario Draghi has just begun his press conference in a more upbeat tone than recent months. EURUSD is limping back from its last try at 1.33 but only modestly as he sees inflation risks 'broadly balanced' and reminds us all of the 'transitory' nature of his temporary non-standard measures, as Bloomberg notes. The main thing is that the ECB is once again easing collateral demands and will now accept credit claims. This simply proves that Europe is running out of any money good assets to pledge to the ECB as "collateral." Before the European (and thus global) ponzi is over, the central banks will accept Mars bars wrappers as collateral at 100 cents on the freshly printed dollar/euro.