Reuters

All you need to read.

• Euro-Region Debt Sales Top $29B This Week (Bloomberg)
• Greek Fury at Plan for EU Budget Control (FT)
• Greek "football players too poor to play", leagues running out of money, may file for bankruptcy (Spiegel)
• After insider trading scandal, Einhorn wins the battle: St. Joe Pares Back Its Florida Vision (WSJ)
• China Signals Limited Loosening as PBOC Bucks Forecast (Bloomberg)
• China's Wen: Govt Debt Risk "Controllable", Sets Reforms (Reuters)
• IMF Reviews China Currency's Value (WSJ)
• Watching, watching, watching: Japan PM Noda: To Respond To FX Moves "Appropriately" (WSJ)
• Cameron to Nod Through EU Treaty (FT)
• Gingrich Backer Sheldon Adelson Faces Questions About Chinese Business Affairs (Observer)

Both the ECB and the Fed are accepting poorer and poorer sludge and collateral to back various liquidity schemes.

You've just crossed over...

After it was the west backing down from further unnecessary escalation with Iran two weeks ago, when Israel and the US delayed indefinitely joint naval operations in the Arabian Gulf, it is now Iran's turn to blink. Following reports that Iran would pass a law halting crude exports to European countries, in advance of the full-blown embargo expected to take place some time by June, or as soon as European countries have found alternative supplies, we now learn that "Iran's parliament on Sunday postponed the debate over the bill." This is happening just as nuclear inspectors are arriving in the country "to probe allegations of a secret atomic weapons program." Yet does this mean that Iran has just exposed a major weakness that the West will immediately pounce on? It is still unclear - Reuters reports that "Iran's oil minister said on Sunday the Islamic state would soon stop exporting crude to "some" countries, the state news agency IRNA reported." Naturally the vague, open-endedness of this statement makes it quite clear that it was Iran's turn to de-escalate this time around. Or does this simply mean that Iran has been unable to conclude alternative oil trade arrangements with China, Russia and India just yet?

While over the past 2 days there may have been some confusion as to who, what, how or where is demanding that Greece abdicate fiscal sovereignty (with some of our German readers supposedly insulted by the suggestion that this idea originated in Berlin, and specifically with politicians elected by a majority of the German population), today's quotefest from German Economy Minister Philipp Roesler appearing in Germany's Bild should put any such questions to bed. And from this point on, Greece would be advised to not play dumb anymore vis-a-vis German annexation demands. So from Reuters, "Greece must surrender control of its budget policy to outside institutions if it cannot implement reforms attached to euro zone rescue measures, the German economy minister was quoted as saying on Sunday. Philipp Roesler became the first German cabinet member to openly endorse a proposal for Greece to surrender budget control after Reuters quoted a European source on Friday as saying Berlin wants Athens to give up budget control." And some bad news for our Portuguese (and then Spanish) readers: you are next.

Update 2: the first local headlines are coming in now, from Spiegel: Griechenland soll Kontrolle über Haushalt abgeben (loosely Greece must give up domestic control)

Update: Formal Greek annexation order attached.

It was tried previously (several times) under "slightly different" circumstances, and failed. Yet when it comes to taking over a country without spilling even one drop of blood, and converting its citizens into debt slaves, Germany's Merkel may have just succeeded where so many of her predecessors failed. According to a Reuters exclusive, "Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source told Reuters on Friday." Reuters add: "There are internal discussions within the Euro group and proposals, one of which comes from Germany, on how to constructively treat country aid programs that are continuously off track, whether this can simply be ignored or whether we say that's enough," the source said.' So while the great distraction that is the Charles Dallara "negotiation" with Hedge Funds continues (as its outcome is irrelevant: a Greece default is assured at this point), the real development once again was behind the scenes where Germany was cleanly and clinically taking over Greece. Because while today it is the fiscal apparatus, tomorrow it is the legislative. As for the executive: who cares. At that point Goldman will merely appoint one of its retired partners as Greek president and Greece will become the first 21st century German, pardon, European colony. But at least it will have its precious euro. We can't wait until Greek citizens find out about this quiet coup.

Today we get the first look at where GDP closed 2011.

• Greek Debt Wrangle May Pull Default Trigger (Bloomberg)
• Italy Sells Maximum EU11 Billion of Bills (Bloomberg)
• Romney Demands Gingrich Apology on Immigration (Bloomberg)
• China’s Residential Prices Need to Decline 30%, Lawmaker Says (Bloomberg)
• EU Red-Flags 'Volcker' (WSJ)
• EU Official Sees Bailout-Fund Boost (WSJ)
• EU Delays Bank Bond Writedown Plans Until Fiscal Crisis Abates (Bloomberg)
• Germany Poised to Woo U.K. With Transaction Tax Alternative (Bloomberg)
• Ahmadinejad: Iran Ready to Renew Nuclear Talks (Bloomberg)
• Monti Takes On Italian Bureaucracy in Latest Policy Push to Revamp Economy (Bloomberg)

He said, “Rising commodity prices, uncertainty in the Middle East, the spreading European debt crisis, increased frequency of “extreme weather events” and U.S. fiscal issues are “persistent” problems that will continue to spur market volatility and sway asset prices in the global economy. This is great news for gold. Goldman Sachs noted in a report on Jan. 13th that futures will advance to $1,940 an ounce in 12 months.  Morgan Stanley forecasts the yellow metal will climb to a record of $2,175 by 2013, said analysts Peter Richardson and Joel Crane in their research report.

Update: literally seconds after this article was posted, we receive news that the IMF will seek Saudi contribution to the European bailout fund. There you have it - you enjoy that implicit US protection Saudi emirs? It is about to cost you.

While it is best to pray that NASA will find some very rich and not so intelligent life on Mars so it can bail out the world as it sinks deeper and deeper into a untenable debt hole (which somehow can be "filled" only by issuing more debt at least according to tenured economists at ivy league institutions), a strategy of planning for a realistic outcome may not be a bad idea. The question then is who in the world has some/any spare leverage capacity to incur even more debt and use the proceeds to fund a Eurozone-American-Chinese collapse. Enter the Economist's "wiggle-room index." The publication, best known for recently introducing the "shoe thrower index" (remember the Arab Spring and how Fed induced runaway inflation generated a "democratic" revolution across MENA?) has compiled a list of those developing world countries which still have capacity to provide credible global bailout capital (in fiat form of course - after all that is the only thing that the Ponzi understands) or as the Economist says, the "emerging economies that have the most monetary and fiscal firepower." So if you are on this list (ahem China, Indonesia and Saudi Arabia) - our condolences - you are about to be dragged into the epic slow-motion ongoing collapse of the developed world, kicking and screaming, with some 44 caliber persuasion if needed, but you will be there, before it all falls apart. The time to repay all favors to Uncle Sam is coming.

All you need to read.

• BOJ Should Be Allowed $643 Billion Fund to Buy Foreign Bonds, Iwata Says (Bloomberg)
• Banks Hoarding ECB Cash May Double Company Defaults (Bloomberg)
• China Police Open Fire on Tibetans as Protests Spread (Bloomberg)
• Sarkozy Presidential Rival Hollande Would Lower Retirement Age, Lift Taxes (Bloomberg)
• IMF takes tougher stance over Greek debt (FT)
• Iran threatens to act first on EU embargo (FT)
• PM says ‘no complacency’ on economy (FT)
• George Soros: How to pull Italy and Spain back from the edge (FT)
• Japan's NEC to slash 10,000 jobs (Reuters)
• Obama Planning Corporate Tax Overhaul (Bloomberg)

Gold rose 2.5% yesterday and broke $1,700/oz to $1,712.80, its biggest one-day gain in the past 4 months, as the US Federal Reserve’s 11 out of 17 members voted that interest rates would likely remain near zero into late 2014. Investors sought safe haven refuge into gold fearing their portfolios would lose value as Central Banks flood the markets with loose monetary policies and more cash for governments that can't seem to manage their balance sheets.  A group of 7 major economies now have interest rates that average .5%.  Silver also rallied up 4%.  Today's Comex February gold option expirations will show more activity in the gold markets. One trader stated that gold's gains on Wednesday could be due to a huge cover on a short position before today's option expiration.

As a reminder, the primary reason why the Greek PSI deal "officially" broke down last week, is because the European Fin Mins balked at the creditor group proposal of a 4%+ cash coupon. So now that creditor talks, which incidentally don't have a soft deadline so they can continue indefinitely, or until the money runs out on March 20, whichever comes first, have resumed we already are getting the first totally unsubstantiated "leaks" that negotiations are on the right path. As various US wires reported overnight, including DJ, BBG and Reuters, citing completely "unbiased" and "unconflicted" local Greek media, "Greece's private creditors are willing to improve their "final offer" of a four percent interest rate on new Greek bonds in order to clinch a deal in time to avert a messy default, Greek media said on Thursday without quoting any sources. With time running short ahead of a major bond redemption in March, private creditors are now considering an average coupon of around 3.75 percent on bonds they will receive in exchange for their existing investments, the newspapers wrote." All is good then: the hedge funds will make the proposal to Europe and Europe will accept, right? Wrong. "Another daily, Kerdos said participation of public sector creditors including the ECB in the swap deal was a pre-condition for that offer, which it said could bring the average interest rate to about 3.8 percent." And that as was reported yesterday is a non-starter. So in other words, the latest levitation in the EURUSD started at about 4am Eastern is nothing but yet another rumor-based attempt to ramp up risk. Only this time the rumor is actually quite senseless, which probably explains why even the market which has been completely irrational lately, has seen the EURUSD drop from overnight highs. That said, expect this rumor to be recirculated at least 5 more times before end of trading.