Reuters

The financial sector added 38% to GDP, but the threat of the banking-data sharing agreement will cause clients to pull their money out...

Moments ago, PD's Enrico Letta announced that after several days of negotiations he has enough support to form a government which will see Letta as Prime Minister, while one of Silvio Berlusconi's closest allies, Angelino Alfano, of Berlusconi's PDL, would become deputy prime minister and interior minister, in effect guaranteeing Bunga immunity from any and all political and criminal prosecutions for as long as the government is in power. Reuters also informs that "Bank of Italy director general Fabrizio Saccomanni will take the powerful economy ministry and former European Commissioner Emma Bonino will be foreign minister, Letta said after meeting President Giorgio Napolitano. The government will be sworn in at 1030 BST on Sunday and Letta is expected to go before parliament to seek a vote of confidence on Monday." In other words, the new Italian government will cover all bases: it will be anti-austerity as per Letta campaign to give the people hope that things may get better as much more debt is issued, Berlusconi will be safe and sound, which was his only real mandate, and the Italian Banks will remain in the good graces of the ECB as the link between the financial sector (which has been buying up record amounts of Italian sovereign debt) and the nation becomes inextricably linked, something Europe once upon a time tried to avoid but no longer pretends to even care.

Using cheap debt to buy assets makes a lot of sense right now, but only if it's done right. That wasn't the case with the world's largest retail M&A deal this year.

German finance minister Schaeuble just explained, in a seeming effort to assuage rising fears that the one core nation left in Europe will choose the game-theoretically optimal first-defection wins strategy, that "Germany benefits from the Euro more than others." Indeed it does; as German firms are buying up strong competitors, clients or suppliers at a time when those companies are struggling to stay afloat through years of recession in their home markets and as shaky banks restrict access to credit. It appears that the slow-and-steady bloodless invasion of Europe can be summed up by the following virtuous circle of Germany's hidden strategy. Of course, as Schaeuble explained later in his missive, "it is nonsense" that Germany wants a German Europe and that the Euro exchange rates is "Okay" for Germany.

• Reinhart and Rogoff: Responding to Our Critics (NYT)
• Differences with centre-right delay Italy's Letta (Reuters)
• Italy's Letta moves forward to shape government (Reuters)
• China’s leaders warn on financial risks (FT)
• Norway oil fund makes big move from bonds to stocks (FT) - worked wonders for the Bank of Israel
• Smuggling milk is the new smuggling heroin in HK: Milk Smugglers Top Heroin Courier Arrests in Hong Kong (BBG)
• RenTec's mean reversion models fail on BOJ lunacy: Yen Bets Don't Add Up for a Fund Giant (WSJ)
• From 'Fabulous Fab' to Grad Student (WSJ)
• BOJ in credibility test as divisions emerge over inflation target (Reuters)
• Boston Bombing Suspect Moved from hospital to prison (WSJ)
• Provopoulos Says ECB May Never Need to Use Bond-Buying Program (BBG) which is good because, legally, it doesn't exist

While the main, if completely irrelevant, macroeconomic news of the day will be the first estimate of US Q1 GDP due out later today, perhaps the best testament of just how meaningless fundamental data has become was the scheduled BOJ announcement overnight in which Kuroda's merry men simply stated what was expected by everyone: the Japanese central bank merely repeated its pledge to double the monetary base in two years. The lack of any incremental easing, is what pushed both the USDJPY as low as 98.20 overnight (98.60 at last check), over 100 pips from the highs, and has pressured the Nikkei into its first red close in days, and shows just how habituated with the constant cranking up of the liqudity spigot the G-7 market has truly become.

The tension to "liberate" Syria is palpable. It took just 24 hours for the US to do an about face on its position on Syria, where yesterday, as Bloomberg reported, "U.S. officials said they haven’t seen conclusive evidence supporting an assertion by Israel’s top military intelligence analyst that Syrian government forces have used chemical weapons against rebels. Secretary of State John Kerry and spokesmen from the White House and the Pentagon said investigations haven’t produced hard proof that Bashar al-Assad’s regime has used toxic chemicals -- a step that President Barack Obama has said would cross a “red line." Fast forward to today, and we get pretty much the opposite opposite: "The United States believes with varying degrees of confidence that Syria's regime has used chemical weapons on a small scale, the White House said on Thursday."

There are growing supply issues and a range of gold and silver coins and bars are in short supply internationally and premiums are rising globally. Many smaller dealers have been cleared out of their bullion inventories.

Gold prices are expected to recover in the coming weeks and months according to the Reuters Precious Metals Poll of analysts.

Most of the 29 banking and brokerage analysts and consultants polled expected prices to find support and stay above the $1,400 mark. The majority of analysts, 20 out of 29, expect gold to end 2013 above $1,450 per ounce and 6 analysts, including GoldCore, saw gold above $1,650/oz by the end of 2013.

Interestingly, the majority are bullish at these price levels with average price forecasts for the year of 2013 much higher than today's prices - at a mean of $1596/oz and a median of $1627/oz.  

• UK economy shows 0.3% growth (FT)
• Texas University Fund Sold $375 Million in Gold Bars (BBG)
• Spain Jobless Rate Breaches 27% on Recession Woes (BBG)
• Letta calls for easing of austerity policies (FT)
• Italy Led by Letta Brings Berlusconi Back as Winner (BBG)
• Fed Debate Moves From Tapering to Extending Bond Buying (BBG)
• South Korea wants talks with North on shuttered industrial zone (Reuters)
• Republicans advance bill to prepare for debt ceiling fight (Reuters)
• Republicans claim White House failed to warn on severity of cuts (FT)
• Xi meets former US heavyweights (China Daily)
• Next BoE chief Carney says clear framework key to policy success (Reuters)
• Chinese roll out red carpet for Hollande (FT)

A peculiar trading session, in which the usual overnight futures levitation has not been led by the BOJ-inspired USDJPY rise (even as the Nikkei225 rose another 0.6% more than offset by the Shanghai Composite drop of 0.86%), which actually has slid all session briefly dipping under 99 moments ago, but by the EURUSD, which saw a bout of buying around 5 am Eastern, just after news hit that the UK would avoid a triple dip recession with Q1 GDP rising 0.3% versus expectations of a 0.1% rise, up from a -0.3% in Q4 (more in Goldman note below). Since the news that the BOE will likely delay engaging in more QE (just in time for the arrival of Carney) is hardly EUR positive we look at the other news hitting around that time, such as Finland saying that the euro can survive in Cyprus exits the Eurozone, and that Merkel has rejected standardized bank guarantees for the foreseeable future, and we are left scratching our heads what is the reason for the brief burst in the Euro.

We have no personal experience in the business of false flag terrorism, but we imagine that engineering a successfully staged terror attack to be blamed on innocent or semi-innocent parties with the goal of psychologically manipulating a population requires that one also be an accomplished storyteller.  It demands an avid imagination and an organized sense of foresight.  And, most of all, it requires a consistency of narrative.  Without consistency, the audience’s ability to suspend its disbelief is damaged, and they become disconnected from the fantasy being portrayed. The establishment and the useful idiots they manipulate want to make the “threat” the center of attention, but ultimately, the threat is irrelevant.  There will always be the danger of terrorism and death. True crisis lay in what we refuse to see, and the greatest crisis today is not the bombing of a marathon, but the destruction of our freedoms in the name of “security”.  The bottom line?  Our civil liberties are not up for compromise.  Period.  Shootings, bombs, nukes, nothing!  There is no rationalization that will ever make tyranny a moral enterprise. We are not frightened, and we are not ignorant.  No attack, no matter how heinous, will ever convince us to hand over our freedom.

Those who think back to November 2011 will recall that it wasn't Jon Corzine's wrong way bet on Italian bonds that ultimately led to the bankruptcy of MF Global, well it did in part, but the real Chapter 11 cause was the sudden liquidity shortage due to the way the trades were structured as a Repo To Maturity, where the bank had hoped to collect the carry from the bond coupons, thereby offsetting the nominal repo cost of funding. The kind of deal which is the very definition of collecting pennies in front of a steamroller, as while the funding cost may be tiny and the capital allocated negligible (due to the nearly infinite implied leverage involved when using repo), when the underlying instrument crashes, and the originating counterparty has to fund a massive variation margin shortfall, that is when the shadow transformation cascade triggers an immediate liquidity crisis, which can result in liquidation cascade in a few brief hours. It happened with MF Global, it happened with Lehman too. And, we now learn, it also happened with Italy's most troubled and oldest bank, Monte Paschi (BMPS), whose endless bailouts, political intrigue, depoit runs, and cooked books have all been covered extensively here previously.

It appears, once again, that the government's inept approach to spending 'other people's money' has blown up in their face. As HotAir.com reports, newly obtained documents show the Obama administration was warned as early as 2010 that electric car maker Fisker Automotive Inc. was not meeting milestones set up for a half-billion dollar government loan, nearly a year before U.S. officials froze the loan. Just as with Solyndra, Congress seemed convinced to spend billions of taxpayer money 'investing' in green-tech startups - only to lose everything. Simply put, in our humble opinion, the pattern is explained by the 'monopoly money' perspective we suspect these funds are viewed as in light of Bernanke's inexorable funding of the government's largesse. None other than the great Joe Biden reveled in the news in 2009 that Fisker would re-open a closed GM plant creating jobs, jobs, jobs; it never completed the task and never created one job. When the money isn't yours, 'investing' public funds is oh so easy and it appears, with zero consequence for the decision makers - again. But this story is not over yet, as Fisker heads to Congress looking for the right "financial and stretgic resources" once again.

Things in the US have gotten so bad, not only are most online dealers backlogged weeks and months in advance for most PMs (as the CEO of Texas Precious Metals explained in detail), but respected bullion vaults are also now on the verge of running out of inventory. As Reuters described, "Michael Kramer, president of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York, has been inundated by orders from existing and new wholesale and retail customers. "It's panic. This is one of the busiest times in quite a while. People think gold's at the lows and they want to take advantage." It was only a matter of time before the last bastion of paper money, London, also succumbed to the soaring demand for physical, and sure enough moments ago Bloomberg reported that the "Britain’s Royal Mint, established in the 13th century, sold more than three times more gold coins this month than a year earlier as prices declined." Sales are more than 150 percent higher than last month, according to Shane Bissett, director of bullion and commemorative coin at the Royal Mint.

Why Have We Lost Our Rights In The New "Post-9/11 World" If The Government Can't Keep Us Safe?  Trillions Of Dollars - And Thousands Of American Lives - Have Been Squandered On Boondoggles And Pork. What The Heck Are We Doing?