Switzerland

• Euro zone formally approves 2nd Greek bailout: statement (Reuters)
• In a First, Europeans Act to Suspend Aid to Hungary Unless It Cuts Deficit (NYT)
• UK Chancellor Looks at 100-Year Gilt (FT) - What? No Consols?
• Hilsenrath: Fed's Outlook a Tad Sunnier - (WSJ)
• Banks Shored Up By Stress Test Success (FT)
• U.S. dangles secret data for Russia missile shield approval (Reuters)
• Wen Warns of Second China Cultural Revolution Without Reform (Bloomberg)
• Wen Says Yuan May Be Near Equilibrium as Gains Stall (Bloomberg)
• Merkel Says Europe Is ‘Good Way’ Up Mountain, Not Over It (Bloomberg)

• Tainted Libor Guessing Games Face Replacement by Real Trades (Bloomberg) - so circular, self-reported data is "tainted" - but consumer confidence is great for pumping a stock market?
• Japan Sets up $12 Billion Program for Dollar Loans, Increases Growth Fund (Bloomberg)
• China Hints at Halt to Renminbi Rise (FT)
• Spain Pressed to Cut More From Its Budget (FT)
• Bailout can make Greek debt sustainable, but risks remain: EU/IMF (Reuters)
• Banks to Face Tough Reviews, Details of Mortgage Deal Show (NYT)
• U.S. and Europe Move on China Minerals (WSJ)
• Use of Homeless as Internet Hot Spots Backfires on Marketer (NYT)
• Obama administration seeks to pressure China on exports with new trade case (AP)

Earlier today, we reported that Germans are increasingly concerned that their gold, at over 3,400 tons a majority of which is likely stored in the vault 80 feet below street level of 33 Liberty (recently purchased by the Fed with freshly printed money at far higher than prevailing commercial real estate rates for the Downtown NY area), may be in jeopardy,and will likely soon formally inquire just how much of said gold is really held by the Fed. As it turns out, Germany is not alone: as part of the "Rettet Unser Schweizer Gold", or the “Gold Initiative”: A Swiss Initiative to Secure the Swiss National Bank’s Gold Reserves initiative, launched recently by four members of the Swiss parliament, the Swiss people should have a right to vote on 3 simple things: i) keeping the Swiss gold physically in Switzerland; ii) forbidding the SNB from selling any more of its gold reserves, and iii) the SNB has to hold at least 20% of its assets in gold. Needless the say the implications of this vote actually succeeding are comparable to the Greeks holding a referendum on whether or not to be in the Eurozone. And everyone saw how quickly G-Pap was "eliminated" within hours of making that particular threat. Yet it begs the question: how many more international grassroots outcries for if not repatriation, then at least an audit of foreign gold held by the New York Fed have to take place, before Goldman's (and New York Fed's) Bill Dudley relents? And why are the international central banks not disclosing what their people demand, if only to confirm that the gold is present and accounted for, even if it is at the Federal Reserve?

Today's news focuses on UI benefits and the PVV's euro exit report

Citigroup have said that they believe that gold will rise to $2,400/oz in 2012 and by $3,400/oz in “the coming years”. However, Citi’s Tom Fitzpatrick warned of price weakness in the short term and said there is a “real danger” that there may be a correction to $1,600/oz which would provide an even better buying opportunity. Citi are also cautious near term on oil and silver. Production of gold in Australia slid again last year, despite gold fetching higher nominal prices than ever before. According to gold experts, Surbiton Associates, 264 tonnes of gold were produced last year, two tonnes less than in 2010. The 264 tonnes equated to about 8.5 million ounces and ensures that Australia remains a major player in gold, with only China producing more last year. The United States was the world's third-biggest producer with 240 tonnes. Australia's gold production was well below the nation's production peak in the late 1990s.  This further suggests the possibility of peak gold production. Of the world’s four biggest gold producers (China, Australia, the U.S. and South Africa), only China has managed to increase gold production in recent years and this Chinese gold is used in China to meet the rapidly growing demand for gold jewellery and coins and bars as stores of value in China.

• China cuts 2012 growth target to 7.5 percent, stability key (Reuters)
• Freom the Fed scribe himsef - Fed Takes a Break to Weigh Outlook (WSJ)
• Greek bond swap deal rests on knife-edge (FT)
• Lenders Stress Over Test Results (WSJ)
• China to Curb Auto Production Capacity, Promote New-Energy Car Development (Bloomberg)
• China military spending to top $100 billion in 2012, alarming neighbours (WaPo)
• Warning: A New Who's Who of Awful Times to Invest (Hussman)
• EU to push quota for women directors (FT)
• Romney Advances As Obama Gains (WSJ)
• Saudi Aramco Raises Oil Premium for April Sales to Asia, U.S.; Cuts Europe (Bloomberg)

• China’s Holdings of Treasuries Dropped in ’11 (BusinessWeek)
• Bundesbank at Odds With ECB Over Loans (FT)
• Euro zone puts Greece's efforts under microscope (Reuters)
• Bank of America Considers a Revamp That Would Affect Millions of Customers (WSJ)
• In Days Leading Up to MF Global's Collapse, $165 Million Transfer OK'd in a Flash (WSJ)
• Greece Approves Welfare Cuts for 2nd Bailout (Bloomberg)
• Irish Minister Pushes to Cut Bail-Out Cost (FT)
• China to Support Tech Sectors (China Daily)
• Spanish Bond Yields Fall in Debt Auction After ECB (Reuters)
• China to Expand Cross-Border RMB Businesses (China Daily)

• Euro-Area Banks Tap ECB for Record Amount of Three-Year Cash (Bloomberg)
• Papademos Gets Backing for $4.3B of Cuts (Bloomberg)
• China February Bank Lending Remains Weak (Reuters)
• Romney Regains Momentum (WSJ)
• Shanghai Raises Minimum Wage 13% as China Seeks to Boost Demand (Bloomberg)
• Fiscal Stability Key To Economic Competitiveness - SNB's Jordan (WSJ)
• Bank's Tucker Says Cannot Relax Bank Requirements (Reuters)
• Life as a Landlord (NYT)

Could Sweden or Finland be the scene of the next European financial crisis? It is actually far likelier than most people realize. While the world has been laser-focused on the woes of the heavily-indebted PIIGS nations for the last couple of years, property markets in Northern and Western European countries have been bubbling up to dizzying new heights in a repeat performance of the very property bubbles that caused the global financial crisis in the first place. Nordic and Western European countries such as Norway and Switzerland have attracted strong investment inflows due to their perceived economic safe-haven statuses, serving to further inflate these countries’ preexisting property bubbles that had expanded from the mid-1990s until 2008. With their overheated economies and ballooning property bubbles, today’s safe-haven European countries may very well be tomorrow’s Greeces and Italys.

• Germany Crisis Role in Focus After G-20 Rebuff (Bloomberg)
• G20 to Europe: Show us the money (Reuters)
• Draghi’s Unlimited Loans Are No Panacea (Bloomberg)
• Geithner says Europe has lowered risks of "catastrophe" (Reuters)
• Gone in 22 Seconds (WSJ)
• Gillard beats Rudd to stay Australian PM (FT)
• Brazil Will Continue Reducing Interest Rates, Tombini Says (Bloomberg)
• China to Have ‘Soft Landing’ Soon: Zoellick (Bloomberg)
• China To Be Largest Economy Before 2030: World Bank (Reuters)
• Obama pressed to open emergency oil stocks (FT)

Last week saw dramatic dispersion among the major FX pairs as global and local influences caused significant moves in most of the key crosses. Goldman takes a look back at the key drivers of that volatility and then focuses on the week ahead as the EU Summit at the latter end is the main event risk while ongoing macro developments will be focused on the incessant rise in Crude oil prices and whether we start seeing knock-on impacts in the real economy.

The authors identify two "externalities" to the triggers for default cascades: 1) variability of financial robustness of all of the interconnected financial entities; and 2) the average financial robustness of the interconnected entities. If all parties have similar financial robustness (variability is low), then increasing connectivity makes the system more robust. Stability is even likely through diversification if the individual parties are not very robust. It was only when the initial robustness was highly variable across agents (i.e., some agents are weak and others strong) that increasing interconnectedness tended to stimulate systemic defaults.... The lesson here is diversification is not always a good idea. If you diversify across financial entities with wide risk profiles (i.e., some are weak and some are strong) you actually increase the likelihood of a financial calamity.  We don't have to confine ourselves to financial institutions. If we consider our agents to be sovereign, we expect the same problem. Creating a financial superpower out of a group of Germanys would be perfect--even a group of Greeces might be okay. But creating one out of Germanys and Greeces tends to encourage a financial catastrophe. Who could have predicted that? The authors suggest that the "fix" for this situation is to concentrate risk rather than diversify it. I wonder--in whose hands will the risk be concentrated? Perhaps if you hold gold, the risk won't find its way into yours.

• Spiegel: Stop the 130-billion bank transfer! (Spiegel)
• Greece Wins Bailout as Europe Chooses Aid Over Default (Bloomberg)
• Greek pro-bailout parties at all-time low, poll shows (Reuters)
• Eurozone agrees €130bn Greek bail-out (FT)
• Top Banks in EU Rush for Safety (WSJ)
• Medvedev Adviser Says Kudrin Would Be Better Prime Minister (Bloomberg)
• US and Mexico in landmark oil deal (FT)
• McCain calls for US to support Syria rebels (FT)
• Coal Shipments to India Overtaking China on Fuel Shortage (Bloomberg)
• Gillard Shrugs Off Ousting Threat (WSJ)

Back in the summer of 2009, a peculiar story circulated when two Japanese individuals were arrested trying to smuggle $134 billion in US bonds into Switzerland from Italy. The story quickly died down after it was subsequently reported that the bonds were merely fake bearer bonds. Nobody heard much about it since then. Until today, when out of the blue we get a new story which blows that one out of the water. According to Bloomberg, "Italian anti-mafia prosecutors said they seized a record $6 trillion of allegedly fake U.S. Treasury bonds, an amount that’s almost half of the U.S.’s public debt." From here the story just gets weirder: "The bonds were found hidden in makeshift compartments of three safety deposit boxes in Zurich, the prosecutors from the southern city of Potenza said in an e-mailed statement. The Italian authorities arrested eight people in connection with the probe, dubbed “Operation Vulcanica,” the prosecutors said. The U.S. embassy in Rome has examined the securities dated 1934, which had a nominal value of $1 billion apiece, they said in the statement. Officials for the embassy didn’t have an immediate comment." ...And weirder: "The individuals involved were planning to buy plutonium from Nigerian sources, according to phone conversations monitored by the police." ...And really, really weird: "The fraud posed “severe threats” to international financial stability, the prosecutors said in the statement." Ok great, however one thing we don't get is just how can $6 trillion in glaringly fake bombs be a "threat to international financial stability."