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While the world rejoices in the aftermath of the enjoyable diversion in which a fake market surges on fake, politically-motivated data, which incidentally refutes the warning voiced last week by the Fed Chairman who has a far better grasp of the economy than the BLS, warned last week, the confluence of real events continues to indicate that something is brewing in the middle east. Only this time it is not the US adding another aircraft carrier to the three already situated by the Straits of Hormuz. This time the smoke and fire come from Israel. ABC reports that "Israeli facilities in North America -- and around the world -- are on high alert, according to an internal security document obtained by ABC News that predicted the threat from Iran against Jewish targets will increase. "We predict that the threat on our sites around the world will increase … on both our guarded sites and 'soft' sites," stated a letter circulated by the head of security for the Consul General for the Mid-Atlantic States. Guarded sites refers to government facilities like embassies and consulates, while 'soft sites' means Jewish synagogues, and schools, as well as community centers like the one hit by a terrorist bombing in Buenos Aires in 1994 that killed 85 people." Hopefully the head of security's prediction track record is better than that of the CBO, and that the very act of prediction does not in effect "make it so." At least courtesy of this latest escalation by Israel we get a clue of what to focus on, if not so much who the actual aggressors will be. In the meantime, Iran, which has been dealing with hyperinflation for weeks now, and likely has bigger problems to worry about than focusing on "soft sites" will naturally sense this escalation as the provocation it may well be meant to be, respond in kind, which will lead to further responses of definite attacks imminent by Iran's adversaries, and so on, and so forth, until finally the dam wall finally cracks.

Concerned about European bank deleveraging impacting Emerging Market growth prospects? Worried over Global Trade Volumes dropping and a multi-decade low in the Baltic Dry? Fearsome of record inventories for commodities in China and the potential for a harder landing from credit contraction in the shadow banking system? Concerned that Europe's sovereign and financial insolvency problems are not all gone? Worry no more. It appears, and who are we to argue with the data, that the USA is in fact leading the world out of this global growth slowdown with its Composite PMIs the highest of all the major growth drivers. From Markit Economics, we see that perhaps Goldman's Jim O'Neill will have to change his famous acronym to UBRIC as the decoupling myth (not a lag or inventory cycle) remains firmly in place (and the record-breaking jumps in some of the US Services PMI sub-indices should be treated with all the respect in the world).

Daily news.

With the world ever more lethargic daily, as if in silent expectation of something big about to happen (quite visible in daily trading volumes), it is easy to forget that just about a year ago the Mediterranean region was rife with violent revolutions in virtually every country along the North African coast. That these have passed their acute phase does not mean that anything has been resolved. And unfortunately, as BMO's Don Coxe reminds us, it is very likely that the Mediterranean region, flanked on one side by the broke European countries of Greece, Italy, Spain (and implicitly Portugal), and on the other by the unstable powder keg of post-revolutionary Libya and Egypt, will likely become quite active yet again. Only this time, in addition to social and economic upheavals, a religious flavor may also be added to the mix. As Coxe says: "Today, the Mediterranean is two civilizations in simultaneous, rapidly unfolding crises. To date, those crises have been largely unrelated. That may well be about to change." Coxe bases part of his argument on the same Thermidorian reaction which we have warned about since early 2011, namely the power, social and economic vacuum that is unleashed in the aftermath of great social change. But there is much more to his argument, which looks much more intently at the feedback loops formed by the divergent collapsing economies that once were the cradle of civilization, and this time could eventually serve as the opposite. To wit: "The eurocrisis has been front and center for nearly two years, during which time the economic and financial fundamentals have continued to deteriorate. “The Arab Spring” came suddenly, in a series of outbursts of optimism. It may have come at the worst possible time for the beleaguered nations of the North Shore. The Mediterranean has entered one of the stormiest periods in recorded history. It is the major contributor to risk in global equity markets. It is too soon to predict how these crises will end. The Cradle of Civilization is rocking amid an array of winds and storms. “The Arab Spring” ...may have come at the worst possible time for the beleaguered nations of the North Shore."

Mike Krieger submits: "I’ve always loved history. Even all the way back to grade school I remember it being my favorite subject. Very early on I noticed certain patterns in history and I wondered why they occurred. When I was first exposed to European history, I recall being absolutely floored by how certain countries could become so rich and powerful and then subsequently collapse so stunningly and rapidly. The one that really boggled my mind was Spain - the homeland of my maternal grandfather who I never met. Here was a country that conquered and viciously looted essentially all South America other than Brazil (thanks to the pope being magnanimous enough to grant that part of the world to Portugal in the Treaty of Tordesillas), Mexico, Central America and parts of the United States. The gold and especially silver that was taken back to Spain was the stuff of legend, yet almost at the same time they had defeated the native peoples overseas their kingdom at home was crumbling. Not to bore anyone with too much history, but by the mid 1500s the Spanish had essentially conquered the Aztecs (Mexico) and the Incas (Peru). At the time, the Aztec capital, Tenochtitlan was estimated to be larger than any city in Europe. Despite these tremendous “successes” and the riches that came with them, the battle of Rocroi in Northern France in 1643 less than one hundred years later marked the end of Spanish dominance in Europe. What is so fascinating to me is that while the conquistadors were out raping and pillaging halfway around the world the domestic economy was experiencing economic crisis. There were episodes of major currency debasements in the homeland as the crown was forced to fight wars on their borders as well as fund the excursions abroad. It is important to note that the collapse came pretty quickly as it was only in 1627 when things were still looking pretty good for the empire that The Count-Duke Olivares famously stated: “God is Spanish and fights for our nation these days.” Does this story sound familiar?"

With the IMF cutting its global growth forecasts and signs of slowing evident in the dramatic contraction in World Trade Volume in the last few months, it is perhaps no surprise that the central banks of the world have embarked upon what Goldman Sachs calls an 'Unprecedented Alignment of Monetary Policy Across Countries'. Our earlier discussion of the European event risk vs global growth expectations dilemma along with last night's comments on the impact of tightening lending standards around the world also confirms that this policy globalization is still going strong and is likely to continue as gaming out the situation (as Goldman has done) left optimal CB strategy as one-in-all-in with no benefit to any from migrating away from the equilibrium of 'we all print together'. Perhaps gold (and silver's) move today (and for the last few months) reflects this sad reality that all your fiat money are belong to us, as nominal prices rise (but underperform PMs) in equities (and risky sovereigns and financials).

All you need to read.

European Indices are sliding following comments from EU’s Juncker that Greek PSI talks remain “ultra-difficult”, despite earlier gains following comments from the Chinese Premier considering further contributions to the EFSF and the ESM. The Basic Materials sector is outperforming others amid news of a possible merger between Glencore and Xstrata, causing shares in both companies to trade in strong positive territory ahead of the North American open Oil & Gas are one of the worst performing sectors in Europe today, with Royal Dutch Shell shares showing the biggest losses following disappointing corporate earnings. Elsewhere, S&P released a report suggesting Eurozone recession could end in late 2012, forecasting 1% GDP growth for the Eurozone in 2013, however these comments were not followed by significant European index movements. In terms of fixed income securities, Spain held a well received bond auction earlier in the session, with all three lines showing falling yields and strong bid/cover ratios.

• Merkel Seeks to Reassure China (FT)
• German-IMF Rift Stalls Greece Deal (WSJ)
• Survey of Banks Shows a Sharp Cut in Lending in Europe (NYT)
• Bernanke to testify on economy and deficit (AP)
• House votes to freeze congressional, federal pay (WaPo)

All you need to read.

Back in January 2010, when in complete disgust of the farce that the market has become, and where fundamentals were completely trumped by central bank intervention, we said, that "Zero Hedge long ago gave up discussing corporate fundamentals due to our long-held tenet that currently the only relevant pieces of financial information are contained in the Fed's H.4.1, H.3 statements." This capitulation in light of the advent of the Central Planner of Last Resort juggernaut was predicated by our belief that ever since 2008, the only thing that would keep the world from keeling over and succumbing to the $20+ trillion in excess debt (excess to a global debt/GDP ratio of 180%, not like even that is sustainable!) would be relentless central bank dilution of monetary intermediaries, read, legacy currencies, all to the benefit of hard currencies such as gold. Needless to say gold back then was just over $1000. Slowly but surely, following several additional central bank intervention attempts, the world is once again starting to realize that everything else is noise, and the only thing that matters is what the Fed, the ECB, the BOE, the SNB, the PBOC and the BOJ will do. Which brings us to today's George Glynos, head of research at Tradition, who basically comes to the same conclusion that we reached 2 years ago, and which the market is slowly understand is the only way out today (not the relentless bid under financial names). The note's title? "If 2011 was the year of the eurozone crisis, 2012 will be the year of the central banks." George is spot on. And it is this why we are virtually certain that by the end of the year, gold will once again be if not the best performing assets, then certainly well north of $2000 as the 2009-2011 playbook is refreshed. Cutting to the chase, here are Glynos' conclusions.

• Victory for Merkel Over Fiscal Treaty (FT)
• Everyone wants a mediterranean colony: China's NDRC Delegation Visit Greece to Boost Economic Ties (Xinhua)
• As Florida votes, Romney seems in driver's seat (Reuters)
• Greece’s Papademos Seek On Debt Deal by End of Week (Reuters)
• Banks Set to Double Crisis Loans From ECB (FT) - as Zero Hedge predicted two weeks ago
• S&P: Doubling Sales Tax Won’t Help Japan Enough (Bloomberg)
• Toshiba cuts outlook after Q3 profit tumbles (Reuters)
• Blackrock’s Doll says Fed’s QE3 is Unlikely, In Contrast to Pimco’s Gross (Bloomberg)

All you need to read.

Xinhua, the official press agency of the government of the People's Republic of China reports that a "gold rush" swept through China during the week-long Lunar New Year holiday this year, with demand for precious metals and jewelry surging since the Year of the Dragon began. Data released by China's Beijing Municipal Commission of Commerce shows a 49.7% increase in sales volume for precious metals jewelry and bullion during the week-long holiday (over last year), which lasted from January 22 to 28 over that of last year's Spring Festival. One of Beijing's best-known gold retailers, Caibai, saw sales of gold and silver jewelry and bullion rose 57.6% during the week long New Years holiday  according to data released by the Ministry of Commerce (MOC) on Saturday, Other jewelry stores across the country also saw sales boom during the period, with customers favoring New Year themed gold bars and ingots and other types of Dragon themed jewelries. During the week-long holiday, which lasted from January 22 to 28, the sales volume in just one gold retailer, Caibaiand Guohua, another of Beijing's top gold retailers, reached about 600 million yuan (nearly $100 million). Caibai began selling gold bars as investment items during the 2008 Beijing Olympic Games, but the trend of buying gold or silver bars during the Spring Festival has taken off in the past two years.

• 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)