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Several recent releases of data bring the problem into focus; a sharp focus. In Germany, once thought to be almost invincible and somehow outside the recession that is raging in Europe, the crisis is just beginning - but it is clearly indicated by the newest data which shows that Germany has begun the descent down the rabbit hole with the rest of its brethren. Germany is now trapped; having lost control of the situation - first by the way the game has been played; and second by the limitations of her capital. We suspect you will soon find a politician in Germany who is opposed to the policies of Ms. Merkel and who will rise to power based upon "Germany for the Germans". All of this is also defined by a very warped time-line. The problems are now, the recession is now, the economic difficulties are now and the solutions that have been proposed are one to three years out. Germany is in the box and we are afraid that it is now Frau Pandora and not Frau Merkel who owns the key.

Feel like every day Europe is juggling hot potatoes? You are not alone. As the following graphic summary from Citi's Matt King (whose insight into Europe, liquidity conduits, shadow banking and a comprehensive picture of modern financial "innovation" has rapidly become second to none) shows, the hot potatoes are getting hotter by the minute, and are flying ever faster and higher. But the kicker: King has the best punchline on Europe we have yet encountered: "Losses are unquantifiable" Q.E.D.

As the world anticipates Bernanke's speech on Friday - which most do not expect to explicitly say "NEW-QE-is-on-bitches" - we started thinking just what it is that he can suggest that would provide more jawboning potential. His speech is likely to lay out 'lessons learned' and outline the various conventional, unconventional, and unconventional unconventional policy options available (as we noted here). While open-ended QE, cutting the IOER, and 'credit-easing' are often discussed, none would be a surprise; this reminded us of an article from Morgan Stanley two years ago - after QE2 - that raised the possibility of Price-Level Targeting (PT), which is quite different from Inflation-Targeting. While its cumulative effect could be anti-debtflationary, it is however tough to communicate, reduces the Fed's inflation-credibility, and could be seen as inconsistent with the Fed's dual mandate. Our hope is that by understanding this possibility, the mistaken shock-and-awe is dampened.

Complicity reigns supreme as everyone benefiting from a scam keeps quiet about everyone else's skim lest their own share of the spoils fall under the harsh light of inquiry. Can an economy that has become dependent on lies, misrepresentation, "fudging" of numbers, fraud, embezzlement and a multitude of skimming and scamming operations escape the moral and financial black hole it has created? The self-evident answer is "no."

Speculation that the ECB might, as part of its proposed bond-buying programme, announce an interest rate target (or band) for short-dated peripheral government bonds has sparked a further rally in Spanish and Italian bonds in the past week. Such an 'unlimited' move is a complete volte face from past policy, but Daiwa's research team believes hopes that the announcement of an interest rate or spread target would spare the ECB the pain of having to intervene in the markets at all are flawed in our view. For the ECB to credibly communicate an interest rate or spread target requires it to quantify the excess risk premia. Given the inherent inaccuracy (or falsehoods) of the forecasts underlying these estimates, the ECB would risk having to review these targets regularly, leaving markets uncertain about their permanence. The success and the sustainability of any future ECB interventions will ultimately depend on the peripheral governments’ ability to meet the conditionality required - and we know how that has ended up - always and every time.

There are 3 solid rules to follow and understand when buying gold and silver bullion and or mining stocks. Here they are.

The case for ultra easy monetary policies has been well enough made to convince the central banks of most Advanced Economies to follow such polices. They have succeeded thus far in avoiding a collapse of both the global economy and the financial system that supports it. Nevertheless, it is argued in this stunningly accurate paper via none other than the Dallas Fed (and BIS economist William White), that the capacity of such policies to stimulate “strong, sustainable and balanced growth” in the global economy is limited. Moreover, ultra easy monetary policies have a wide variety of undesirable medium term effects - the unintended consequences. They create malinvestments in the real economy, threaten the health of financial institutions and the functioning of financial markets, constrain the “independent“ pursuit of price stability by central banks, encourage governments to refrain from confronting sovereign debt problems in a timely way, and redistribute income and wealth in a highly regressive fashion. While each medium term effect on its own might be questioned, considered all together they support strongly the proposition that aggressive monetary easing in economic downturns is not “a free lunch”. Absolute must read!

We tried to bite our tongue; we ignored some of the sheer hypocrisy of Cleveland Fed's Sandra' oh Sandy' Pianalto (that QE2 was a definitive success in 2010 but now LSAPs require more analysis of costs and benefits); but when she started down the road of praising the US consumer for deleveraging we had enough. In the immortal words of John Travolta: "Sandy, can't you see, we're in misery" as while she notes consumers cutting back on credit card debt (due to forced bankruptcies we note), Consumer debt has only been higher on one month in history! Soaring auto loans and student debt should just be ignored? There is no deleveraging - Total US Consumer debt is 0.23% from its all-time high in mid-2008, and will with all likelihood break the record at the next data point. Meanwhile her speech, so full of careful-not-to-over-commits can be summed up by the world-cloud that shows the six words most prominent: 'Monetary Policy', 'Financial Conditions', and most importantly 'Credit Economy'. Here's the deal: Consumer Debt is Consumer Debt.

Yesterday, Jens Weidmann called it a "drug addiction"; for the past 4 years we have called it sheer insanity (and other less polite words). Whatever one calls it, it is obvious that using monetary policy to delay the need for real (not theatrical) fiscal policy involvement that sees to restore debt credibility (i.e., deleverage) does nothing to fix the underlying problems, and merely provides an ever briefer respite from the symptoms of insolvency without ever addressing the underlying cause. Today, even Bank of America has realized this fundamental Catch 22 that is now the paradox at the heart of what remains of capital markets: more easing serves to appease politicians, who see no need to change any of their broken policies, in the process requiring even more QE in the future, and so on, until this always ending in tears game of extend and pretend comes to a sudden and violent end.

Earlier today we showed for the nth time that with insanity and insolvency ravaging the old continent, at least one person has the temerity to avoid sticking his head in the sand of collectivist stupidity and denial. That person is Bundesbank head Jens Weidmann, who until now may or may not have had the backing of Germany's elected leader, Angela Merkel. Moments ago it became clear whose side Merkel, who recently came back from vacation and is set to spoil the party that the (insolvent) mice put together in her absence, is on. From Reuters, who quotes Merkel in her just released interview with German ARD: "I think it is good that Jens Weidmann warns the politicians again and again," Merkel said. "I support Jens Weidmann, and believe it is a good thing that he, as the head of the German Bundesbank, has much influence in the ECB."

Update: Yes it was - Police: All Empire State shooting victims were wounded by officers

The official media-friendly narrative explaining yesterday's latest tragic shooting incident in midtown Manhattan in which a recently unemployed Jeffrey Johnson, 58, walked up to his former boss and shot him three times point blank before "calmly" walking away, is that Johnson also shot 9 other people, luckily none fatally, before being taken down by the NYPD. Sadly, as so often happens these days, the "media-friendly" narrative is wrong, and as CBS and Guardian report, Johnson did not fire during the quote unquote shootout, in which at least nine other perfectly innocent were hit, all of them by stray NYPD bullets.

With the polls apparently seeing it all tied up at 46-46 (and heading into the period when McCain and Obama diverged so strongly in 2008), a recent Gallup poll brings up the age-old question of whether the electorate will vote with their hearts or their wallets. Only in a Facebook-world; but 54% 'like' Obama versus 31% 'like' Romney but this huge social-network-factor disappears when asked who will better handle the economy - 52% believe Romney will be better for the economy as opposed to 43% believing in Obama. Of course none of that matters if the market remains up here.

There is a frequent tendency to over state the importance of the Fed and its policies and ignore the primary fundamentals driving the gold market which are what we have long termed the ‘MSGM’ fundamentals. As long as the MSGM fundamentals remain sound than there is little risk of gold and silver’s bull markets ending. What we term MSGM stands for macroeconomic, systemic, geopolitical and monetary risks. The precious metals medium and long term fundamentals remain bullish due to still significant macroeconomic, systemic, monetary and geopolitical risks. We caution that gold could see another sharp selloff and again test the support at €1,200/oz and $1,550/oz. If we get a sharp selloff in stock markets in the traditionally weak ‘Fall’ period, gold could also fall in the short term as speculators, hedge funds etc . liquidate positions en masse. To conclude, always keep an eye on the MSGM and fade the day to day noise in the markets.

When first the speculation and subsequently the confirmation that in addition to suffering massive losses on its IG-9 position, JPM had engaged in massive, reckless and criminal CDS mismarking with the intent to defraud and to boost the appearance of profit for selfish reasons, we promptly concluded that "Jamie Dimon's "tempest in a teapot" just became a fully-formed, perfect storm which suddenly threatens his very position, and could potentially lead to billions more in losses for his firm." So far, the regulators which are currently on page two of "CDS for Absolutely Corrupt Criminal Morons", are only slowly catching up. And while the stench will eventually lead to Jamie, as what happened in the over the counter, unregulated CDS market has most certainly happened at the tens of trillions in other OTC products traded by JPM, most of which are IR swaps, tying it all back nicely to the Libor scandal of which JPM is also a part, the first person who will certainly experience some major pain as the JPM scapegoating plays out, is none other than the London Whale himself Bruno Iksil, who was loved by all at JPM when he was making money, and is now being hung out to dry, once the bank is in the prosecution's cross hairs.

I have to admit, I am pretty sick of writing about Europe, particularly since nothing has changed over there in the last month.

Instead what’s happened is that Mario Draghi issued a borderline ridiculous statement that he somehow will be able to fix the EU’s solvency Crisis.

The actual speech started with a philosophical inquiry comparing the Euro to a bumblebee. I kid you not: