Testimony

We present today's main circus event: Eric Holder, Attorney General of the US, who will field questions from assorted members of the House Judiciary Committee chaired by Bob Goodlatte whose career donors can be found here broken down by industry. As a reminder, earlier today we got this: "House Speaker John Boehner wants to know, "Who's going to jail over this scandal?" He's talking about the Internal Revenue Service's targeting of conservative groups for extra scrutiny of their applications for tax-exempt status." We know the answer: nodody.

And so the final curtain falls on the myth of what was supposed to be, in its own words, the "most transparent administration" in history. As it turns out, the big Friday story of Bloomberg journalists snooping on clients was just amateur hour compared to what the AP was about to serve. In fact, the Watergate affair may soon appear like a walk in the park compared to the First Amendment shitstorm that is about to be unleashed following the just reported news that the US Department of Justice had "secretly obtained two months of telephone records of reporters and editors for The Associated Press in what the news cooperative's top executive called a "massive and unprecedented intrusion" into how news organizations gather the news." First amendment? Freedom of speech and press? Surely not when it comes to the Nobel-peace prize winning President and those who dare to expose his secret ways. And what's worst, is that the AP breach has all the makings of a spiteful hack driven by personal vengeance against one of America's premier news outlets.

Overnight risk continues to ignore all newsflow (today the economic reporting finally picks up with advance retail sales due at 8:30 am as expectations for a second modest decline in a row of -0.3%) and is focused entirely on what the consensus decides to make of the Hilsenrath piece, even as the difficulty level was raised a notch following another late Sunday Hilsenrath piece, which puts more variable into the "tapering" equation, and whose focus is whether Bernanke will be replaced by Janet Yellen, Geithner or Summers, or anyone. With all three classified as permadoves, one does scratch their head how the market can be confused: worst case Fed tapers by $10/20 billion per month, market tumbles, then Bernanke's replacement or Ben himself ploughs on even more aggressively with QE. QED.

The IRS conservative targeting scandal is going from bad to worse. Following the Friday revelations that despite all prior appeals to the contrary, the IRS did in fact apply political bias and prejudice in targeting conservative groups who had applied for exempt status (and who knows what other prejudice when targeting non-liberals entities - perhaps it is time to do an analysis of what the ratio of conservatives to liberals audited each year is?), culminating with the farcical response by an IRS official during the Friday press meeting, this may be just the beginning of a major political scandal which in additon to tangential fallout crushing the alleged "impartiality" of the Obama administration, additionally validates many of the heretofore right-wing "conspiracy theories." And as Zero Hedge has shown time and again, it is not a conspiracy theory if it is a conspiracy fact.

What REALLY Happened?

When it comes to the deep hole of lies and inconsistencies that US foreign policy is vis-a-vis Syria, it has two options: stop digging or double down. Following the earlier report by the UN that outright rejected the full blown White House propaganda push to make it seem that it was Assad's regime that was using chemical weapons as a front to stage a military incursion against a very unappealing despot, that it was the Al-Qaeda assisted and potentially US-armed rebels who had in fact been using toxic sarin gas, there was some hope that the digging would stop. Instead, the doubling down began.

Carla Del Ponte, a member of the UN independent commission of inquiry on Syria, said that testimony gathered from casualties and medical staff indicated that the nerve agent sarin gas was used by rebel fighters. "Our investigators have been in neighbouring countries interviewing victims, doctors and field hospitals and, according to their report of last week which I have seen, there are strong, concrete suspicions but not yet incontrovertible proof of the use of sarin gas, from the way the victims were treated," Ms Del Ponte said in an interview with Swiss-Italian television, broadcast on Sunday. "This was used on the part of the opposition, the rebels, not by the government authorities," she added, speaking in Italian. Ms Del Ponte added that the inquiry has yet to see any direct evidence suggesting that government forces have used chemical weapons, but said further investigation was required before this possibility could be ruled out. The new claims come one week after the United States said it had "varying degrees of confidence" that sarin had been used by Syria's government on its people.

In the past months and right after implementing Quantitative Easing Unlimited Edition, the Fed began surfacing the idea that an exit strategy is at the door. With the latest releases of weak activity data worldwide, the idea was put back in the closet. However, a few analysts have already discussed the implications of the smoothest of all exit strategies: An exit without asset sales; a buy & hold exit. We have no doubt that as soon as allowed, the idea will resurface again. Underlying all official discussions is the notion that an exit strategy is a “stock”, rather than a flow problem, that the Fed can make decisions independently of the fiscal situation of the US and that international coordination can be ignored. This is logically inconsistent as we address below...

In what has been a banner weak for the many serial inflationists and fans of Big Government out there, equity markets have largely reversed the declines of the previous period on the hope for – what else? – yet more pump priming. On the fiscal front, much heart has been taken at EU Commission President Barroso’s assertion that the time has come to move beyond an exclusive reliance on ‘austerity’ and to begin to focus on encouraging growth. Needless to say [Barroso's actual words, were] far less radical than anything whipped up by the journalists. In the circumstances, however, the wilful desire to over interpret (if not actively misinterpret) the message was far too powerful to resist, especially in the wake of the academic catfight going on over the state of Reinhardt and Rogoff’s Excel skills. For those who have real lives to lead, the briefest of synopses of this spat will suffice and, indeed, it is only introduced here to illustrate the heedless Flucht nach Vorne mentality of the Krugmanites, ever eager as they are to peddle the line that the only reason stimulus has ‘failed’ is because there has been nowhere near enough of it. But other than this war of the scholastics, the whole debt issue surely misses the crucial point that debt only swells in a polity where not only is government over large to begin with, but where it is serially profligate – i.e,. where the political class persists in spending more than it dares ask its electors to contribute to their whims.

When just one firm accounts for 99.3% of the physical gold sales at the COMEX in the last three months it’s not what most of us on this side of the rainbow would consider “broad-based” selling.  Of course discovering this kind of relevant information requires an internet connection, 2nd grade math and reading skills, and the desire to do a teeny-weeny bit of reporting.  Sadly they’ve wandered so far down the rabbit hole that the concept of “physical demand” (i.e. people actually wanting to take possession of the stuff) is puzzling to them because the vast majority of the world’s so-called “gold-trading” takes place in the realm of make believe (which is their natural habitat).  It’s all fun and games until somebody loses their metal and “somebody” has lost one hell of a lot of metal in the last 90 days... J P Morgan has fumbled ownership of 1,966,000 Troy ounces of gold since February 1.  That’s 74% more gold than the US mint delivered through the US mint’s American Eagle program in all of 2012.  I mention this because there’s little doubt in my mind that the US government is one of JPM’s gold “customers.”  So (if I am correct) the same US government who just let the Morgue dump its gold on the COMEX floor will once again be suspending gold sales to peasants.

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.

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?

Fresh from his humiliating defeat in the Senate to promote his pacifist gun-control agenda yesterday, in the name of the "90%" of course (who apparently need to pick their senatorial representative just a little more effectively), the Nobel Peace Prize winner has decided that guns just may be the right answer when it comes to promoting peace, or least his agenda abroad. WaPo reports that  the Obama administration has ordered additional U.S. troops to Jordan for possible chemical weapons control, humanitarian response or “stability operations” in Syria. "The new troops, a headquarters element of the 1st Armored Division based at Fort Bliss, Tex., will not greatly increase the number of U.S. forces in Jordan. About 150 troops were sent last year to help train Jordanian military and Syrian opposition forces. Some of those troops will remain, and the new arrivals will increase the total to more than 200."

• Apple reportedly stops placing Mac component orders (DigiTimes)
• Apple Ordered to Remove Obscene Content From China Store (BBG)
• Texas Ammonia-Plant Blast Kills as Many as 15 People (Reuters)
• Boston Probe Said Focused on Person Dropping Bag at Site (BBG)
• The Chinese cold trade war comes come to roost: US becomes Japan’s top export market (FT)
• Berlusconi, Bersani back Marini in presidential vote (Ansa)
• German parliament backs Cyprus bailout (Reuters)
• China Vows Wider Yuan Movement (WSJ)
• Morgan Stanley Sees Core Earnings Weaken (WSJ)
• Gold Miners Lose $169 Billion as Price Slump Adds ETF Pain (BBG)
• G-20 Draft Affirms Pledge to Avoid Competitive Devaluations (BBG)
• IMF warns on risks of excessive easing (FT)
• The battle for the Swiss soul (Reuters)