WIESBADEN, April 5 -- "NOTHING CAN SAVE THIS SYSTEM," A TOP EUROPEAN BANKER NOTED TODAY, following Friday's events on financial markets.

The banker said that the world, and in particular the U.S., are in the midst of the biggest credit expansion in history.   In the case of the U.S., the credit generation, not only in absolute terms,
but also relative to the size of the economy, is now greater than in the years preceding the Great Depression in the 1930s.

Ever more credit is being required to feed the various bubbles. These financial asset bubbles, in turn, are needed to keep private households from taking on more debt for consumption.

"What kind of system is this", he said. "You call this an economy?"
In earlier times, he said, you would call this a "pyramid scheme." In recent years, the U.S. economy produced about $2 trillion in new debt per year. But, in the meantime, we have accelerated
to an annual rate of $2.7 trillion in new debt.

Any considerable rate increase is now a threat to the system. Yields on 10-year U.S. Treasuries have already climbed
up from 3.65% on March 17 to 4.23% today, with the biggest rise taking place on Friday, April 2.

The banker said he can't judge at what point the house of cards will come down. But that it will come down is certain. And it might come down fast.

[Source: St. Louis Fed, combined wires]

WIESBADEN, April 5 -- FED GOVERNOR POOLE CALLED FOR PREEMPTIVE" MOVE IN CASE OF "UPSIDE SURPRISE."

On March 30, a few days before the announcement of fantastic job figures by the U.S. Labor Department, St. Louis Federal Reserve Governor William Poole appeared at several public events in Evansville, Indiana.

In the University of Evansville he first addressed local business
leaders, then university students, and later the Rotary Club of Evansville.  During these events, he told the audience
that interest rates will not remain near zero forever.

"If you leave them too low, too long you can create an inflation problem, so we want to be preemptive.
If we already see substantial increases in inflation, then we've fallen behind."

When he was asked when the Fed would start rising rates, Poole responded: "They are going to start going up when we have an upside surprise, an upside confirmation that the economy is picking up steam."

[source: PIMCO website, April newsletter]

PIMCO CHIEF BILL GROSS TELLS INVESTORS
TO BUY "ANYTHING BUT TREASURIES."

Gross, whose company PIMCO, manages the largest bond
mutual fund in the world, in his April newsletter issued before
the administration leak of faked March jobs report, said: "In
short, I recommend getting the hell out of Dodge City, U.S.A. and reinvesting in London and Frankfurt. Construct an ABT
portfolio--Anything But Treasuries, and hand those Old Maid
Treasury bonds to the Japanese and the Chinese...."

[source: Reuters, April 5]

ON APRIL 2, INTEREST-RATE DERIVATIVES TRADING VOLUME HIT RECORD HIGH AT CHICAGO'S TWO BIG FUTURES EXCHANGES.

Following the April 2 faked figures on the "great job recovery,"
turnover in Eurodollar futures -- a type of short-term interest rate contract -- on the Chicago Mercantile Exchange hit a whopping 2.548 million contracts, surpassing the previous high of 2.177 million on March 5.

Some 615,932 Eurodollar contracts traded electronically
on the largest U.S. futures market's Globex trading platform,
topping 408,855 from March 5.

Eurodollars are U.S. dollar-denominated time deposits
held in commercial banks outside the U.S.

At the second-largest exchange, the Chicago Board of Trade,
10-year Treasury note options volume jumped to a record-high
501,856 contracts, beating 446,585 options traded on March 5.
Open interest was a record 2.568 million contracts.

CBOT 10-year Treasury note futures had their third-busiest day on April 2. At both exchanges, the day's total trading volume
was the second-highest on record.