San Bernardino, California, filed for municipal bankruptcy after disclosing a $46 million shortfall in the city’s budget, the third California city to seek court protection from creditors since June 28.

California cities from the Mexican border to San Francisco Bay are confronting rising pension costs as they contend with growing unemployment and declining property- and sales-tax revenue. The costs stem from decisions made when stock markets were soaring and retirement funds were running surpluses.

San Bernardino officials sped up the timing of the bankruptcy filing because they were concerned that some creditors may take legal action against the city, Mayor Patrick J. Morris said yesterday in a phone interview. Under Chapter 9, all court cases and other legal actions against the city will be halted until the bankruptcy case is over.

The city was forced to seek court protection so abruptly because of actions by plaintiffs in three cases involving the San Bernardino Police Department, prompting the city to submit an “emergency filing,” according to an e-mailed statement from the San Bernardino city attorney’s office.

I found this story filed on the Bloomberg Internet site yesterday evening...and the link is here.

While the national unemployment rate paints a grim picture, a look at individual states and their so-called real jobless rates becomes even more troubling.

The government's most widely publicized unemployment rate measures only those who are out of a job and currently looking for work. It does not count discouraged potential employees who have quit looking, nor those who are underemployed — wanting to work full-time but forced to work part-time.

For that count, the government releases a separate number called the "U-6," which provides a more complete tally of how many people really are out of work.

The numbers in some cases are startling.

This CNBC story was posted on their website mid-afternoon yesterday...and I thank Ontario, Canada reader Richard O'Mara for sending it. The link is here.

Local governments across New York State are collecting less in taxes, burning through their cash reserves and running up deficits, according to a report released Wednesday by the state comptroller.

The report by the comptroller, Thomas P. DiNapoli, cast long-term doubt on the financial health of many municipalities in the state, which are faced with anemic revenues and fewer remaining ways to cut costs.

And it offered another sobering prospect to local officials who have worried aloud in recent months that some of the state’s largest city governments may soon be unable to make ends meet.

In a telephone interview, Mr. DiNapoli said local governments were facing a “perfect storm” of financial pressures — including diminished state aid, falling property values and sluggish collections of sales tax.

It pretty much goes without saying that this story would apply to just about any state in the nation, with the odd notable exception. This story showed in the Wednesday edition of The New York Times...and I thank Phil Barlett for sending it along. The link is here.

The IRS is paying out billions of dollars in fraudulent tax refunds to identity thieves; a problem that the tax service’s inspector general told CNBC is a “growing problem” involving numbers that are increasing “exponentially.”

In a new report to be issued Thursday, the inspector general for the IRS says that tax thieves are stealing the identities of taxpayers and then filing bogus returns on their behalf and collecting fraudulent refunds as a result.

The inspector general estimates that the IRS could issue as much as $21 billion in fraudulent tax refunds over the next five years.

The scam is so rampant that thieves are apparently sending in false returns in bulk without even bothering to change the mailing address on the returns. The inspector general said it found one residential address in Lansing, Michigan that was the source of an astonishing 2,137 tax returns, and to which the IRS directed more than $3.3 million in potentially fraudulent refunds.

This CNBC story was posted on their Internet site mid-afternoon on Thursday...and I thank reader Scott Pluschau for digging it up for us. The link is here.

Knight Capital Group Inc. said losses from yesterday’s trading breakdown are $440 million, almost quadruple its 2011 net income and more than some analysts had estimated, and the firm is exploring strategic and financial alternatives. Its stock has lost 66 percent in two days.

Knight said it will continue its trading and market-making today as it considers its options. Yesterday’s issue was related to the installation of trading software and resulted in the company sending “numerous erroneous orders,” the Jersey City, New Jersey-based firm said today. The stock tumbled 50 percent to $3.46 at 9:36 a.m. New York time today.

Shares of Knight, one of the largest U.S. market makers, plunged 33 percent in record volume yesterday as investors speculated on how much the breakdown that sent stocks swinging as much as 151 percent will cost the company. Analysts at JPMorgan Chase & Co. estimated yesterday that Knight’s loss would be as much as $170 million, while Raymond James & Associates Inc. said the amount could be “hundreds of millions.”

From $170 million to $440 million worth of losses in one 24-hour period. Will they close their doors...or are they 'too big to fail'? This Bloomberg story from early yesterday morning is courtesy of West Virginia reader Elliot Simon...and the link is here.

Knight Capital Group appeared to be fighting for survival Thursday after suffering a $440 million loss, seeing several big customers defect and watching its stock plunge over 70 percent in two days.

The big market maker has been reeling since a trading glitch on Wednesday caused a series of erroneous trades in several stocks, roiling markets and wiping out $440 million of Knight's capital, forcing it to seek new funding.

The company's biggest customers, including TD Ameritrade, the No. 1 U.S. retail brokerage by trading volume, Fidelity Investments, Vanguard, Scottrade, and Etrade have stopped routing orders through Knight. Smaller customers also were taking business elsewhere.

The company, one of the largest U.S. market makers, said it is "actively pursuing its strategic and financing alternatives," raising the possibility Knight could be sold or even face bankruptcy.

This Reuters story was posted on the cnbc.com website just before 4:00 p.m. yesterday afternoon...and I thank Ontario reader Richard O'Mara for his second offering in today's column...and the link is here.

Knight Capital Group Inc's newly acquired futures brokerage came under stepped up regulatory scrutiny on Thursday after a $440 million trading loss wiped out much of the firm's capital, raising concern over the safety of its customer funds.

Confidence in the futures industry's ability to safeguard customer funds has been shaken after two financially pressed futures brokers in less than a year have been accused of improperly raiding customer accounts for as much as a combined$1.8 billion, despite regulatory oversight.

Commodity Futures Trading Commission staff is monitoring Knight's futures brokerage, with special attention to its capital and segregated funds, a person familiar with the matter told Reuters.

This Reuters piece was picked up the finance.yahoo.com Internet site early yesterday evening...and I thank Ted Butler for sharing it with us. The link is here.

It was riotous, side-splitting comedy last week when Sanford Weill, the onetime head of Citibank, went on CNBC to announce that he thought it was time to break up the big banks.

Why this was funny: Through his ambitious (and at the time not yet legal) decision to merge Citibank, Travelers, and Salomon Brothers into one giant wrecking ball of greed, self-dealing and global irresponsibility called Citigroup, Weill more or less single-handedly created the Too-Big-To-Fail problem. You know, the one currently casting that thick, black doom-like shadow over all humanity which, if you look out your window, you can see floating over all our heads this very minute.

Nonetheless, Weill came out last week against Too Big to Fail banks. "I’m suggesting," he told astonished reporters on a live CNBC interview, "that they be broken up so that the taxpayer will never be at risk…. What we should probably do is go and split up investment banking from banking."

The interview became an instant YouTube classic. The very funniest part, I thought, was the response of Squawk Box host Andrew Ross Sorkin, the single most credulously slobbering financial reporter on the planet this side of Maria Bartiromo. Even he was so shocked by Weill’s comments that he lost his voice – "I’m speechless," he said.

Matt Taibbi is up on his soap box here...and as Manitoba reader Ulrike Marx, who sent me this story, said..."Not a new story, of course, but Matt Taibbi is always a delicious read." Yes, he is...and this rant is particularly tasty. It was posted on the Rolling Stone Internet site on Wednesday...and the link is here.

Investors had been hoping for a clear signal from Mario Draghi that the European Central Bank was ready to take action to prop up the euro. But in his press conference following the ECB monthly meeting on Thursday, all he offered was more promises. Markets plunged as a result.

Anticipation ahead of Thursday's European Central Bank (ECB) meeting was high. Last week, ECB head Mario Draghi had pledged that the bank would "do whatever it takes to preserve the euro." The comments set off a mini rally on stock markets the world over, and even the euro began gaining back some lost ground. Investors were eager to find out what exactly he intended to do.

Draghi, it would seem, was unable to live up to their expectations. "The Governing Council … may undertake outright open market operations of a size adequate to reach its objective," the ECB president said. "We will consider further non-standard monetary policy measures according to what is required to repair monetary policy transmission. In the coming weeks, we will design the appropriate modalities for such policy measures."

Markets plunged before he was even finished with his press conference. Germany's blue chip stock index DAX plummeted immediately by 1.88 percent, and the euro cratered in value from $1.24 to below $1.22. American stock futures, which indicate how stock markets in the US might perform on a given day, slumped as well, signalling a potentially rotten day on Wall Street.

Even I was taken aback by his 'Promise that he will promise something.' This story was posted on the German website spiegel.de yesterday...and I thank reader Donald Sinclair, who was the first through the door with this piece yesterday. The link is here.

When Mario Draghi took the helm of the European Central Bank nine months ago, he took care not to alienate Bundesbank President Jens Weidmann. Now the gloves are coming off.

Draghi yesterday announced the ECB is working on a plan to re-enter bond markets and took the unusual step of naming Weidmann as the only policy maker to object to the proposal. While the move would ratchet up the ECB’s response to Europe’s debt crisis, it risks isolating the German central bank, potentially undermining the effectiveness of the new measures.

The euro dropped yesterday, with the standoff between Draghi and Weidmann adding to uncertainty around the latest effort to tame a debt crisis that’s threatening the survival of the single currency. Weidmann must now decide whether to acquiesce to a new bond program or dig his heels in. Two German policy makers have already quit the ECB’s Governing Council over bond buying.

This story was posted on the Bloomberg website at 7:00 a.m. Eastern time yesterday evening...and I thank Elliot Simon for sharing it with us. It's worth reading...and the link is here.

The first blog is with Michael Pento...and it's headlined "We Are Now Just Weeks Away From a European Bombshell". The second contains excerpts and charts from the Investor's Intelligence report...and it's entitled "Here is a Huge Key to the Market". And lastly is this blog with Stephen Leeb. It's headlined "Gold...and Why We Are Facing a Real Catastrophe Going Forward".

Assigning analysts to cover the humdrum world of commodities and mining was once investment banking’s punishment for low-flyers or copybook blotters. Then China’s pulsating economy and appetite for raw materials sent the prices of industrial metals and bulk commodities soaring. It turned watching the dismal world of copper, zinc and nickel, and the mining firms that dug them up, from a role tantamount to constructive dismissal to glamour.

Can it last? Signs that China’s economy is coming off the boil—recent figures put annual growth in the second quarter at a mere 7.6% compared with the double-digit rates of the past few years—have led some to suggest the commodity boom is over and prices are likely to crumble. That prognosis looks premature.

The past decade has been a remarkable one for metals and bulk commodities—iron ore and coal. Consumers, desperate to get their hands on raw materials, paid well over the cost of production as demand outstripped supply, which was constrained by years of underinvestment by mining firms. Many analysts talked of a “super-cycle”, a long-term surge in prices lasting for decades on the back of Chinese demand.

This worthwhile read showed on the economist.com Internet site on July 28th...and I thank Donald Sinclair for sending it. The link is here.

Sen. Marco Rubio introduced a bill Wednesday to eliminate the federal government’s tax on Olympic medals, saying the levy amounted to yet another way the government tries to punish those who succeed.

Athletes who win a gold medal also earn a $25,000 honorarium — and with it an $8,986 tax bill to the IRS, according to Americans for Tax Reform, which crunched the numbers. That covers both the honorarium and the tax on the value of the gold in the medal itself.

The silver medal tax comes to $5,385, and the bronze medal tax is $3,502 — including $2 for the value of the bronze medal itself, and the $10,000 honorarium.

That could leave amateur athletes — in many cases still teenagers — facing stiff tax bills when they return to the U.S.

Reader Scott Pluschau, who sent us this story, said in his covering e-mail that "You can't make this stuff up!" He would be right about that. This news item showed up in The Washington Times on Wednesday...and the link is here.

Where is the gold price today? If you're like many Americans, you have no idea whether it went up, down, or sideways. Fortunately, I know my readers to be more informed - you likely know that after falling from almost $1900, gold has been trapped around $1600 since early May. But you may still be curious why despite continued money-printing and abysmal US economic reports, gold hasn't been able to hit new highs.

Here's the truth: gold is currently priced for collapse. Many investors believe the yellow metal has topped out and are selling into every rally.

Nowhere is this pessimism more evident that in gold mining stocks. Rising inflation has driven production costs higher, but the mistaken belief that inflation is contained and Treasuries are a safer haven is keeping a lid on gold prices. As such, many of the major producers have missed their earnings projections, and their share prices have been punished. This has placed a cloud over the entire sector. In fact, the P/E ratios of major gold miners are near record lows. Stock prices reflect future earning expectations, and judging by the low P/Es, Wall Street expects future earnings to plummet. This likely reflects their bearish outlook for gold, which is generally viewed as a bubble about to pop.

This piece showed up on Peter Spina's goldseek.com website yesterday...and I thank Roy Stephens for finding it. It's worth reading...and the link is here.

Back in April we wrote about Vietnam and gold investment, a brief look at the Vietnamese government's attempts to ‘stabilize' the economy through a series of restrictions on the gold market.

These restrictions included banning gold as a medium of exchange and issuing 7 ‘solutions' which were designed to reduce ‘goldization' the practice of replacing the dong with gold in transactions.

As many readers already know, Vietnam has a huge affinity with gold. So much so that house prices are priced in both dong and gold. According to Ronald Stoerferle's ‘In Gold We Trust' 2012 report, ‘Overall gold demand amounts to roughly 3.1% of GDP' Stoerferle also notes that by comparison it is less than 0.5% in China.

These moves by the government aren't so much to change the behaviour of citizens but also their psyche. Further measures have been put into place in the last month in order to reduce the dependency on gold.

This mineweb.com story was filed from London yesterday...and I thank reader Donald Sinclair for his final offering in today's column. The link is here.

Yesterday, GoldMoney published an interview with Swiss parliament member Luzi Stamm of the Swiss People's Party, who is leading a campaign for a referendum to require the Swiss National Bank to bring the country's gold reserves home.

The interview addresses concerns that central banks have misled their countries about the status and security of gold reserves. The interview is headlined "Luzi Stamm: Champion of a New Swiss Gold Initiative".

I borrowed the headline and the above two paragraphs of introduction from a GATA release yesterday. This is a must read in my opinion...and it's posted at GoldMoney Internet site. The link is here.