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The first tremors in the region were felt in mid-January and continued at regular intervals, creating mounting alarm in the medieval city, about 100 km (60 miles) east of Rome.

Vans with loudspeakers had driven around the town a month ago telling locals to evacuate their houses after seismologist Gioacchino Giuliani predicted a large quake was on the way, prompting the mayor’s anger.

Giuliani, who based his forecast on concentrations of radon gas around seismically active areas, was reported to police for “spreading alarm” and was forced to remove his findings from the Internet.

Italy’s Civil Protection agency held a meeting of the Major Risks Committee, grouping scientists charged with assessing such risks, in L’Aquila on March 31 to reassure the townspeople.

“The tremors being felt by the population are part of a typical sequence … (which is) absolutely normal in a seismic area like the one around L’Aquila,” the civil protection agency said in a statement on the eve of that meeting.

“It is useful to underline that it is not in any way possible to predict an earthquake,” it said, adding that the agency saw no reason for alarm but was nonetheless effecting “continuous monitoring and attention”.

As the media asked questions about the authorities’ alleged failure to safeguard the population ahead of the quake, the head of the National Geophysics Institute dismissed Giuliani’s predictions.

“Every time there is an earthquake there are people who claim to have predicted it,” he said. “As far as I know nobody predicted this earthquake with precision. It is not possible to predict earthquakes.”

Enzo Boschi said the real problem for Italy was a long-standing failure to take proper precautions despite a history of tragic quakes.

Clive Stafford Smith, legal director of UK charity Reprieve, and colleague Ahmed Gappour have been summonsed to appear before a Washington court on May 11.

If they fail to get the case thrown out, there would be a full-blown trial, at which they could be jailed for six months.

The hearing follows a complaint by the ‘Privilege Review Team’ – Pentagon officials who censor communications between Guantanamo prisoners and lawyers and say what aspects of cases can be made public.

Mr Stafford Smith wrote to the President last month after the High Court in Britain ruled out publication of edited CIA papers describing Mohamed’s ordeal because Foreign Secretary David Miliband said this could imperil US-UK intelligence-sharing.

Mr Stafford Smith urged the President to order the evidence to be disclosed. He attached a memo summarising the case, as he has US security clearances to see much of the classified material.

He and Mr Gappour sent the memo to the privilege team, offering to cut anything ‘sensitive’. The memo went through four drafts until it was returned blank – except for its title.

Mr Stafford Smith then sent the blanked-out memo to the President with his letter saying: ‘You, as Commander-in-Chief, are being denied access to material that would help to prove that crimes have been committed by US personnel.’

In its complaint to the court, the privilege team claims this was ‘unprofessional conduct’ that breached the rules that govern Guantanamo lawyers.

You can read the whole paper by Harvard’s Joshua Coval and Erik Stafford and Princeton’s Jakub Jurek below. The striking conclusion is that the low prices of toxic assets actually reflect the fundamentals, rather than being driven by an illiquidity discount.

“The analysis of this paper suggests that recent credit market prices are actually highly consistent with fundamentals. A structural framework confirms that bonds and credit derivatives should have experienced a significant repricing in 2008 as the economic outlook darkened and volatility increased. The analysis also confirms that severe mispricing existed in the structured credit tranches prior to the crisis and that a large part of the dramatic rise in spreads has been the elimination of this mispricing.”

This contrasts sharply with the analysis that underlies most of the financial rescue programs launched by the Federal Reserve and the Treasury Department. The white paper released to support the Private-Public Investment Partnerships, the program that seeks to encourage private firms to buy toxic assets with government subsidized loans, took the opposite point of view.

“Troubled real estate-related assets comprised of legacy loans and securities, are at the center of the problems currently impacting the U.S. financial system…The resulting need to reduce risk triggered a wide-scale deleveraging in these markets and led to fire sales,” the Treasury and the Fed claimed.

Many prominent economists–including such diverse types as Anna Schwartz and Paul Krugman–have taken with this official view, saying the government was mistaking a solvency crisis for a liquidity crisis. This latest paper effectively demolishes the “fire sale” view. It draws three important conclusions.

* Many banks are now insolvent. “…many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities.”

* Supporting markets in toxic assets has no purpose other than transfering money from taxpayers to banks. “…any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities.”

* We’re making it worse. “…policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen – the day of reckoning.”

Bullion has tumbled 5 percent in three days, wiping out this year’s gains, on expectations government efforts will revive the global economy. The MSCI World Index of shares has climbed 23 percent in the past month as the metal has lost 6 percent. The biggest exchange-traded fund backed by gold fell for the first time in two weeks.

“Risk appetite has increased further following the actions of various governments and central banks as well as the combined efforts of the G-20 nations last week,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a note today. “While scrap gold sales have eased over the past week, data has shown ETF demand has stalled.”

Gold for immediate delivery slipped as much as $19.08, or 2.1 percent, to $874.08 an ounce, the lowest since Jan. 23, and traded at $878.99 by 1:04 p.m. in London. The metal had risen as much as 14 percent this year. June futures lost 1.8 percent to $881.30 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.

The metal dropped to $879.50 in the morning “fixing” in London, used by some mining companies to sell production, from $905 at the afternoon fixing on April 3. The commodity is trading 15 percent below the record $1,032.70 set in March 2008.

Not far from the gilded towers that house the London bases of discredited institutions such as the Royal Bank of Scotland and UBS, and tucked above a sandwich shop, is what is thought to be the first pawnbroker to open in the City of London for the best part of a century.

In a grim sign of the times the shop, which opened last month, used to house a recruitment consultant.

At Nikolas Michael it is Rolex watches and diamond necklaces that are the currency of the loans it provides as, with bonuses long gone, City workers seek out alternative ways to make ends meet.

Finance and Economy Minister Kaoru Yosano said he had received an order from Prime Minister Taro Aso in a meeting held earlier in the day to make an extra budget worth “2% or more” of Japan’s gross domestic product to fund the government’s planned new stimulus package.

The 2% amounts to Y10.152 trillion based on the value of Japan’s total output of goods and services in 2008, not adjusted for inflation, Cabinet Office data show. The largest supplementary budget to date, as gauged by actual expenditure included, is the third one made in fiscal 1998 that had disbursements worth Y8.5 trillion, according to a finance ministry official.

“We had an instruction from the prime minister that from the perspective of Japan’s deeper contraction compared with other major advanced economies, as well as from the perspective of international cooperation, we should consider economic steps with ‘mamizu’ worth 2% or more of GDP” when devising the budget, Yosano said.

“Mamizu,” or pure water in Japanese, generally refers to actual spending and tax cuts.

While well-expected, Aso’s decision to put together a record extra budget despite the nation’s tattered fiscal health shows how determined the government is to turn around Japan’s ailing economy. It also signals Aso’s hope to lift his low public approval ratings of below 30% ahead of general elections that must be held later this year.

Aso wants the government to funnel new money mainly to five areas, Yosano said. Those are: safety nets for temporary workers, support for companies raising funds, the promotion of solar power generation, improvements to health services and medical care, and aid for local governments to spur regional economies.

The dead and injured included foreign militants, but women and children were also killed when two missiles hit a house in the village of Data Khel, near the Afghan border, according to local officials.

As many as 1m people have fled their homes in the Tribal Areas to escape attacks by the unmanned spy planes as well as bombings by the Pakistani army. In Bajaur agency entire villages have been flattened by Pakistani troops under growing American pressure to act against Al-Qaeda militants, who have made the area their base.

Congress extended unemployment aid twice last year, allowing people to draw a total of up to 59 weeks of benefits. Now, as the recession drags on, a rolling wave of people who were laid off early last year will lose them.

Precise figures are hard to determine, but Wayne Vroman, an economist at the Urban Institute, estimates that up to 700,000 people could exhaust their extended benefits by the second half of this year.

Some will find new jobs, but prospects will be grim: Layoffs are projected to go on, and many economists expect the jobless rate, already at 8.5 percent, to hit 10 percent by year’s end.

“It’s going to be a monstrous problem,” Vroman said.

WILLIAM K. BLACK: Oh, absolutely. This stuff, the exotic stuff that you’re talking about was created out of things like liars’ loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That’s why it’s toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it’s scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I’m quoting Fitch, the smallest of the rating agencies, “the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined.”

BILL MOYERS: So if your assumption is correct, your evidence is sound, the bank, the lending company, created a fraud. And the ratings agency that is supposed to test the value of these assets knowingly entered into the fraud. Both parties are committing fraud by intention.