Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Friday's Top 10 at 10 to bernard.hickey@interest.co.nz My apologies for horrible lateness. A tad hectic again.

1. We always pay - Brian Fallow has an excellent column in the NZHerald that's worth saving because it explains the new Emissions Trading Scheme and concludes that taxpayers will eventually foot a big bill. Brilliant. Again politicians decide to burden future generations to preserve today's electoral results. Just plain dumb.

So in the short term it is taxpayers who (eventually) bear most of the cost of emissions, and in the medium term it is domestic energy users and the scheme is broadly fiscally neutral. But that is as good as it gets from a finance minister's point of view.

Over time as the national emission target gets more stringent and carbon prices bite, the extent to which the Government over-charges domestic energy consumers will reduce.

And the longer the price signal to trade-exposed emitters remains as faint and feeble as it will be under the Government's amendments to the scheme, the more their emission will grow both in absolute terms and as a share of the national total.

The cross-subsidy will wear thin and the taxpayer will be in the gun again.

2. Beijing bubble - One of China's largest property developers has warned of a bubble forming in Chinese real estate caused by rampant lending over the last year by Chinese state banks desperate to pump the economy back up, the FT.com reports.

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Zhang Xin, chief executive of Soho China, one of the country's most successful privately owned property developers, told the Financial Times the asset bubble was leading to rampant wasteful investment in the sector, undermining the country's long-term growth prospects.

"Real estate prices should only go up because people want to actually use the space, but at the moment we can see more and more empty buildings across the whole country and in every real estate segment," Ms Zhang said. "The rising prices are a direct result of so much money coming from the banks and the Chinese banks should be very worried."

Ms Zhang's assessment was echoed by Fan Gang, a member of the central bank's monetary policy committee, who warned on Wednesday that real estate in cities such as Beijing, Shanghai and Shenzhen was expensive and there was a growing risk of asset price bubbles.

3. Black swans - Dylan Grice at Societe Generale Strategic Research has an interesting paper here on the nature of unexpected events and how they can destabilise markets and societies. It's a fascinating look at things like the collapse of the Berlin Wall and Ceausescu's overthrow and how cockups can unleash enormous forces when the pre-conditions are right.

Grice suggests the pre-conditions are right for an almighty pop in the various bubbles around right now, particularly given most western governments are essentially insolvent on any longer term analysis. He says markets are kidding themselves about volatility and have forgotten about the power of black swans. Well worth a read. HT Troy Barsten via email.

Maybe a spiritual descendent of Gunter Shabowski, the politburo spokesman who accidentally brought down the Berlin Wall and exposed the unsustainability of the communist model, will do the same thing for our governments’ fiscal positions. A stray comment at a press briefing might be erroneously interpreted as meaning
China wants to sell all its Treasury holdings, and this might set in train an irreversible cascade of financial panic.

I wish I knew. But I don’t. What I do know is that, like Eastern Europe before the fall of the Berlin Wall, our governments’ current actions are inconsistent with long-run stability. I know that not being able to predict the crisis trigger doesn’t mean there isn’t a crisis trigger.

I know that with human nature being what it is, people assume that because outcomes such as government funding crises and runaway inflation haven’t troubled developed markets for many decades, they can't ever happen again. And I know that with volatility at these levels the market is much more confident in its ability to predict what lies in the future than I am.

SocGenPopular Delusions

4. Big reform necessary - Here's a Treasury paper written for Bill English in August on what's needed to close the gaps with Australia, including the need for big reform. It has been censored because it was disclosed under the Official Information Act, but it still shows how Treasury (and I think Bill English) is thinking.

One option was a much tougher budget policy to give the Reserve Bank room to cut interest rates to help the export sector. Not sure that's going to fly with the current government, particularly now Phil Goff has opened up the hornets nest of a debate about monetary policy.

Here are the conclusions reached by Treasury, which I largely agree with. But will John Key?

Significant policy changes are needed to reverse this situation. The per capita GDP growth rate needs to be more than doubled, and maintained at that higher rate for 15 or 20 years. Substantial multi-faceted structural reform is essential if this growth acceleration is to occur, and if resources are move sufficiently from the non-tradables to the tradables sector. The first, and probably the single most important element, should be a thoroughgoing reform of the tax system. Tax reform should be focused on removing the significant biases in favour of consumption, and on providing a tax environment much more conducive to achieving the sort of levels of innovation, participation, savings and investment that New Zealand needs.

Government spending has increased very rapidly (as a share of GDP) in the last few years. Substantially unwinding this increase, more quickly than assumed in the Budget, would support the reallocation of resources from meeting unsustainable domestic consumption demand, and make an environment with lower overall tax rates, itself offering powerful potential payoffs for growth and productivity, more achievable.

5. Not so safehaven - Christopher Galakoutis at Safehaven encapsulates nicely the choices facing the US government and global investors in this blog post. Essentially, the US is bankrupt and investors globally won't let it get away with printing much more money. America will have to slash its budget deficits and control its future health and pension liabilities. He starts off by arguing inflation is not an issue. HT Troy Barsten via email.

Those arguing the other side say that if this money were to be lent out, it would lead to high levels of inflation that would end up hurting both the economy and the dollar. That is the inflation scenario that folks fear, hence the calls for the Fed to remove this excess liquidity from the system sooner rather than later.

Obviously, taking on additional debt, in the hope that it would solve the original problem of too much debt, is not the answer. As I have written in previous posts, the answer will involve a long-term structural change in this economy.

If I am right and we are witnessing an unfolding deflationary collapse brought about by a collapsing debt bubble, the only avenue that avoids such an outcome in the immediate future would be to blow up a new debt bubble --, i.e., bail out, as it were, the collapsing debt bubble with one of equal or greater magnitude that takes its place.

But a new credit boom, as one would imagine, not only doesn't appear to be happening, but might not even be possible. After all, how do you create a new debt bubble to replace back-to-back, most improbable, epic stock & real estate bubbles from the last 10 years alone?

Those two bubbles had massive participation at the retail level, and those folks have been burned and are in intensive care. What the country experienced in the fall of 2008 through March earlier this year was something the majority never thought possible. As noted above, banks are not lending. Credit conditions are tight. It seems to me those in the hyperinflation camp yelling at the top of their lungs are wasting their efforts on a phantom threat. Banks will simply not lend money in this environment, but even if they wanted to, the demand is not there in the way it was. This isn't the roaring anything's. Those years are behind us.

I don't believe the US will resort to outright money printing as per Weimar Germany in the 1920's or more recently Zimbabwe. The bond market has a gun to Ben Bernanke's temple, and is telling him in no uncertain terms that if he were to drop dollar bills from helicopters, he would get his head blown off.

Will the US make the tough choices and retain some semblance of self-respect, or will it simply print money and go the way of Zimbabwe?

I would argue that anyone who believes there is no difference between a Zimbabwe and the US -- in that the US takes the easy way out and literally prints greenbacks to pay off creditors -- simply does not understand how the world works. If they invest in anticipation of such an outcome, they will be looking at substantial loses in the near future.

6. Bad bet - It's hard to feel sorry for bankers who get landed with a dud asset after a borrower defaults. Deutsche Bank now owns the world's biggest casino construction site in Las Vegas and it's all going very pear-shaped, Bloomberg reports. Oh dear. HT Gertraud via email.

Deutsche Bank, the resort's owner since it foreclosed on developer Ian Bruce Eichner last year, requires 24-hour pumps and containment walls after workers hit an aquifer below the Nevada desert floor. It's another challenge for a project whose delays and redesigns have sparked lawsuits from condominium buyers and sales agents amid record declines in Las Vegas's gambling revenue, home prices and hotel-room bookings.

The German bank's foray into the heart of the U.S. gambling industry, where it's also a lender to bankrupt Station Casinos Inc. and the unfinished Fontainebleau, looms as an "impending disaster," casino magnate Stephen Wynn said on a conference call with analysts last month. Wynn, who presides over the Wynn and Encore Las Vegas resorts, built the Bellagio next door to the Cosmopolitan.

7. Sucking in equity - Japan may become the source of the black swan with its huge public debts and a negative savings rate as its elderly age. So this news from Bloomberg that bank Mitsubishi UFJ plans to raise more than US$10 billion in fresh equity could prove interesting. Where is it going to come from?

Mitsubishi UFJ Financial Group Inc. may beat Japanese banking rivals to market with its planned sale of as much as 1 trillion yen ($11.2 billion) in stock as regulators demand bigger capital cushions.

Chief Executive Officer Nobuo Kuroyanagi said he didn't want to "miss the opportunity" to tap equity investors for the second time in less than a year as smaller competitors Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. are barred from selling common stock for at least another month.

Mizuho Financial slumped to a six-year low in Tokyo trading today and Sumitomo Mitsui fell to the lowest since March. The stocks are among the worst performers this year among the world's major banks, and the companies trail global rivals in capital strength, lending profitability and return on equity, according to data compiled by Bloomberg.

"The big Japanese banks seem unable to change, to become leaders, innovators," said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion in assets. "They remain elephants with low IQs."

8. Toys out of ratings cot - Standard and Poor's is objecting to moves in Australia to make the ratings agency more accountable for ratings provided for retail savers. He says it will no longer provide retail ratings there. I wonder what that means for S&P's involvement (mandated by the Reserve Bank here) in rating our finance companies and banks. Here's what S&P had to say, as reported by BusinessSpectator.

S&P managing director or Australia and New Zealand John Bailey said while S&P supported regulations to strengthen transparency and improve market confidence, there was a need for international consistency in regulatory oversight.

"In terms of the requirements for a retail licence, we are concerned that membership of a local EDR [external dispute resolution] scheme would interfere with the analytical independence of our rating opinions and undermine the global consistency and comparability of ratings," Mr Bailey said.

Mr Bailey said the scheme could change the substance of a rating and result in the creation of dual credit ratings - an Australian "EDR" domestic credit rating and a "rest of the world" credit rating.

"Because the local ombudsman would effectively be second guessing S&P's analysts, we believe this would ultimately create investor confusion and harm financial markets," Mr Bailey said.

"An EDR scheme could also require credit rating agencies to disclose information that is commercially confidential and proprietary to third parties."

9. Rent to own schemes - It seems many property spruikers are still out there feeding on the intensely Kiwi desire to become a property owner without having to save up for it. RadioLive reports of a conviction for misleading rent-to-own scheme in Invercargill where four companies have been convicted and fined. Anyone heard of anything similar oop north?

Stewart Wallace of the Commerce Commission says the four companies involved made a conscious decision to conceal the true nature of the deal.

"[We] would understand ownership as having the title to your property - that you own it. But you didn't get security of title until after the 30 year period."

The Commerce Commission alleges more than 100 Auckland renters have been caught up in similar schemes.

10. For no relevant reason - There is about 5 seconds of this 55 second video that is funny. But it's worth waiting for it. It has 4.6 million views. We live in a strange world...that I'm happy to feed.