Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments in the comments below or please send your suggestions for Tuesday's Top 10 to bernard.hickey@interest.co.nz We always look busy at interest.co.nz... 1. Microcosm - Here is my NZHerald opinion piece on how the problems at Crafar Farms are a microcosm of the weaknesses in New Zealand's business and investment cultures.

The story of the growth of Crafar Farms over the last 15 years includes all these symptoms of a national malaise. We don't like big businesses that are corporate and we are obsessed with debt-funded property investment. There should be a lesson for us in this. Debt-driven growth in land is not a solution to New Zealand's economic problems. It stores up risks for our financial futures and the nation's reputation.

2. History repeats - This piece from Grant Dossetto at ZeroHedge takes another look at the Depression and finds some disturbing parallels. Governments failed to let wages and prices adjust in the 1930s and they're doing the same thing again now, he says. HT John Henderson.

Credit is contracting at historical rates with commercial real estate and option ARM resets looming. Record foreclosures portend future losses and the shutdown of banks at an escalating rate. Credit will not expand soon increasing the likelihood of further price decreases as consumers increase personal savings rates. The government reflation experiment has ensured that company costs cannot reach equilibrium with weak final goods markets. This is similar to the Great Depression except that artificial wage inflation has been replaced by artificial commodity inflation to create the disequlibrium. To cut rising costs, the only option is to reduce salaried employees, or shut down completely due to losses in core operations. Rising unemployment will create further weakness in final goods. This portends continued macroeconomic performance below trend for a length of time not seen since the Depression. Asset prices will eventually fall to the market solution, government intervention aimed at avoiding this harsh reality will only delay the inevitable and probably assure a more painful destination in the process.

3. Ed Harrison at CreditWritedowns also riffs on this idea that the US is actually in a depression with a small d.

This post will discuss why we are in a depression, not a recession and what this means about likely future economic and investing paths. When debt is the real issue underlying an economic downturn, the result is a period of stagnation and short business cycles as we have seen in Japan over the last two decades.  This is what a modern-day depression looks like "“ a series of W's where uneven economic growth is punctuated by fits of recession. A recession is merely a period of recalibration after businesses get ahead of themselves by overestimating consumption demand and are then forced to cut back by making staff redundant, paring back inventories and cutting capacity. Recessions can be overcome with the help of automatic stabilzers like unemployment insurance to cushion the blow. Depression is another event entirely.

4. Toxic tale - This video with Janet Tavakoli is a good backgrounder on toxic derivatives and why, until these are sorted, the current US policy of borrow, print, spend and deny is going to fail. There's also some hard hitting comment about the "˜probable' criminal fraud behind much of the toxic problem. HT John Henderson for the link and this great spiel to go with it.

If the USA is really in this sort of problem, then NZ direct exports to the US are stuffed, and the economies of many other countries that rely on the US as consumers are also going to be doing it hard, and thus our exports to this much bigger group will also be impeded. The level of the NZ dollar is just way too high and may even prove to be a "˜bridge-too-far' in this very weak consumption phase.

5. California Kalifornicated - California, the world's 8th largest economy, is in an awful mess, Paul Harris points out in the Observer. HT Troy Barsten, a one-time resident of the not-so-golden state. Well worth a read.

The crisis is so deep that Professor Kenneth Starr, who has written an acclaimed history of the state, recently declared: "California is on the verge of becoming the first failed state in America." Outside the Forum in Inglewood, near downtown Los Angeles, California has already failed. The scene is reminiscent of the fallout from Hurricane Katrina, as crowds of impoverished citizens stand or lie aimlessly on the hot tarmac of the centre's car park. It is 10am, and most have already been here for hours. They have come for free healthcare: a travelling medical and dental clinic has set up shop in the Forum (which usually hosts rock concerts) and thousands of the poor, the uninsured and the down-on-their-luck have driven for miles to be here. The queue began forming at 1am. By 4am, the 1,500 spaces were already full and people were being turned away. On the floor of the Forum, root-canal surgeries are taking place. People are ferried in on cushions, hauled out of decrepit cars. Sitting propped up against a lamp post, waiting for her number to be called, is Debbie Tuua, 33. It is her birthday, but she has taken a day off work to bring her elderly parents to the Forum, and they have driven through the night to get here. They wait in a car as the heat of the day begins to rise. "It is awful for them, but what choice do we have?" Tuua says. "I have no other way to get care to them."

6. Failure map - here is an excellent interactive graphic from Foreign Policy showing which states in the world are at risk of failing. New Zealand is in the very stable category, which is more stable than America or the UK. HT Gertraud There's an excellent series of articles on the subject here too. 7. Chinese burn - China's dominance of the global supply for rare earth elements (REE) is getting a few people in America excited. These rare metals are crucial in many computer components and for all sorts of technology, including much of America's war machine. Here's the PDF on ZeroHedge from Doug Hornig of Casey's International Speculator. HT Troy Barsten

95% of the world's REE production originates in China. If you're looking for reasons. Why we're so nice to the premier Communist power left standing, this is a biggie. We weren't always so dependent. Not long ago, mines such as Mountain Pass in California made us nearly self-sufficient in REEs. But in the early "˜90s, China flooded the market with cheaper product, until it had driven all of its competitors out of business. And that's what's behind the recent furor over these obscure elements. Because China threatened just that, a cutoff. The one thing that really gets Washington's knickers in a twist. In August, the story broke in the mainstream press. Sources in China leaked news of a draft copy of a report from the Ministry of Industry and Information Technology. It allegedly calls for a total export ban on five of the rare earths, with the rest restricted to a combined export quota of 35,000 metric tons a year, far below annual global consumption of 125,000 tons, and rising fast. This doesn't look like a move they'd follow through on, if only because of the lost trade revenues. And it's only a recommendation; final approval rests with China's State Council. But consider it an opening shot across our bow, if you wish.

8. New finance company? - The Timaru Herald reports that Forbes Elworthy, the son of big rural name Peter Elworthy, is planning to put NZ$11 million of his own money to set up a new finance company called Craigmore Finance that invests in agriculture and sustainable energy projects.  In an aside Elworthy Jr warns that overleveraged dairy farmers could become the 'sub prime of the pacific'.

The company will be based in London and invest internationally, but may eventually establish offices in New Zealand and Australia. Mr Elworthy, son of the late Sir Peter Elworthy, lived abroad for more than two decades. He established trading firm Credit Market Analysis in 2001, which he sold to Chicago Mercantile Exchange last year. Mr Elworthy returned to New Zealand briefly in 2003 to help run Craigmore station, but returned to Oxfordshire earlier this year. Mr Elworthy's newsletter expressed concerns that dairy could become the "subprime of the South Pacific", as too many farmers were over-leveraged. "If the New Zealand dollar continues to be strong then a number of NZ dairy farmers who purchased at high land prices will be insolvent," he said.

9. Weak jobs -  Here's Peter Schiff's take on the weak US jobs report and real US unemployment of 17%. "Some people say it's a jobless recovery. It's jobless alright but it's not a recovery. The more they stimulate the bigger the problem gets." HT Rob Pharazyn via email.

10. Swarm power - Here's an interesting idea out of Germany where very small gas furnaces in people's homes can be networked together to produce a lot of power more cheaply. Lisa Margonelli at The Atlantic Monthly has the story. HT Gertraud via email

The German Answer: Put thousands of VW workers on the assembly line to make home-sized natural gas furnace/hot water heater/generators. These generators, based on a natural gas engine already used in the Golf, are 92 percent efficient (because they can use the waste heat for heating water or homes) and can either produce electricity for home use or put it out on the grid. In other words, they're removing much of the second fact (waste), and also removing the need to build many more transmission lines. And, if the company Lichtblick is to be believed, they'll be creating the generation capacity of 2 nuclear power plants (2 Gigawatts) by installing 100,000 of these units in German homes at a total cost of $1.5 billion. (Far cheaper than the nukes, with no radioactive waste or risk of its weaponization.) But wait, this is more than a fancy furnace. It's also a business model and a stealth energy policy.The units, networked together as "SchwarmStrom" or swarm power could be turned on and off by a smart grid controller to balance the mix of wind, solar, nuclear and what all on the grid at a given time, earning homeowners some bonus money for the power they generate and eliminating the need for some of those transmission lines and backup generators to deal with  the ebbs and flows of wind and solar. And then there's the super ultra unasked bonus question. Two percent of the US's greenhouse gas emissions are from manure ponds alone, and more are from municipal sewage and landfill. The Swarm Power generators could run on biogas, reducing methane emissions from manure AND emissions from coal fired generation in one go.