Here are my Top 10 links from around the Internet at 10am. I welcome your additions in the comments below or please send your suggestions for Thursday's Top 10 at 10 to bernard.hickey@interest.co.nz My apologies to those who sent in suggestions in the last couple of days. I'm on the road and am having a few problems accessing email. We'll get them in tomorrow. We don't do Kung Fu.

1. Fran O'Sullivan says in her NZHerald column that it's time for the government to seize the initiative on tax reform and stop mucking around waiting for the results of the Australian tax review. I agree.

Frankly, there is enough on the table now for the National Government to order its own review team to press ahead rapidly with a set of measures that are appropriate to New Zealand's status as a small economy and introduce them ahead of the Rudd Government's policies.

Sure it was almost a quarter of a century ago, when NZ's taxation reformers savagely reduced the top personal taxation rate as a quid pro quo for moving to a broad- based consumption tax (GST), wiped myriad indirect taxes like stamp duty, and lowered the corporate rate.

At that stage New Zealand was feted as sporting one of the world's most neutral taxation platforms - notwithstanding Sir Roger Douglas's failure to notch things up again with the introduction of a "flat tax" regime.

Bumping up GST again is a no-brainer to fund a significant lowering of corporate rates. Taking our own unilateral action on dividend streaming - rather than waiting even longer for Australia to come to the party - would seem in order.

The reality is we are a small country trying to compete against our larger neighbour for capital, investment and labour. Time to frame our policies that way.

2. Chris Martenson does an excellent job of fisking a WallStJournal article that jumped on the idea that the US government is funding its massive debt issues from domestic savers. It's a thorough look at just how the US debt explosion is being funded and what it will mean eventually for the US dollar.

While I understand the temptation to engage in the wishful belief that the US can borrow record-shattering amounts of money while not somehow also mortgaging the entire farm, piece by piece, to foreigners, such thinking flies in the face of both common sense and the data.

My conclusion from all this is that the US has a date with a funding crisis and probably an associated dollar crisis, and increasing foreign indebtedness is an absolutely vital component of that pair of risks.  I assume that the record-breaking pace of foreign Treasury accumulation is not sustainable and that it will therefore stop.  Since it does not seem to want to stop for natural or fundamental reasons, I assume it will stop for some other reason(s), possibly abruptly.

3. China is getting increasingly serious about its move to 'internationalise' the yuan/renminbi and kick its bad habit of buying US dollars and US Treasuries.  Ed Harrison at Credit Writedowns points out that Chinese vice-premier Wang Qishan has been appointed to lead a taskforce to make the renminbi the currency of choice for trade settlements, especially with regional trading partners. How long is it before New Zealanders know the NZ$/renminbi cross rate off by heart in the same way they know the NZ$/US$ cross rate?

4. Ambrose Evans Pritchard at The Telegraph is palpably stunned that market eurphoria about a recovery is so out of step with the fundamentals and the warnings of the world's economic policymakers. He prescribes more money printing. I'm not so sure about that, but I share his astonishment at how out of touch the markets are.

Never in modern times has there been such a flat contradiction between the euphoria of markets and the stern warnings of officialdom at central banks and financial watchdogs.

We know what caused this crisis. The West kept short-term interest rates too low for a quarter century, luring society into debt: and the East held down long-term rates by flooding bond markets as a side-effect of their mercantilist strategy (ie suppressing currencies to gain export share).

The outcome was over-investment, excess capacity, and too much debt among those supposed to buy the goods. Has any of this changed? No. Have we cleared the excess plant? No.

Jeff Wenniger from Harris Private Bank says an army of baby-boomers have seen their old age plans shattered by the housing bust. Their nightmare is here. They will have to spend less, and save more. "Generational destruction of a society's balance sheet down not rectify itself in a matter of months".

How about a quarter century?

5. The FT.com writes a comprehensively grim piece about the parlous state of the Irish economy, where GDP is expected to fall 8.4% this year and the government's budget deficit will hit 12.2% of GDP. The government faces having to make brutal public sector cuts and add a range of new taxes. There but for the grace of God (Standards and Poor's and Moody's) go us...

Consultants brought in by Finance Minister Brian Lenihan identified €5.3bn of potential savings, which range from cutting public service employment by 17,000, to ending the police's clothes allowance, to dropping the practice of providing the prize money for horse and greyhound events. But the minister's most controversial measure came in February with a levy on public service pensions that represented a 7.5 per cent cut in take-home pay.

Nonetheless, the IMF says "further cuts in the public service wage bill are likely to be inevitable", pointing out that public sector wages are on average 20 per cent higher than in the private sector.

Ireland's tax take has been hit by the collapse of property transaction taxes, with the contribution halving from 18 per cent of total tax receipts in 2006 to 8.4 per cent last year, less than the amount raised in 2002. The commission on taxation is widely tipped to recommend a new property tax. But any such move risks alienating a key political constituency for Fianna Fáil, the house-owning middle classes, some of whom are already burdened with mortgages that exceed the value of the homes.

6. Matt Nolan over at TVHE has a discussion about the pros and cons of bank bailouts and concludes they're morally hazardous but necessary. Unfortunately that's true in New Zealand where our banks are definitely way too big to fail.

Now, I completely admit that Moral Hazard is a relevant issue.  But is a the cost of letting large financial institutions know that, in a 1 in 100 year collapse in the global economy, they will be prevented from going bankrupt immediately greater than the benefit of avoiding a sharp and self-propogating decline in economic activity?  For the bailouts to be a good idea we merely need to say:

1. the costs exceeded the benefits,
2. this was the best scheme that was able to be approved at the time.

I think both these factors hold "“ although I completely understand when people feel differently, given that there is a trade-off.

7. Matt Nolan also defends Infometrics' (where he works) extraordinary forecast of a 24% rise in house prices.

Ultimately, in the long-run, we agree with Bernard Hickey and Gareth Morgan that prices need to go back to "fair value".  Our argument is only over the transition path.  There is a difference between saying that they economy needs to rebalance (true) and assuming it just magically will "“ we don't think it will in the short-term.

Limited supply on the basis that people don't really want to sell (unemployment stays moderate, interest rates low, lack of forced sales).

Driving growth is:

• Loosening credit conditions,
• Low interest rates,
• Limited supply on the basis of a weak build rate

8. This is an interesting piece from the excellent voxeu.org group of European economists. It examines the links between banking crises and trade flows. It finds bailouts don't help much.

For most countries in the world, this is not a financial crisis "“ it is a trade crisis. For the first time since 1982, global trade flows will not grow. The latest IMF projections expect global trade in goods and services to drop 11% this year and stagnate next year. This collapse in trade has spread the global recession far beyond the couple dozen nations whose banks were involved in the financial wizardry that sparked the crisis.

Could these dramatic effects on exports be mitigated by policy interventions? Using a reduced sample of 14 out of the 23 periods, we are unable to find any positive impact on exporters arising from various policies including blanket depositor protection, forbearance, bank recapitalisations, and government-sponsored debt relief. Rather, it emerges that general economic and financial development and access to alternative sources of finance helps to reduce the adverse effect of a financial crisis.

9. This is a bit of fun, also from voxeu.org. It's a study showing that woman loan officers are better than men (at least in Albania where a new study was done). Women write fewer bad loans than men. It seems women watch the detail closer, are not naturally over-confident and are a better judge of bad borrowers. It's no coincidence that the almost all the Wall St and London investment bankers that got us into this mess were men. Perhaps positive discrimination is the solution to the Global Financial Crisis?

Female loan officers build better portfolios, such that loans to borrowers working with a female are significantly less likely to incur arrears.

10. Here's an amusing song and dance about the perilous US fiscal situation, if that's possible. I like the line: 'Who can tax the sunrise?' sung to the tune of The Candyman. HT Mish.