Top 10 at 10: Obama's big banking failure; Japan uses soft porn to sell bonds; Black Swans explained; Dilbert

Here are my Top 10 links from around the Internet at 10 past midday.

I welcome your additions and comments below or please send suggestions for Monday's Top 10 at 10 via email to bernard.hickey@interest.co.nz 

My aim in life is to get this out by 10am. I welcome your help.

1. Obama fail (on banking reform) - Simon Johnson at Baseline Scenario has been following the financial reform process through the US Congress and asks if Barack Obama has abandoned the so-called Volcker rules to split the Too Big to Fail banks into their (risky) investment banking and (not so risky) commercial banking component parts. 

Johnson's insights and conclusions are damning. I've said it before, but here it is again: Obama is a liar and a fool on budgetary, monetary and financial issues. Here Johnson says we're all about to find out what Obama is made of. I think we know already.

The president announced the Volcker Rules to great acclaim in late January, but unfortunately the detailed follow up by his own team was lackluster at best. Senators Merkley and Levin stepped into the political and legislative gap, pushing hard for at least some version of the Volcker principles to be adopted in Senator Dodd’s bill. They were turned back at every stage, but have remained doggedly on message.

Ultimately, this comes down to President Obama. Is he will to really put his political capital seriously into play? Or is his new found (and oil spill inspired) rhetoric against runaway corporate power and pathetic regulation at best completely empty and at worst a smokescreen for continued abuses? We will learn a great deal in the coming weeks, not just about the future stability of our financial system, but also for what President Obama really stands.

2. Nowhere to run - Rolfe Winkler at Reuters points to this interesting chart showing the US Federal Funds Rate and US national debt to GDP. It seems there are few places left for the US authorities to hide. 

The Fed has trapped itself. The only way to keep the economy “growing,” is to pump ever more copious amounts of credit into it. If we’re not willing to put up with any recession whatsoever in order to pay-down/write-off debt, well, then, eventually we become Greece.

Even central banks that print the currency in which their debt is payable can’t defy gravity forever. The Japanese have tried for the better part of a generation….hasn’t worked so well….

4. Unintended consequences - Tax changes always throw up unusual consequences that were unintended. It now seems that Britain's plans to increase capital gains tax has increased demand for gold and silver coins, The Telegraph reports. This is adding to shortages already being reported in Europe because of fears about the financial system there.

 Dealers are reporting a backlog of orders for bullion coins recognised as UK legal tender, which are exempt from CGT. Anthony Baird, managing director of gold dealer Baird & Co, said the company could not deliver any Britannia coins until August because of lack of supply.

"We buy directly from the public," said Linda Warner of bullion merchant ATS Bullion. "In the last couple of weeks, supply has been drying up because people hold on to what they've got in a situation like this."

The supply situation is worse from overseas sources, with European sales onto the market of coins and other forms of investment bullion particularly slack. Gold is in high demand in Europe as investors there seek out the metal as a safe store of value amid fears over sovereign debt problems in the eurozone, meaning fewer coins are coming back to market.

5. The new Greece? - Investors are now worried about Belgium's debt, the FT reports. It's a paradise for bond vigilantes shorting European debt at the moment. 

Anxiety is mounting in financial markets that a prolonged bout of political uncertainty in Belgium following national elections next Sunday could prevent decisive action to tackle the nation’s debt mountain that threatens to turn it into “the Greece of the north”. Interest rates on 10-year Belgian government bonds jumped from 3.15 to 3.50 per cent last week and investors are demanding a mounting premium to hold the debt over corresponding German paper.

Belgium’s debt is currently at 99 per cent of its gross domestic product, the highest in the eurozone after Greece and Italy, and is forecast to exceed GDP by the end of the year. Yet no political party is campaigning for an explicit belt-tightening mandate. Despite rising unemployment and sluggish growth, the economy has barely featured in the campaign. The structure of its debt could add to its problems. Eighty two per cent of short-term paper is owned by foreigners. 

6. Those crazy Japanese... - This picture below is allegedly an advertisement for Japanese government bonds. Essentially the government in Japan is saying that bond buyers are sexy and desired by women. Often two women at a time. Naked women.  Brad deLong spotted it and said this: HT Kevin via email. 

Does this mean that Japan is still very, very far away from the limits of its debt capacity? Or very close to them? Japan is a somewhat strange country in many ways...

 Here's the Bloomberg story on the push to sell Japanese bonds to marrying age men... No wonder the Japanese look to invest in New Zealand Uridashis when their own government is so desperate for funds. It seems the Japanese housewives are tapped out. Now they're asking for the money unmarried men would normally spend elsewhere...

The government’s plan to attract marrying-age men comes after a campaign aimed at retirees started last August. That push featured Junko Kubo, a former anchor on Japan’s public broadcaster NHK, in ads placed in the backs of taxi cabs.

Kubo followed Koyuki, an actress and model who in 2003 appeared in “The Last Samurai” with Tom Cruise as well as posters for government bonds.

“It strikes of desperation,” Christian Carrillo, a senior interest-rate strategist in Tokyo at Societe Generale SA said about the ad campaign. “I doubt this will be a successful strategy to attract retail investors.”

7.  'Set the target to Zero' - Former Canadian Foreign Minister Maxime Bernier is quite a character. He wants the Bank of Canada to stop all the money printing and target an inflation rate of Zero. A man after my own heart... His full comment on the National Post is worth a read. HT Robert Davey via email.

If we have to have an inflation target, I believe the best and most realistic alternative at this point would be to set it at 0%. It is true that this would diminish the ability of the Bank of Canada to artificially stimulate the economy. There could not be negative real interest rates as we have now, since the Bank’s official interest rate cannot go below 0%.

But as I said, I think that too much monetary manipulation is the problem, not the solution. The Bank would need to have a much more prudent and sound monetary policy to keep price inflation at 0%. That would really preserve our purchasing power. That would help prevent the cycles of booms and busts that we have experienced. It would reduce the price distortions that inflation causes throughout the economy. It would facilitate the financial planning of individuals and businesses and increase the efficiency of our economy. 

8. The problem with the euro - Fund manager John Taylor puts his finger on why the markets don't believe the euro has a future in this must-read at Zerohedge.

Differences within the Eurozone are extreme. Ireland saw its nominal GDP drop by 10.2% last year, a decline similar to those experienced in the Great Depression, while the German economy recently grew at a nominal rate above 3%. An independent economist calculated that the value of the euro would have to be $0.31 to balance Greece’s international position, and the number for Spain was $0.34, while Germany could effectively compete in the international marketplace with a euro over $1.80.

Despite the ECB pegging the refinancing rate at 1.00%, two-year benchmark government rates for Germany are way below that at 0.48%, but way above it at 7.91% for Greece, Ireland 3.37%, and 3.20% for Spain. Ireland has been living with annual deflation for the last 16 months, while German lawmakers are worried about inflation.

By any economist’s measure this is not an optimal currency zone. But the economists are not in charge, the politicians are, and these politicians have spent their entire careers following their conception of the European currency. There is one overarching problem that the defenders of the euro cannot overcome: in its current form, the euro’s survival is economically impossible. Prior to the Greek crisis, the market did not understand this, but now it does. And you cannot put the genie back in the bottle.

If part of the euro is worth $1.80 and another part is worth $0.31, how do you value this currency today, while it’s still in one piece? That is the crux of the matter. The uncertainty around this issue is what has caused billions of euros to flee into the security of the Swiss franc. As the politicians are completely in control, the schizophrenic euro could go on for years with the economic dislocations becoming more and more intense.

9. The Black Swan speaks - Nassim Taleb talks with James Surowiecki about the financial crisis. Worth watching. He calls Bernanke 'incompetent' and explains his Black Swan theory (proved say many by the crisis). He points out the massive risk in 'Too Big to Fail' banks.

FYI above to #1 and Obama's criminal negligence in failing to break them up. Nassim says the 'Too Big to Fail' banks have hijacked the state at the expense of regular taxpayers. He points his pointy finger at Bob Rubin, who worked under Clinton and got rid of Glass-Steagall, Larry Summers and Bernanke.

He essentially says that debt de-stabilises society and that 'Too Big to Fail' banks break all sorts of laws of nature. I think he's right.

 10. Totally irrelevant video - This weightlifter should perhaps have avoided the cheeseburger and coke before trying to lift 1,018lb... Watch this over lunch...