Friday's Top 10 at 10 with NZ Mint: 'Flick-pass the problem to Obama'; Debt forgiveness in Ireland; Fred the Shred's rogue biscuits; The NZX's turgid monopolies; Dilbert

Here's my Top 10 links from around the Internet at 8.30 pm in association with NZ Mint.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream. See all previous Top 10s here.

Will Bernanke dig himself a big hole in Jackson?

1, Flick it back to Obama - PIMCO's Mohamed El Irian writes nicely at FT.com ahead of the Jackson Hole shindig about the problems Bernanke faces.

The QE II announced at last year's Jackson Hole conference worked to push up asset prices, but also boosted inflation.

It rewarded stock investors, but failed to convince actual companies and consumers to spend more.

When the markets worked out the charade, the stock market slumped.

Now Bernanke is back where he started, but with less political or economic room to move.

El Irian reckons he should pass the buck back to Obama to fix the problem in his September 5 speech.

No worries then...

Here's El Irian:

With America’s economy again losing momentum this summer, I suspect that Mr Bernanke feels a renewed urge for policy activism – both to meet the employment part of the Fed’s dual objectives and to relieve some of the mounting pressures on the financial system. However, I also suspect that he is aware of his reduced degrees of freedom, both in an absolute sense and relative to a year ago.

Compared with August 2010, inflation is higher, structural impediments to job creation are deeper, the global environment is less co-operative, and the independence and credibility of the Fed are under greater pressure. Moreover, judging from the fleeting impact on risk sentiment of last week’s Federal Open Market Committee statement on interest rates, markets seem less sensitive to Fed shock therapy.

All this serves to tilt Mr Bernanke’s policy equation towards greater costs and risks. Accordingly, rather than embark on another policy initiative (“QE3”) with questionable net benefits, it would be better for Mr Bernanke to use his Jackson Hole speech to reframe the national policy debate and, in the process, set the stage for President Barack Obama’s key economic announcements on September 5.

2. Just forgive the debt - David McWilliams writes on his Irish blog about the ultimate need for debt forgiveness for many mortgage borrowers who are now horribly under water.

The “normal” laws of economics don’t apply in Ireland. The banking bottleneck is preventing saving being recycled. Therefore, the more the generation who got shafted in the boom pay back their mortgages — despite their balance sheet being decimated — the less money they have to spend on something else and the more the tax base shrinks. If the money they save gets stuck in the banks and doesn’t find its way to people who would like to use this money profitably, the economy will shrink more.

Thus, coming back to debt forgiveness, restructuring or whatever you are having yourself, the arguments are less to do with morality, moral hazard or bailing out the profligate and more to do with how demand and employment are generated.

For many these issues are contentious and some might say, why should this generation get special treatment? But bear in mind that big policy changes always have a generational aspect to them because of the way wealth is created and at what stage in life it is created. For example, the generation older than me received a massive once-off transfer of wealth when we joined the euro. They had saved in the old, soft currency, the punt, which was a “serial devaluer”, yet, as if by magic, they got all those savings in a “weak” currency redenominated in the “hard” euro currency. Did we hear much from them about the “fairness” of this once-off windfall?

Debt restructuring is going to happen; it is just a matter of when — not because it is right or wrong, but because that’s how the economy works.

3. Shifting out the curve - Reuters' Jason Lange suggests the Fed may announce the sale of short term Treasuries and the purchase of longer term Treasuries as a way to lower long term interest rates without printing money.

The idea, outlined by Bernanke in July, would be to lower long-term interest rates without increasing the money supply. That in theory could spur home purchases by lowering benchmark rates for mortgages. It could also make it cheaper for companies to borrow so they can buy more equipment.

Such a plan could also weaken the dollar and increase stock prices, which might boost exports and make people feel more positive about the economy. But many analysts doubt growth would improve much unless the Fed injects a lot more money into the economy.

In the parlance of economists, using monetary policy to boost growth is currently like trying to push on a string. "What is a 2 percent 10-year yield going to do that a 2.5 percent 10-year yield didn't do?" said Jacob Oubina, an economist as RBC Capital Markets in New York, referring to the level of return on a 10-year Treasury note.

4. Rogue biscuits -  A long time ago (1999) I was a banking reporter for Reuters in London and covered Royal Bank of Scotland. I interviewed future CEO Fred 'the shred' Goodwin a few times.

He was a grumpy bugger.

Now I can see why.

Here's detail via the Daily Mail of his now infamous behaviour. My favourite is the 'Rogue buscuits' memo:

Details of Sir Fred’s menacing management style and extravagance are laid bare in the book: Masters Of Nothing: The Crash And How It Will Happen Again, which goes on sale next month. It alleges that the man dubbed ‘Fred the Shred’ because of his ruthless obsession with making savings could not control his anger if the wrong type of biscuit was put in the boardroom.

Catering staff were threatened with disciplinary action in an email titled ‘Rogue Biscuits’ after someone had the audacity to offer executives pink wafers, it says.

Other examples of wastefulness during Sir Fred’s appalling reign included spending £100,000 a month on part-time chauffeurs, and claims that the bank twice changed £100-a-square-yard carpeting in two vast boardrooms because Sir Fred ‘didn’t like the shade of amber’.

At dinner functions, an engineer was kept on standby until the early hours to perform a simple task: To switch off the fire alarms when executives wanted to smoke. The squandering of vast sums of money extended to hospitality, with RBS using suppliers hundreds of miles away.

5. The problem with some very large multinational companies - Pfizer is one of the biggest around. This Fortune investigation of the power struggles that went on inside this massive company do make you wonder if the system that created such behemoths is broken.

A short term bonus culture and extraordinary pay packets for executives seem to have created a type of sociopathic behaviour that is something to behold.

The detail in this long story are excrutiating. It is well worth a read. Anyone who has worked in a big corporation will recognise many of the features.

McLeod's primary focus was the care and feeding of the CEO. She became Kindler's protector and surrogate, whispering in his ear, controlling access to him, delivering his blunt messages. Kindler admiringly called her "Neutron Mary," after his hero, Jack Welch. McLeod seemed to encourage his harshest nature, telling him, according to a person who was present, that one senior executive was "a B player," another too ambitious, someone else a "crybaby."

Even as McLeod alienated staffers with her behavior, she was attracting notice for her perks. McLeod had negotiated a special deal, personally approved by Kindler and later ratified by the Pfizer board. First, she received a $125,000 cost-of-living adjustment to compensate for moving to the New York area from her home in Delaware (while getting another $238,000 to cover a loss on the sale of a second home she owned on Long Island.

6. More money printing - The Guardian reports The Bank of England is again considering printing more money.

Martin Weale, who until this month was advocating an increase in interest rates, showed how far his thinking had moved by arguing that the Bank could return to so-called QE if oil prices continued to fall and the sovereign debt crisis in the eurozone worsened.

In a speech to the Doncaster Chamber of Commerce, Weale warned that events on the continent were a greater threat to the UK economy than the slowdown in America, and said: "There is undoubtedly scope for further asset purchases to trigger further reductions in yields on government debt should the need arise."

The Bank has already bought £200bn of assets, mainly government bonds, using electronically created funds to inject money into the economy and drive down interest rates.

7. A bunch of monopolists - Brian Gaynor makes the good point in his NZHerald column that New Zealand's major listed companies these days tend to be former state-owned monopolies rather than fast-growing privately created companies.

The latest top 10 list, based on Wednesday's closing prices, includes six former publicly-owned companies; Telecom, Contact Energy, Auckland International Airport, Vector, Port of Tauranga and Air New Zealand.

It could be argued that only Fletcher Building and Ryman Healthcare operate in a truly competitive environment as SkyCity owns a monopoly casino in Auckland and SkyTV has created its own monopoly because of weak competition.

These top 10 sharemarket value figures show that New Zealand businessmen and women have lost the ability to create great companies and the domestic sharemarket is now heavily reliant on former publicly owned organisations.

The National Government's partial privatisation proposals will be a huge boost to the NZX, but these are one-offs. After the float of Mighty River Power, Meridian Energy, Genesis Energy and Solid Energy, it is conceivable that eight or nine of the NZX's 10 largest companies will have their origins in the public sector.

8. The funding problem - Gillian Tett writes at FT.com about how US money market funds are withdrawing from European banks.

This could all get very ugly. Very quickly.

It is worth watching what those money market funds do next. For one thing, their antics tend to have a powerful impact on market psychology, particularly given folk market memories of 2008. Secondly, this quiet exodus has reminded US and European investors alike of something that policymakers have hitherto tended to downplay: namely the rather surprising degree to which eurozone banks depend on short term financing.

Morgan Stanley, for example, calculates that of the €8,000bn funding that is currently in place for the largest 91 eurozone banks, some 58 per cent needs to be rolled over in the next two years. More startling still, some 47 per cent of this funding is less than a year in duration. Much of that is in euros.

However, as the saga of the money market funds shows, eurozone banks have been raising short-term dollar funds too, either to finance their portfolios of dollar assets, or to provide a cheap form of funding (which is then swapped back into euros.) The scale of this reliance is – thankfully – not nearly as large as it was in, say, 2007; back then eurozone banks had a vast network of dollar-funded mortgage vehicles, creating a funding mismatch that was about $800bn, according to the Bank for International Settlements. Nevertheless, some element of this mismatch remains; hence the current crunch.

9. In praise of manufacturing - John Gertner writes a long and detailed piece at the New York Times Magazine about the need to grow manufacturing jobs and to be nakedly interventionist about it.

Good.

You don't see the Chinese wandering around theorising about free markets and the power of comparative advantage.

They just intervene in currency markets and invest in companies that build technology and factories and jobs and exports and wealth.

Now the Americans are starting to do it to. Gertner looks in particular at the moves to repatriate the growing business of high-tech battery making to America.

On both sides of the world, the fundamental appeal of expanding manufacturing is jobs. It is a curiosity of modern life that information companies can create extraordinary social disruptions and vast shareholder wealth but relatively few jobs. Facebook has about 2,000 employees worldwide. Google has about 29,000. Even in its new, slimmed-down state, General Motors, a decidedly less valuable company, has about 200,000 employees. What’s more, that number represents only a fraction of the people behind the production of a G.M. car.

“When you’re manufacturing anything, even if the work is done by robots and machines, there’s an incredible value chain involved,” Susan Hockfield, the president of M.I.T., says. “Manufacturing is simply this huge engine of job creation.” For batteries, that value chain would include scientists researching improved materials to companies mining ores for metals; contractors building machines for factory work; and designers, engineers and machine operators doing the actual plant work. By some estimates, manufacturing employs about 65 percent of America’s scientists and engineers.

10. Totally Clarke and Dawe on how Shane Warne and Liz Hurley are apparently reported to be getting married...reportedly...by reporters...