Tuesday's Top 10 with NZ Mint: Euro shock and awe; South America resurgent; bloated returns; Italian rail project; Dilbert; George Carlin

Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.

Bernard Hickey is on vacation and won't be back until early May.

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

I am still keen to get your suggestions for suitable cartoons. If you notice a really good one, please email me.

See all previous Top 10s here.

1. Capital flight needs shock and awe
If you were living in the EU would you keep your money in Spain or Italy, let alone Greece, Portugal or Ireland? Of course not. That is the same choice millions are making or have already made.

The flows are tough to quantify, but they can be estimated by examining the balance sheets of euro-area central banks as Bloomberg has done.

By looking at the changes in cross-border claims, we can figure out how much money is leaving which euro nation and where it’s going.

The seven-month increase is about double the previous 17- month rise, and brings the three safe-haven countries’ combined loans to other central banks to 789 billion euros, their highest point on record. In essence, the central banks of the three countries -- and, by proxy, their taxpayers -- have agreed to make good on about 789 billion euros that were once the responsibility of Italy, Spain, Greece and others.

The worries about Italy and Spain reflect the inadequacy of Europe’s efforts to stem what has become a combined banking, sovereign debt and economic crisis. The European Central Bank’s efforts to prop up bond markets with more than 1 trillion euros in emergency bank loans have only encouraged Italian and Spanish banks to buy more of their governments’ bonds, tying their fates to those of the afflicted sovereigns.

The harsh austerity measures required by Europe’s new fiscal compact are making things worse by stunting the economic growth needed to help the countries reduce their debt burdens. Should markets balk at lending to Italy and Spain, Europe’s bailout fund - with only about 600 billion euros in spare capacity - remains far too small to cover the two countries’ financing needs, which amount to more than 1 trillion euros over the next five years.

If Europe’s leaders want to stop the rot, they’ll have to change their approach. The least bad solution, as Bloomberg View has argued, is a combination of overwhelming force and deeper integration. Together with the European Union and the International Monetary Fund, the ECB would provide large enough guarantees - more than 3 trillion euros, by our estimate - to erase any doubt that solvent governments such as Italy and Spain can cover their financing needs and banks can raise capital. If the amount pledged were big enough to tame markets, it wouldn’t have to be spent.

2. A reversal in the western hemisphere
All in all, this is a pretty good time to be an American. Think about it. The middle class is expanding and growing richer. Once-stark inequalities are shrinking. The quality of governance has improved by leaps and bounds. Politics is becoming less ideological and more centrist and pragmatic. And never before have Americans held such sway in the wider world.

Oh, perhaps a clarification is in order. This is a pretty good time to be a Latin American. The Economist makes some revealing comparisons.

3. A fallen star
Things aren't looking great in the once-powerful South African mining industry. Due to weak markets, safety related shutdowns and strikes, South Africa has recorded its lowest mine output numbers in 50 years with gold, platinum, copper, nickel and nonmetallics particularly hard hit. Iron ore, chrome and manganese bucked the trend. More on Mineweb:

"There is no question about it - the market is in surplus. There is enough metal around".

The outlook doesn't seem to appear any better. Nell said "the numbers we see going forward will be lower on a like for like basis from last year. It is from both sides [seller and buyer]. Demand is slow and there has also been a slowdown in capex spend".

4. A rail project without public ownership
Is this what Len Brown has in mind for Auckland? He will need to go on another 'trade mission' to check it out. Later this month, Italy will unveil what has been dubbed the most luxurious and modern high-speed train in Europe. Described as the "Ferrari of trains", and travelling as fast as a Formula One car, the launch of the Italo will mark the end of Italy's state-run operator's monopoly on rail travel in the country.

The Milan-to-Naples route will also be the first privatised high-speed route in Europe, offering an alternative model to government-funded networks in other countries. On second thoughts, because its privately funded Mayor Brown will probably skip this inspection tour.

5. A possible answer to a failed experiment
Predatory, poisonous, pestilent and bloody-mindedly persistent: the South American cane toad is the eco-scourge of Australia. They were introduced to Australia in the early 20th century in a bid to control crop-devouring sugar-cane beetles. The experiment was a disaster: not only did the toads completely ignore the bugs they were supposed to eradicate, but in a few short years they proved themselves highly adaptable, prolific breeders and more-or-less indestructible.

This nightmare scenario has seen more than 200 million of these monster toads - which can weigh well over 2kg each - on an unstoppable march across the north of Australia. Vast amounts of funding, endless community initiatives and countless failed vaccines have gone into battle against the feral toad. Tamara Sheward reports:

But it is simple science - with a touch of romance - that may finally win the war.

Researchers in Australia's far north have developed a unique trap that could spell doom for the most menacing cane toad of them all: the exceptionally fecund female.

While male toads are relatively simple to catch, the wily female - who can lay an astonishing 30,000 eggs in one sitting - has proven a more elusive target. But by playing up to females' predilection for full-voiced mates, scientists at Townsville's James Cook University have come up with a solution that increases trapping success by as much as 300 per cent. By emitting low-frequency, high-pulse-rate calls that signify what project leader Lin Schwarzkopf calls "the toad version of Barry White" and incorporating attractive, specially-designed "mood lighting", the new female toad traps are snaring potential breeders in unprecedented droves, and may prove to be a vital breakthrough in Australia's lethal war against the toad.

6. The labour market is hot in Panama
Panama’s economy was the fastest growing in Latin America last year, expanding more than 10%. It was boosted by the US$5.25 billion expansion of the Panama Canal and other infrastructure projects. Firms are scrambling to find skilled labor, provoking "a high degree of uncertainty" on consumer prices (IMF code for rampant inflation).

"You can’t hire a lot of workers in a lot of positions because there simply aren’t the workers," Panamanian President Martinelli said in an interview at a regional summit in Cartagena, Colombia. "Wages have risen, firms are stealing workers from each other."

7. Canada not that interested
Canada is not interested in joining the TPP talks if it has to reform and open up its dairy sector.

Canada, Mexico and Japan asked to join TPP negotiations last November at a regional summit hosted by U.S. President Barack Obama. Canada has so far resisted a request that it abandon its supply management of poultry and dairy products before it joins the talks.

“Canada’s not going to negotiate away things to get to the (negotiating) table,” [a spokesman for the Canadian Prime Minister] said.

8. Chinese get tough on foreign projects
Chinese authorities are cracking down on foreign investment after a string of troubled projects that have run up tens of billions of dollars in losses, including two big resources deals in Australia.

''The Chinese government has learnt two important lessons since the advent of the 'going out' initiative,'' he said. ''Firstly, that Chinese companies are not always equipped to be successful buyers, owners and operators of overseas projects.

''Secondly, Chinese government thinking is gradually evolving towards the conclusion that security of supply does not necessarily require ownership of these assets.''

9. Gilding the hedge fund lily
One senior British academic is claiming that hedge fund returns are as much lower than are being reported.

Harry Kat, professor of risk management and director of alternative investment research at Cass Business School, at London's City University, said lack of information on hedge funds had created a misleading impression of returns.

“If you only look at live funds, you miss all the funds that have closed and you will overestimate returns,” Prof Kat told a hedge fund conference in London last week.

Whereas just 5 per cent of hedge funds closed in 1994, about 15 per cent would close this year, he said. Failure to look at closed funds overestimated returns by 2-4 per cent.

In addition, new hedge funds took 32 months on average to register on databases. This resulted in returns not including companies that had closed before they registered. Prof Kat said research from the Netherlands showed these omissions resulted in returns being overestimated by 3-4 per cent.

10. The last laugh
The incomparable George Carlin. "A house is just a pile of stuff with a lid on."