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Thursday's Top 10 with NZ Mint: How Germany plans to get hold of Italy's gold hoard; Waiting for Godot and the euro-zone doom loop; Spain has 'just days' before bailout; Running of the (Spanish) bears; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 11:00 am today in association with NZ Mint.

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

See all previous Top 10s here.

My must read today is #8 on national delusions and political opportunism. And we have some fresh Jon Stewart for your viewing pleasure today.

1. Here's one way to repay your debt - Make sure investors are so scared they'll pay you to look after their money.

Interest rates in Switzerland have gone negative, the Washington Post reports.

That way you get the lender, rather than the borrower, to pay off the debt.

Related Topics

What has the world come to?

Germany's 2 year bond yield hit 0% overnight.

Interest rates seem set to stay lower for longer at this rate. Unless of course you are the Spanish or Italian governments...

Switzerland first offered negative interest on government debt last year when the franc surged on market fears about the euro.

Unicredit economist Alexander Koch says it underscores how investors are willing to incur some losses to preserve capital.

Tuesday’s debt sale comes after the Swiss National Bank said Switzerland was preparing for a possible collapse of the euro. SNB president Thomas Jordan told Zurich Newspaper SonntagsZeitung on Sunday that Switzerland was considering introducing cross-border capital controls.

2. This is a hilarious version of Waiting for Godot - It's well worth a click through. It's from a JP Morgan banker with too much time on his hands. It's brilliant and explains the euro doom loop perfectly.

3. The US debt ceiling fight could get very ugly - With all the euro-grief around, the attention has shifted away from a looming fiscal cliff in America.

Business Insider says a lot of people are getting worried.

At Bloomberg View, economist partners Betsey Stevenson and Justin Wolfers predict that the next debt ceiling fight could sink the entire economy, in part thanks to the fiscal cliff issues being felt at the same time. They point to the economic deterioration seen last summer (when confidence collapsed around the time of the debt ceiling fight) as evidence for the trouble.

Ezra Klein recently called the next debt ceiling fight as something approaching a Lehman moment, again because it could come amidst the fiscal cliff miss.

4. Rejected - The FT points out the European Central Bank's decision this week to reject a fancy back-door bailout of Spain's bailout of Bankia has set up a giant game of chicken.

The ECB’s rebuff appeared to toughen Madrid’s insistence that the only solution to a crisis that is pushing its borrowing costs close to unsustainable levels is for the ECB to become a government lender of last resort. Spanish 10-year sovereign bond yields topped 6.5 per cent on Monday and only fell back slightly on Tuesday.

Senior government officials in Madrid argue that bailouts in Portugal, Greece and Ireland have been catastrophic and Spain will not compromise on its refusal to accept a similar form of intervention. They said the country had implemented reforms requested by Brussels and must now be granted relief by the ECB, or the future of the single currency will be threatened. The government would like to see the ECB restart its government bond-buying programme and wants the nascent European Stability Mechanism to be retooled as a bank bailout fund.

“This is like a game of poker now,” one government adviser said, “and I don’t think Spain is bluffing”.

5. Watch out for Chinese local government debt - Northwestern University Professor Victor Shih, who has written a book about China's politics and its financial system talks here with Credit Suisse's Cushla Sherlock (a New Zealander) at an Asian Investment Conference in Hong Kong about local government debt in China, which he says is around 40-45% of GDP. HT Macrobusiness

He says the central bank will continue to bail out these local governments, but it may not be able to do so much of it in years to come.

6. 'Pledge us your gold' - Ambrose Evans Pritchard writes here at the Telegraph about how the Germans might get their hands on the Greek, Spanish and Italian gold.

Southern Europe’s debtor states must pledge their gold reserves and national treasure as collateral under a €2.3 trillion stabilisation plan gaining momentum in Germany.

Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. "The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations," said the proposal.

This demand could enflame opinion in Italy and Portugal. Both states have kept their bullion, resisting the rush to sell by Britain and others. Italy has 2,451 tonnes of gold, valued at €98bn in March.

Alessandro di Carpegna Brivio, a gold expert at Camperio Sim in Milan, said Italy should treat such proposals with care. "Everything being done at a European level is in the interests of Germany and France, to save their banks. It is not in the interest of Italy," he said.

7. The countdown to zero of Spain vs Portugal - This chart via Sober Look shows the paths that the spreads to German bond yields took for Portugal and Spain.

This suggests that Spain has just a few days to go before it has to ask for a bailout. About 15 days by this measure.

8. Delusions and opportunists - This is a fascinating musing from Mark Dow about how people close to a market delude themselves and how politicians react.

The table below is a great laugh. Everyone thinks the Germans are the hardest working, except for the Greeks, who think the Greeks are the hardest working. Everyone thinks the Greeks are the laziest, except for the Greeks, who think the Italians are. Here's a sample of Dow's musing:

What politicians can be blamed for is opportunistically tapping into our cognitive weaknesses. At this, they are ruthlessly efficient. Having observed politic cycles in countless countries over the past 20 years, I have boiled campaigns down to a three point message.

1.       I feel your pain. Politicians need to connect, to empathize convincingly. Or, to paraphrase George Bernard Shaw, they need to be able to fake sincerity.

2.       You deserve more than you are getting, and it is not your fault.

3.       I’m gonna get the bastards who are keeping you down.

You can fill in the details about what you should be getting, and who is keeping whom down, but I have seen this formula play out, from Equatorial Guinea to the United States. The bottom line, brutal though it may be, is that when we are in pain, human nature is well equipped to convince itself that the group it belongs to is not to blame and then to find another group at whom to lash out. And while politicians are less responsible for crises than we are inclined to allege, they are certainly there to pitch themselves to us opportunistically in our moments of weakness.

As things continue to heat up in Europe, expect less rationality, not more—especially from the countries deepest in the pressure cooker. And, be on the lookout for more, not fewer opportunistic politicians.

9. Six reasons Spain will leave the euro first - Here's Matthew Lynn at Bloomberg with his list.

One: Spain is too big too rescue. Two: Spain has tired of austerity already.Three: Spain has a real economy. Four: Spain is politically secure. Five: Spain has bigger horizons. Six: The debate has already started.

For all those reasons, the Spain is the nation within the single currency that might conclude first that a negotiated departure from the single currency is a logical step. It might not be alphabetically correct, but the Spexit will come before the Grexit.

10. Yay. He's back. Totally Jon Stewart on his roots as a socialist.

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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35 Comments

here is an example of why the

here is an example of why the worlds economy is going down the gurgler.
31.3million dollar loss hailed as a success.So says RNZ chairman.
Our politicians operate exactly the same way so we shouldn't be surprised that we are heading south quickly.

Lest we let a story of

Lest we let a story of stereotyping the those slacker Greeks and their pitiful work record gain too much traction , the Gummster took a dive into some relevant OECD statistics ....... they sport a lovely table showing the average hours worked per employee by nation .
 
And in 2010 , the OECD countries averaged  1749 hours  per worker . NZ ( 1758 ) , Australia ( 1686 ) & the USA ( 1778 ) were close to the average .....
 
...... Germany ( 1419 ) and France ( 1554 hrs in 2009 ) were lagging the pack a smidgeon ..
 
And those wastral Greeks ? ......2109 hours worked per employee in 2010 !!!
 
...... gotten himmel  !

Quality not quantity - Bet

Quality not quantity - Bet the output of a German worker is superior to that of 5 Greek workers. 
 

Of course , everyone knows

Of course , everyone knows that the Hun is a damn fine worker , and that  the Greeks are a load of ouzo sucking lay-a-bouts .....
 
..... golly gosh goldenfox , this stereotyping is alotta fun , isn't it !

Right, that's it - YOU'RE

Right, that's it - YOU'RE BANNED.
 
Stereotyping is just fun but scapegoating will never go out of fashion. Hence the politicians' appeals to their "core constituants" which is no more than blaming The Other Lot. Illogically it usually ends up that poor people, unemployed people, immigrants, racial minorities etc. are the source of all your troubles...

That book '23 things...'

That book '23 things...' appears to have had an anti-social influence on you Gummy. Now you are getting banned from forums for using real numbers. 

...... some people are tetchy

...... some people are tetchy about the oddest things ..... the last time Bernard threatened to ban me ( about 4 days ago ) , it was for quoting Robert Kiyosaki ..... well , paraphrasing a little ......
 
Boggled my tiny cranium , that Bernard is a Kiyosaki-denier .....

I have a very limited

I have a very limited understanding of what Kiyosaki was saying, so I won't be too critical. My limited understanding indicates he was giving advice but that its relevance has passed. It might not be good advice any more, but from my point of view he is welcome to give it. There is absolutely no point denying that such advice exists.
I actually think you were 'banned' by somebody who failed to read any irony from what you said, at least I think there was a lot of irony to what you said.
You know I am interested Gummy, because I would have expected a lot of the content of that book would jar with your own opinions. Did anything you read challenge them? I don't actually think its a fantastic book, but it does challenge existing economic dogma in some way which is readily accessible.
 

.... I do like to take the

.... I do like to take the wee-wee out of Kiyosaki , I know ....
 
But his first book ,  " If you want to be rich & happy , don't go to school . " ( 1993 ) was fairly good . The writing style was a tadge " dry " , but the message resonated ....
 
... all of his many books since then have been just fleshed out regurgitations of his original thesis ....
 
Thesis / Faeces ...... why do I get those two words ever so mixed up ? ..... Kiyosaki !

Rich brother, Rich sister

Rich brother, Rich sister wasn't too bad, at least the bits by his Buddhist Nun sister Emi extolling the virtues of peace. I did think it was somewhat cruel though, given his riches, he didn't just bail her out (she needed heart surgery) but instead he thought it good medicine to turn her into an investor and bring her on his roadshows etc.
Gonzo are the days of Buddhists being supported in their path to enlightenment. The 21st Century Buddhist has to get an MBA on the side to keep the dharma alive because the monastic life is finito. Fair enough I guess, no free lunches. Maybe in Thailand still, alms still a good feed for the monks.
Pad Thai in a baggie never tasted so good.
 

...... only someone like you

...... only someone like you could think that !
 
( ... aha ha ha de haaaaaaaaaaa ! ....   :-)

Umm, read #8.  

Umm, read #8.
 

 " GBH .....   I thought you

 " GBH .....
 
I thought you were smart ...... "
 
... ... buddy , if you thought that , can I interest you in purchasing some FaceBook shares , hmmm ?

That " dog " FaceBook has

That " dog " FaceBook has found a friend ..... Alexis Madrigal over at the Motley Fool has written a contrarian piece , extolling the virtues of FB :  " The Case for Facebook " .....
 
...... he whom snares what turns out to be a " 10-bagger " will have the last laugh ..

Does that mean we can't be

Does that mean we can't be "friends" on FB Gummy?! 
Pray tell how you haven't been roped in after the cannibalisation of hotmail and the like. 

..... sadly , mine isn't the

..... sadly , mine isn't the type of  face to grace any book ....... on the side of a recycling truck , perhaps ....
 
The thing is , 900 million contented FaceBook users is an amazing achievement , but how does the company monetize that , without pissing people off ?
 
.... for "big tech " investments I still think that Google & Apple are surer plays ....

From the children; F  

From the children;
F   riendly
A   pplication
C   an
E   nable
B   ullying
O   f
O   ther
K   ids.
 
 

Finished All Cash , Equity

Finished All Cash , Equity Blown , Out On Kennel .... !

Yes Portugal has some fat

Yes Portugal has some fat Gold reserves....most of which came from the Nazis for the purchase of Wolfram I think...and the bulk of that ..if not all of it...was stolen from German Jewish families....often out of the mouths of the millions slaughtered in the death camps....

  Germany.  "It wants to do

 
Germany.  "It wants to do with banks what it couldn’t – historically – do with tanks. It wants a Europe that looks and feels democratic, but in which Germany really rules the roost and makes the final decision in all the big calls. This it will achieve by financial dominance.". - David McWilliams.

Quick...somebody should warn

Quick...somebody should warn Walter...Kaikoura might be on the list!
"A break-up of the euro could see London property prices halve as the world’s wealthy house buyers look elsewhere once more, say economists."
http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/9300780/Euro-break-up-could-wipe-50pc-off-London-house-prices.html

"The Reserve Bank of

"The Reserve Bank of Australia will lower its overnight cash rate target to a record low this year as Europe’s escalating debt crisis damages global growth, Westpac Banking Corp. (WBC) chief economist Bill Evans predicted.
The RBA will reduce the benchmark by a quarter percentage point at its June 5 meeting and follow that with cuts in July and August and a final move in the fourth quarter to 2.75 percent, Evans said in a research report today. He previously saw 3.25 percent as the low point in the easing cycle that included quarter-point reductions in November and December and a half-point reduction May 1.
“These two extra cuts are based on our assessment that the global environment -- read Europe -- has deteriorated even further,” Evans, who correctly picked the degree of easing in the past eight months, wrote in the report. “In turn this deterioration is expected to have a more severe impact on confidence in Australia than had earlier been expected.”
 
 
http://www.bloomberg.com/news/2012-05-31/rba-to-lower-cash-rate-to-record-low-2-75-in-2012-westpac-says.html

Although I believe the RBA

Although I believe the RBA has made the same mistakes the RBNZ has made, in wasting very positive trade terms through too high an exchange rate; it seems to me the RBA is reacting more quickly, and getting its priorities sorted faster than the RBNZ. 

Julia Gillard is claiming

Julia Gillard is claiming that the record low interest rates are testimony to how wonderfully well she and Wayne Swan are directing the Australian economy ...... much much lower bank rates than when John Howard & Peter Costello were running the show .....
 
....... the Gummster wonders if the Reverse Bank hasn't reduced the OCR so low because the larger part of the economy , the 90 % which is non-mining , is absolutely stuffed ( West Australia excepted ) .......

"Former Australian prime

"Former Australian prime minister John Howard wants his countrymen to be kinder to their Kiwi neighbours.
 
Mr Howard said too many Australians were condescending to New Zealanders and took for granted the relationship the countries shared."
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10809859
Come on over John...we got a Key job you can have......!

You didn't read the whole

You didn't read the whole article did ya Wolly?
"I like John Key, I think he's a terrific bloke and he's doing a tremendous job."
"Mr Key was not available for comment this afternoon but a woman in his office said Mr Howard's words were flattering."....I bet it put a smile on his face eh Wolly!
 

Meant to put this here

Meant to put this here instead of on Weds top 10
Nobel Prize winning economist Paul Krugman says Greece will have to leave the euro.
He told BBC HARDtalk's Sarah Montague there was no alternative but whoever took the decision Greece should go would simultaneously be ending their own political career.
You can watch the full interview on BBC World News on Thursday 30 May at 20.30 and on Friday 31st May at 03:30, 08:30, 15:30 GMT and on the BBC News Channel on Friday 1st June at 00:30 BST and 04:30 BST.
Watch recent episodes online (UK only) or subscribe to our podcast. Find out who is coming up on the programme by following us on Twitter .
Excerpt here
http://news.bbc.co.uk/2/hi/programmes/hardtalk/9725121.stm

Christchurch exodus - Paul

Christchurch exodus - Paul Gorman - The Press today.....
 
..........with Hugh Pavletich commnts at Cantabrians Unite www.cantabriansunite.co.nz facebook page. Hyperlinking function on Interest Co website appears to be a problem at the moment.
 
Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

To me this is financial

To me this is financial idiocy writ large – a cancer on the world which, if left unchallenged and not eradicated will morph through the generations to come into a species with completely distorted and ultimately unsustainable sets of values which will eventually lead to its demise.

Reputedly Nero fiddled while Rome burned – presently we have world leaders tinkering while half the world is already in flames and the other half is choking in the smoke and desperate to stop the flames igniting. And, if you will excuse the crudity, these ‘leaders’ wonder why the people want to piss on their parade – could it be because our piss is all we are left with to fight the flames created by their carnage?