Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.
Bernard will be back with his version tomorrow.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
1. The US audits its gold holdings
Ron Paul has had a 'win'. His haranguing has gotten the US authorities to do a detailed audit of the gold held in the New York Fed. Apparently there are 34,000 gold bars stored there that are owned by the US Federal Government.
But it surprised me to learn that this vault stores another half million bars. Who owns them? And how much is at Fort Knox in Kentucky?
The answer is that the NY Fed holds about 7,000 tonnes and Fort Knox holds about 4,500 tonnes.
The audit, which began in January, took place 80 feet below the Fed's limestone and sandstone Italian Renaissance building in Manhattan's financial district. Visitors to the vault make their way through a steel and concrete entrance where a 90-ton door rotates open.
Inside, a massive scale is ringed by 122 blue cages that hold about 530,000 gold bars — 34,021 of which belong to Uncle Sam. The auditing team counted the U.S. stash, selecting more than 350 bars from which to extract samples for assaying.
The process involved about half a dozen employees of the Mint, the Treasury inspector general's office and the New York Fed. It was monitored by employees of the Government Accountability Office, Congress' investigative arm.
The bars were first weighed on a small electronic scale, then transferred to a table mounted with a long, thin drill used to burrow into the gold, said a person familiar with the operation who was not authorized to speak publicly.
2. The next big oil production frontier?
The Russians are going all-out to exploit their oil reserves in the Arctic. The Moscow Times reports:
Prime Minister Dmitry Medvedev on Thursday appointed his deputy, Arkady Dvorkovich, to oversee the creation of tax and customs incentives for oil companies developing hydrocarbon reserves in the Arctic, in a measure aimed at increasing economic feasibility and attracting more private investors to resource potentially rich maritime territories.
3. New Japanese eco house cuts electricity consumption by 88%
Annual electricity costs at an experimental housing unit were cut by almost 90% by using solar panels, a storage battery and a fuel cell, Osaka Gas Co. and Sekisui House Ltd. have reported. More from The Japan Times.
From July 2011 to June 2012, the three-member household reduced its power costs to 584 kwh, from 4,830 kwh during the prior 12 months after their house was refitted with the panels, the firms said Thursday. Osaka Gas and Sekisui House aim to begin marketing the "eco-house" system by 2015, after lowering the equipment costs, particularly for the storage batteries, which cost around ¥10 million (NZ$150,000)
4. 'It's worse than it sounds'
The slow-motion collapse of the government status quo across the Western world is obvious, but the reality is the opposite of what Twain said about Wagner's music - it's worse than it sounds for many big American states. That's the message of a recent report from Richard Ravitch and Paul Volcker reported in the WSJ that deserves far more attention than it has received.
The other novel Ravitch-Volcker observation is that no one knows for sure how deep these problems run, because the states are running bookkeeping cons that disguise the fiscal realities. The task force uncovered "chronic dependence" on gambits like assets sales, "temporary" raids on rainy-day funds, and shifting current spending to future years "as an ongoing budget strategy."
California, Illinois, New Jersey and New York are even securitizing their future tax revenue—that is, not merely borrowing with bonds that must be serviced but selling their projected tax collections to investors. So to "balance" their budgets today, they're making it far harder to correct them in the future and locking in higher tax rates. Even Greece doesn't do that.
The message of the Ravitch-Volcker report is that some large portion of the states are replicating the dysfunctions of Washington—adding to entitlements that crowd out priorities like schools and bridges, and then concealing the real danger when they're not ignoring it. State and local governments now spend $2.5 trillion, and rising. Without 49 more Scott Walkers, the fiscal mayhem has only begun.
5. Sovereign defaulters pay up eventually
Even sovereign bond defaulters pay up in the end to salvage their reputation. Argentina is 'celebrating' the payoff of some bond promises that were made in desperation back a decade ago. Then, that nation’s economic disaster left thousands with a grim choice after their government seized dollar-denominated deposits to stop bank runs in 2002. They could switch to devalued pesos and regain access to what was left of their savings, or accept a piece of paper promising to repay the money in dollars over the next 10 years. Those few that believed the government promise and took the second option have gotten their money back plus a modest return. The Globe and Mail has more:
Few had any faith in the government’s promises back then. Argentina had just defaulted on more than US$100-billion in foreign debt, banks were shuttered, the economy was in ruins and streets were filled with pot-banging protesters whose chants of “throw them all out” would send five presidents packing.
But Argentina has mostly paid up after all, making good on 92.4 per cent of that defaulted debt so far, including US$19.6-billion in U.S. currency over the years to cancel the Boden 2012 bond. Most of the hard-luck investors later sold the bonds at a loss, but as the government makes its last $2.3-billion payment on Friday, the few stalwarts who kept the faith have been made whole, while earning a modest 28 per cent profit over the years.
6. Indian reincarnation
This last weekend, the ship once known as the Exxon Valdez came to its final resting place on an oil-stained beach in Alang, India, where it’ll be recycled in the world’s largest and most notorious shipbreaking yard. Environmentalists inside and outside of India are outraged.
The ship - now renamed (I am not making this up) the Oriental Nicety - like almost all ships scrapped in India, is filled with hazardous substances. Under Indian law and international treaties to which India is party, that should render it illegal to import. And yet, not only is it being imported, it’s one of hundreds of ships that are brought into Alang every year for recycling. More from Adan Minter at Bloomberg:
The environmental community likes to avoid the term “recycling” when it talks about places like Alang. But that doesn’t mean there aren’t very strong green arguments in favor of them. Of these, the most compelling has to do with energy savings. On average, the manufacture of recycled steel requires 74 percent less energy than the manufacture of new steel from virgin ores dug from mines. Because re-rolled steel doesn’t need to be remelted in a furnace, the energy savings are even more significant (though no figures or studies support that suggestion). For India, such savings means that an already overtaxed power grid can be devoted to providing electricity to poor people rather than steel mills, and valuable open space can be conserved rather than dug up for new iron-ore mines.
7. The tunnel vision problem
While Auckland's mayor Len Brown has 'tunnel vision' for his billion dollar rail plans, he is ignoring the housing affordability crisis that is particular to Auckland. The strangling of new supply is having a devastating effect on those at the margins. While Len ignores, at least Housing NZ is trying some stuff and it seems ironic that Wellington has to patch up his blind spot. The only thing that will fix it is building new houses faster than the growing demand. Even more irony is the Left whining about a Housing NZ project in Glenn Innes. Can they count?
But housing Kaitaia's homeless is coming at a serious cost in Glen Innes, where Housing NZ is removing or renovating 156 houses to make way for 78 new or renovated state units, 39 homes for community providers and about 140 privately owned homes.
Come again? I make that "removing or renovating 156 houses" for a gain of 257 357 units, plus those in Northland. Seems like doing something positive about the issue to me. Sure there is some disruption, but it's a crisis for heaven's sake. We just need more houses. Time to Len to divert 'his' billions into someplace meaningful. Forget the train set for now.
8. It's pouring
Second quarter ready-mix concrete data is now out and shows a sharp rise in production, somewhat more than expected. These rises were across the nation with every region except Gisborne and, interestingly metro Auckland, recording increases above the same quarter a year earlier. The biggest rises have been in Christchurch.
9. Free money - QE for the people
The US Fed seems to have come to the conclusion that more QE is a waste of time. The markets and most commentators think more money printing is coming (but I win a coffee if there is none before the US presidential elections!). I think the Fed is right - QE hasn't worked as expected because there has been way insufficient trickle-down. So the private chatter is searching for a new approach, and one alternative is ... more but different QE !?! Anatole Kaletsky at Reuters has the thinking:
One such radical measure is too controversial for any policymaker to mention publicly, although some have discussed it in private: Instead of giving newly created money to bond traders, central banks could distribute it directly to the public. Technically such cash handouts could be described as tax rebates or citizens’ dividends, and they would contribute to government deficits in national accounting. But these accounting deficits would not increase national debt burdens, since they would be financed by issuing new money, at zero cost to government or to future generations, instead of selling interest-bearing government bonds.
Giving away free money may sound too good to be true or wildly irresponsible, but it is exactly what the Fed and the BoE have been doing for bond traders and bankers since 2009. Directing QE to the general public would not only be much fairer but also more effective.
10. Being a street-corner crack dealer isn’t lucrative
Steven Levitt: The freakonomics of McDonalds vs. drugs
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