Friday's Top 10 with NZ Mint: Breaking an 80 year old social contract; Why China's nearly-naked Ferrari crash matters; Why Super Mario's Big Bazooka won't solve Europe's austerity trap; Clarke and Dawe

Here's my Top 10 links from around the Internet at 12 pm today in association with NZ Mint.

As always, we welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must read today is #1 on the chance of an epic change in America's social contract in this election.

1. Breaking the social contract - Princeton Economics professor Alan Blinder has written a cracking editorial at the Wall St Journal about how Republican Presidential co-candidates Mitt Romney and Paul Ryan seem determined to destroy the bipartisan consensus that has existed in America since the 1930s.

Blinder is saying that since the Great Depression and Roosevelt's New Deal both sides of Congress essentially agreed on a 'mixed economy' model with a modest safety net.

Ryan and Romney want to shred that consensus utterly.

It is the furtherest right the Republicans have ever been.

He says Reagan would have appeared too socialist for Romney and Paul.

This is the best summary I've seen yet of the competing visions for America now before voters. We should all brace for a Depression if Romney and Ryan win.

The two political parties certainly had their differences between the 1930s and the 2000s, but the broad consensus often had bipartisan support. Thus Eisenhower built public infrastructure; Nixon declared himself a Keynesian and established the Environmental Protection Agency; both Reagan and Bush II acted like Keynesians; Bush I promised a "kinder, gentler nation" and Bush II expanded Medicare—unfortunately, without a way to pay for it.

But with Messrs. Romney and Ryan, it's out with Franklin Roosevelt and in with Ayn Rand. As many observers have noticed, even Ronald Reagan would be considered a bit too lefty for the current Republican Party. After all, he signed several tax increases to shrink the budget deficit and barked at but never seriously bit the safety net.

President Obama stands with (Republican) President Eisenhower's emphasis on building infrastructure, with (Republican) President Reagan's willingness to raise taxes to reduce the deficit, and with (Republican) President George H.W. Bush's call for a kinder, gentler economic policy. Mitt Romney stands with Barry Goldwater and Herbert Hoover.

2. How Washington Lobbyists work with regulators - It's rare to see behind the scenes to show how America writes and polices its laws for banks. This Bloomberg piece is fascinating.

It shows how a revolving doore between regulators and lobbyists works to slowly, but surely, kill democracy and protect the interests of the powerful. A must read for the detail.

Nazareth’s e-mails to Schapiro and then-SEC General Counsel and Senior Policy Director David Becker, obtained through a Freedom of Information Act request filed by Bloomberg News, demonstrate how lobbyists and lawyers draw on bonds they formed in government service to gain access for clients, and how they work to maintain those ties.

It’s “a real advantage” to send a familiar face into the agency, said Adam Pritchard, a University of Michigan law professor and ex-SEC lawyer. “If I’m a client, I’m very pleased. I’m willing to pay top dollar for that.”

3. Why the Ferrari crash matters - A story has been doing the rounds in China in recent days about the details of a insanely-fast Ferrari crash where the son a Princeling was killed with a couple of nearly naked fellow students in the car with him.

This piece from Evan Osnos at The New Yorker helps explain why it matters.

He harks back to a Russian example before the collapse of the Wall...

In Beijing this week, another Communist Party is straining to suppress discussion of a scandal that suggests an inconvenient contrast between the experiences of ordinary people and the lifestyles of the rich and connected. On Monday, the South China Morning Post put to paper a story that had been making the rumor-rounds for months: a black Ferrari that crashed in Beijing in the predawn hours of March 18th, claiming the life of “a half-naked man in his twenties” and seriously injuring “two young women—one naked, one semi-naked” has been tied to the highest ranks of the Party élite. The man in the car was reportedly Ling Gu, son of Ling Jihua, one of President Hu Jintao’s closest aides.

It’s tempting to write off these stories as tabloid fodder. But the story of the Ferrari crash—yes, already blocked on the Chinese Web—is the second full-blown political scandal of the year, after Party leader Bo Xilai was stripped of his power and his wife was convicted of murdering a British businessman. Along the way, the Chinese people were treated to competing reports about whether their son drove a Porsche, or a Porsche and a Ferrari. The Ferrari crash has touched off a round of odds-making on élite politics, since we are weeks away from a major leadership transition. (Gady Epstein has a good take on The Economist blog.) But the broader consequences, the impact outside the halls of power, may be more lasting.

Beijing is not Moscow in 1990, as far as anyone can tell. China’s defining problem is not deprivation; it is, perhaps, something closer to fairness and expectation. Any political party relies, in the end, on a fragile foundation that balances performance and faith. It can lose one or the other at various times, but if it loses both at once, it’s in trouble. The Chinese Communist Party is bracing for tougher economic times ahead, and it will need rely more than ever on faith. With each new story, that gets harder. Those are the rules, and they were the rules twenty two years ago, on a cold night in Chernigov.

4. Don't count the Euro-zone chickens yet - Marshall Auerback writes at CreditWritedowns that the saving of the Euro-zone by the Big Bazooka is no sure thing. The Germans are still imposing a long, slow death by austerity to the Euro-zone.

The problem is that the renewed bond buying will be tied to the conditionality of yet more fiscal austerity, and Greece is being held up as the poster boy of what happens when you don’t comply with the conditions laid out by the ECB, or the Troika. In addressing the solvency issue, the ECB’s conditionality ironically will make the very “problem” of fiscal profligacy and higher government deficits much worse, as demand gets crushed by yet more austerity. In effect, one is left with the Scylla of a quick death via exit from the euro zone, or death via slow strangulation of aggregate demand via the fiscal austerity conditionality laid out by Mario Draghi today. Pick your poison.

5. That'll learn ya - The Euro-zone wants Greeks to work six day weeks to dig themselves out of their austerity hole and stay in the Euro. Interesting that the Syriza party, which is in favour of defaulting and pulling out of the Euro, is now the most popular party in the opinion polls, if not the parliament. From now it's all about politics.

Here's the Guardian:

The demand is contained in a leaked letter from the "troika" of the country's lenders, the European commission, European Central Bank, and International Monetary Fund. In the letter, the officials policing Greece's compliance with the austerity package imposed in return for the bailout insist on radical labour market reforms, from minimum wages to overtime limits to flexible working hours, that are likely to worsen the standoff between the government and organised labour in Greece.

After a long delay caused by months of political paralysis in Greece, the troika inspectors return to Athens this week to scrutinise Greek observance of its bailout terms. They are expected to deliver a verdict next month that will determine whether Greece is ultimately allowed to remain in the single currency.

The letter, sent last week to the Greek finance and labour ministries, orders the government to extend the working week into the weekend. "Measure: increase flexibility of work schedules: increase the number of maximum workdays to six days per week for all sectors.

6. 'How low can you go'? - The Arctic Sea ice is melting fast. So what does it mean. Faster climate change, suggests the Spec.com

Now we begin to see the consequences. The polar jet stream, an air current that circles the globe in the higher northern latitudes and separates cold, wet weather to the north from warmer, drier weather to the south, is changing its behaviour.

In a paper in Geophysical Letters last March entitled Evidence Linking Arctic Amplification to Extreme Weather in Mid-latitudes, Jennifer Francis of Rutgers University and Stephen Vavrus of the University of Wisconsin-Madison offered a hypothesis that may explain why world grain prices have risen 30 per cent in the past four months (and are still going up).

First, a warmer Arctic reduces the temperature gradient between the temperate and polar zones. That, in turn, slows the wind speeds in the zone between the two and increases the “wave amplitude” of the jet stream. The jet stream flows around the planet in great swooping curves, like a river crossing a flat plain, and those curves — Rossby waves, in scientific language — are getting bigger and slower.

This is a recipe for extreme weather

7. The PIGS, competitiveness and New Zealand - The big problem in Europe is Southern Europe is uncompetitive and doesn't have an exchange rate to help it become more competitive.

New Zealand has the same problem. We're uncompetitive and our exchange rate isn't adjusting because of capital flows.

This chart showing competitiveness vs wages is courtesy of Zerohedge and is a cracker. It shows NZ on the wrong side of the line, along with the PIGS.

The more competitive a country is, the higher its wages can be justified. There is a clear relation between the two variables. Countries below the regression curve have a strong competiveness rank relative to their labour costs while countries above the curve have a lower competiveness rank relative to their labour costs. Greece is one of the most extreme outliers, but Italy, Spain, and Argentina are also above the curve. They have a long way to go to get close to competitive.

8. Oops - This is too bizarre to behold, courtesy of CBSlocal in Philadelphia.

An Occupy Easton protester faces an attempted bank robbery charge following an arrest at an organized event at a bank – during which the “Occupier” was holding a sign that reportedly read “You’re being robbed.”

According to The Express-Times, Dave Gorczynski allegedly held cardboard signs outside a Wells Fargo Branch that read, “You’re being robbed,” while the other said, “Give a man a gun, he can rob a bank. Give a man a bank, and he can rob a country.”

9. Night of the long spreadsheets - A wave of executives of listed Chinese companies resigned yesterday after their companies reported big profit drops or losses, Want ChinaTimes reported.

Some of them 'passed away'.

In just a single day, Sept. 4, 16 companies disclosed changes in their executive staff. Most of them are listed on the Shenzhen Stock Exchange. Except for two senior executives who passed away, high-level personnel changes included three corporate chairmen, three vice presidents, two board supervisors, one director, one business supervisor and one corporate securities representative who all abandoned their posts, reported the Beijing Business Today newspaper.

The total number of listed enterprises that have reported executive departures was estimated at more than 100 in the 10 most recent trading days in Shanghai and Shenzhen.

10 Totally Clarke and Dawe on how Australian politicians answer every questions. Robert Dazzler has all the answers. He wins a well known newspaper company. He's not