Tuesday's Top 10 with NZ Mint: 'Chinese property investors shutting out young Kiwis in Auckland'; 'On the road to zero growth'; Hong Kong's birth rate slumps as housing affordability worsens; Dilbert

Here's my Top 10 links from around the Internet at 11 am 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 watch is #6 from Hugh Hendry. So erudite about economics and so entertaining.

1. 'Buying property is like buying a ticket into this country' - Property Developer Grant La Hood is quoted by Anne Gibson in NZHerald as calling for deterrents or action to stop or slow a flood of Chinese investors buying up rental properties and land in Auckland.

This is building as an issue.

Australia has already imposed controls on non-resident purchases of properties.

Singapore and Hong Kong have imposed stamp duties on such buying by Chinese investors to cool down the market.

There's no mystery here. China effectively prints money to keep its currency in line with the US dollar, which itself is printing money. Investors then look around the world for assets with yields higher than 0% and where central banks are not printing money. Hence the drive to buy property in Australia and New Zealand.

Here's La Hood:

"I spend my days looking for suitable development sites and it is almost impossible to compete," he said of wealthy Chinese.

"Let's remember housing is a necessity and not just a commodity to be bought, sold and traded. Politicians need to spend some time in the auction rooms and see the demoralised faces of first-home buyers to truly understand why Kiwis are fleeing to Australia. Aucklanders would be shocked to know how much of our rental stock is owned by investors living in places like Hong Kong and China."

One real estate agent told him 60 per cent of his agency's rent roll was non-resident Asian investors.

2. On the road to Zero growth - Jeremey Grantham's latest monthly newsletter is a cracker on why economic growth appears to be slowing permanently. HT BusinessInsider.

Grantham sees real U.S. GDP growth trending at 0.9 percent through 2030, then falling to 0.4 percent from 2030 to 2050.

"Someday, when the debt is repaid and housing is normal and Europe has settled down, most business people seem to expect a recovery back to America’s old 3.4 percent a year growth trend, or at least something close," he wrote. "They should not hold their breath. "A declining growth trend is inevitable and permanent and is caused by some pretty basic forces."

Those basic forces include unfavorable demographic trends, decelerating productivity growth, tightening resource constraints, and rising environmental costs.

3. This is the elephant in New Zealand's economic engine room - Anne Gibson at NZ Herald reports on an estimate that earthquake strengthening work needed elsewhere in New Zealand after the Christchurch earthquake could top NZ$100 billion.

4. Azerbaijan buying Australian government bonds - Australia and New Zealand, which aren't printing money, are now seen as safe havens by every cash-rich central bank in the world.

That's why the Australians are quietly soaking up some of this demand via its Reserve Bank to try to reduce some of the pressure on the Australian dollar. No such luck in New Zealand. It's open slather here.

Here's the WSJ with the scoop:

Azerbaijan, the Caspian nation best known for its caviar and petroleum, is buying Australian government bonds, joining a growing list of sovereign investors acquiring debt Down Under in a trend that has seen the Aussie dollar labeled a potential safe-haven currency by the International Monetary Fund.

The former Soviet republic's US$33 billion dollar sovereign-wealth fund—the State Oil Fund of the Republic of Azerbaijan, or Sofaz—said it quietly started buying Australian bonds in July at a time when market data show the Aussie dollar gained 3.4% in value over the month.

"The main purpose of these investments made within Sofaz's investment policy is diversification of its currency basket," the fund said in written responses to questions from The Wall Street Journal. "Additionally, Sofaz is expecting these investments to enhance its return in the light of extremely low-yield environment in U.S. and European financial markets."

Such is the RBA's concern about the high exchange rate—partly caused by foreign demand for Australian bonds—that it recently started a policy of allowing its foreign-currency reserves to grow in a passive form of intervention.

5. Hong Kong's birth rate dropping - Nomura's Paul Louie points out that Hong Kong's painfully unaffordable housing market (12.9 times income) is coinciding with a fall in the birth rate, similar to what was seen in the mid 1990s when affordability reached painfully similar levels. HT BusinessInsider.

The current condition of a 5% drop in births while marriages are up by 5% is highly unusual. Considering that this is the Year of the Dragon and private hospitals’ zero quota on mainland babies does not come into effect until 1 January 2013, the decline in the birth rate may suggest that Hong Kong may have become so unaffordable that local fundamental demand is now being curtailed.

6. 'We're in the death spiral of mercantilism' - So says Hugh Hendry in this video.

Hendry is always fascinating.  He talks about how he became a gold bug in 2002 and then became a bond bug in 2006. He was right both times. He sees a real risk of a Japanese collapse because of the strength of the yen. Some of the largest Japanese corporates are on the verge of bankruptcy, he says. He sees the dimemberment of the Bank of Japan's independence and a Swiss style peg to its currency. The election due soon will be crucial.

He also says: "China is this giant mousetrap that has to grow at 10%..."

"I have a history of contentious posturing..."

My kind of commentator...

7. 'Forget the bond vigilantes' - So says Paul Krugman in this New York Times blog. He's right, of course. I don't understand why our government is so paranoid about the ratings agencies and bond investors giving us the flick.

Bond investors are desperate for bonds because they are ageing and risk averse, and they want our bonds because of our high yields. Fitch and Standard and Poor's cut our rating last year and the world didn't end.

It’s very hard to come up with any reason why either the US or the UK might default, since they can simply print money if they need cash. And given the absence of real default risk, long-term interest rates should be more or less equal to an average of expected future short-term rates (not exactly, because of maturity risk, but that’s a fairly minor detail).

So if you expect the US and UK economies to be depressed for a long time, with the central bank keeping rates low, long rates will be low too — end of story.

But won’t that money printing cause inflation? Not as long as the economy remains depressed. Budget deficits could lead people to expect higher inflation down the road, once the slump finally ends — but that would be a good thing for the economy in the short run, discouraging people from sitting on cash and weakening the exchange rate, thereby making exports more competitive.

8. Learning to love volatility - Here's Nassim Taleb at the WSJ.

9. Why is housing so insanely expensive - The Independent reports from Positive Money suggesting a few answers.

The conventional wisdom is that it’s a simple case of supply and demand. The UK is a small, densely populated country. There simply aren’t enough houses. This high demand pushes prices up. Simple as that.

But maybe it’s not that simple. The campaign group for banking and monetary reform, Positive Money, believe that it is the debt-based nature of our economy which has caused such huge increases.

According to Positive Money, who draw on the work of economists such as Steve Keen and the head of the FSA, Adair Turner, it is the banks’ ability to create digital money when they make new loans that has driven the rise in house prices and fuelled the most recent and catastrophic housing bubble. This is because most of the banks’ lending – and hence most newly created money – goes into the housing market in the form of mortgage lending.

This increased money supply in the housing market creates an increase in demand for houses. The supply of houses, as we already know, can’t match this rising demand so prices are pushed up. The bubble is further inflated by speculators buying property (and borrowing from the banks to do so) because they know the prices will go up, thus creating even more demand and a vicious circle of price rises and increased borrowing until the inevitable bust.

10. Totally Stephen Colbert on the David Petraeus scandal.