Top 10 at 10 past 11: Australia's Goldilocks boom; California bankrupt; Brash 'can't recall'; Dilbert

Here are my Top 10 links from around the Internet at 10 past 11. I welcome your additions and comments below or please send suggestions for Thursday's Top 10 at 10 to bernard.hickey@interest.co.nz  We love to scurry at interest.co.nz 1. 'It's not fair' - Alan Wood at The Press reports CBS Canterbury CEO Bryan Inch as saying the Reserve Bank's liquidity rules are pushing the big 4 Australians down into the local term deposit territory that is the bread and butter of Kiwibank and other local institutions. This is making life difficult for many of them, including CBS and Kiwibank. It is however great for consumers. Oh well...

"It's straight out supply and demand - there's not an unlimited supply of money in the New Zealand market." CBS Canterbury was 100 per cent retail funded, Inch said. "It's just putting up the cost of money really . . . the likes of us are having to fight harder to get the deposit dollar.". There was a gap opening up between the RBNZ's official cash rate of 2.5 per cent and retail deposit rates being offered, Inch said. "You can get short term retail rates now for about 5.0 per cent . . . there's just a total disconnect now between the retail market and the wholesale market." If the Reserve Bank had wanted to keep a rein on the economy, "they have certainly done that" while making it difficult for the smaller lending institutions, Inch added.

2. Grrrrrrr - Ben Heather in The Press picks up on Lincoln University research on how many South Island High Country farmers bought land cheaply from the government in the tenure review process and then promptly flicked it on to developers for massive profits. The numbers are extraordinary. More proof many farmers seem more interested in farming for capital gain rather than profitable production.

Sales figures from the past 15 years show farmers have made $146.6m from selling the land in freehold titles, says Lincoln University tenure-review specialist and public policy senior lecturer Ann Brower. They showed tenure review had been "a rip-off" for the public, with land sold to farmers on the cheap, allowing some to subdivide it and sell it to developers for millions of dollars, she said. "It has been a pretty good deal for the farmers." Under tenure review, farmers with pastoral leases allow unproductive farmland to become Department of Conservation (DOC) estate in exchange for freehold rights to higher-value farmland. Brower said that, in 1998, a farmer paid $120,000 for 73 per cent of Hillend Station, near Lake Wanaka, which was then subdivided into 36 smaller sections and sold for $26.2m.

3. 'I don't recall'- Huljich Wealth Management Chairman Don Brash has broken his silence on the controversial Huljich KiwiSaver 'top up' payments in this Fran O'Sullivan piece in the NZHerald.

Brash said he was aware that Huljich had contributed $1.3 million to the Huljich unit trusts soon after they were formed. "That was the major reason for the board deciding that those unit trusts should be closed off, at a time when the number of investors was very low and involved only close associates of the board. "I don't recall registering the fact that this payment had affected the performance of the KiwiSaver funds, probably because at that time the KiwiSaver funds were extremely small and the dollar amount to which they benefited from that payment was less than $9000.

4. Twitmoney - This Wired article by Daniel Roth looks at the future of payments systems and concludes a lot of action is happening away from the banking and credit card system. This is a must-read for anyone interested in payment systems and the future of money. The opening up of Pay Pal's system to API developers looks to have sparked some real innovation.

"It seems really odd that credit card companies can continue to charge a tax on the economy," says Aaron Patzer, founder of the financial management service Mint.com, which is now owned by Intuit. "Outside the US government, they are the only entity that has the power to levy a fee across virtually every transaction. Maybe that made sense in the early 1960s, when computer infrastructure was expensive and proprietary. But now, with cheap bits everywhere, the actual cost to do a transaction is pennies." There is, in other words, a massive inefficiency to be exploited. And so, an army of engineers and entrepreneurs is rushing in, hoping to do to the payment world what has already been done to the music, movie, and publishing businesses "” unseat a legacy industry built on access and distribution, drive the costs to zero, undercut the traditional middlemen, and unleash a wave of innovation. Square's Dorsey sees his company as creating a new, open system that allows users to swap funds instantly, without a series of interlopers grabbing their share. "We bring an engineering discipline to this problem," he says. "What we want to know is, how can we get right to the source?" A generation ago, when people made the choice to switch to plastic, credit cards did not just replicate cash; they fundamentally changed how we used money. The ease with which people could make purchases encouraged them to buy much more than they had in the past. Entrepreneurs suddenly had access to easy "” though high-interest "” loans, providing a spark to the economy. Now, while it may be hard to predict what innovations PayPal's platform will enable, it's safe to say that the payment industry is going to change dramatically. As money becomes completely digitized, infinitely transferable, and friction-free, it will again revolutionize how we think about our economy.

5. Hasta la vista - Arnie's state, California, is bankrupt. That's according to the people who run it. It's hard to understand how a state could be bankrupt, but the golden state fits all the criteria, reports the San Francisco Chronicle. HT Blair Rogers via Twitter

Federal law prohibits states from declaring bankruptcy and without a legal framework, assertions about California's solvency are left to interpretation. But persistent multibillion-dollar budget deficits, cash crises, tens of billions of dollars in debt and other obligations have blurred the legal distinction. "California is deeply in debt. You could say that it's bankrupt," Attorney General - and presumptive Democratic gubernatorial candidate - Jerry Brown told a group of young Democrats earlier this month. Republican U.S. Senate hopeful and former Hewlett Packard CEO Carly Fiorina raised the specter of bankruptcy in a discussion with Southern California business owners. And Republican Assemblywoman and retired banker Diane Harkey of Dana Point (Orange County) said the state is "literally bankrupt."

6. 'We're so lucky' - Reserve Bank of Australia Deputy Governor Ric Battelino has highlighted the benefits of Australia's latest mining boom in a speech overnight. He says this boom is better than previous ones because the impact on GDP is bigger, the terms of trade spike is bigger, and the exchange rate is floating, which is reducing the distortionary (and inflationary) impacts. Bragger Battelino. We're just jealous over here of Australia's Golden and Goldilocks economy.

In the 30 years since the previous boom, the Australian economy has developed in ways that should make it better able to accommodate the surge in mining activity that is currently under way. The floating exchange rate is a key difference, but goods and labour markets are also more flexible, and the monetary and fiscal policy frameworks are now more soundly based. This gives grounds for confidence that we can do better this time, but the task will not be without challenges.

7. Coming to a bank near you? - This is an interesting idea bubbling around at National Australia Bank, which owns BNZ. The NAB is considering dropping its 'one size fits all' price for mortgages for its own customers to include discounts for lower risk customers, the Herald Sun reports. This raises the prospect of a range of mortgage rates depending on loan to value ratios. That seems fair enough. But it makes my head hurt when I think of what it might do to our rates tables. Remember, NAB set the trend in Australia last year when it abandoned exception fees on overdrafts, which was eventually adopted both in New Zealand and in other markets. Could the same happen this time?

National Australia Bank is considering a radical shift in its home lending business, with a move to price residential mortgages according to the risk profile of individual borrowers. The bank has already introduced a risk-based pricing model on its HomeSide mortgages sold through brokers which offers interest rate discounts to "low risk" borrowers. Under the pricing policy, borrowers who stump up a deposit of 30 per cent on the property they are buying get a 0.1 per cent discount on their interest rate. However, borrowers who are only able to put up a deposit of 10 per cent or less incur an extra 0.1 per cent on their interest rate costs. NAB is the first Australian bank to adopt risk-based pricing on home loans, although all the banks use it for business loans. The pricing model was developed by NAB last year following requests from brokers for a mortgage product that rewarded borrowers considered less likely to default. NAB's head of broker partnerships, Matt Lawler, told BusinessDaily that the bank was looking at applying the new pricing model to its flagship mortgages sold through branches if it proves successful in the broker channel.

8. Longer and more golden - The Economist has produced this graphic showing how the expected length of retirement has lengthened in many developed countries from around 10 years in the 1960s to around 19 years now. The implications for fiscal deficits in coming years are obvious. Younger generations graduating now will end up paying higher taxes for the pension and health care costs of the elderly, unless retirement ages are delayed and/or health care costs are rationed/capped or made user-pays. The choices are simple, yet painful. I can't see any politicians making them. It will require a crisis. John Key just wasted a good one. Stats NZ survivability data shows the expected length of retirement before death for a New Zealand male retiring now at the age of 65 is 18 years, which is up from 12.5 years when a male retired in 1965. That puts us about in line with Greece in the table below...Just sayin... John Key's promise to resign if he moved the retirement age or changed NZ Super looks more shortsighted than ever.

AS GOVERNMENTS try to tackle huge structural budget deficits, one means of attack is to delay paying state pensions by gently raising the official state-retirement age. Protests are expected in Spain on Tuesday February 23rd against an official plan to lift the retirement age by two years to 67. Official retirement ages have failed to keep pace with rising life expectancy, making pensions increasingly unaffordable. In practice many people in the rich-world OECD countries retire several years early, which lets them enjoy, on average, some 19 years in retirement before death.

9. Vampire squid sucks big time - Bloomberg has this exclusive expose on how Goldman Sachs sold CDOs that it later took out Credit Default Swaps on with AIG that were subsequently paid out in full by the US government. American voters (18% of whom are either unemployed or unemployed) are slowly working out just how they've been sucked dry by Manhattan investment bankers during a crisis. Those same bankers just increased their bonuses by 17% to US$20.3 billion in 2009. Anyone wondering why the Tea Party movement is so strong need only to look at this story. It essentially says taxpayers were duped during a crisis into bailing out bankers who then tried to cover it up. They now have to sit on their hands and watch while bankers pay themselves big bonuses to celebrate this clever trick.

The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place. The banks should have to explain how they managed to buy protection from AIG primarily on securities that fell so sharply in value, says Daniel Calacci, a former swaps trader and marketer who's now a structured-finance consultant in Warren, New Jersey. In some cases, banks also owned mortgage lenders, and they should be challenged to explain whether they gained any insider knowledge about the quality of the loans bundled into the CDOs, he says. "It's almost too uncanny," Calacci says. "If these banks had insight into the underlying loans because they had relationships with banks, originators or servicers, that's at the least unethical." The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured -- more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion. These tallies suggest a possible reason why the New York Fed kept so much under wraps, Professor James Cox of Duke University School of Law says: "They may have been trying to shield Goldman -- for Goldman's sake or out of macro concerns that another investment bank would be at risk."

10. We're Rogoffed - Harvard Professor and former IMF big wig Kenneth Rogoff has warned that sovereign defaults are likely to cause a new period of painful austerity, Bloomberg reports.

Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks. Following banking crises, "we usually see a bunch of sovereign defaults, say in a few years," Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. "I predict we will again." The U.S. is likely to tighten monetary policy before cutting government spending, sending "shockwaves" through financial markets, Rogoff said in an interview after the speech. Fiscal policy won't be curbed until soaring bond yields trigger "very painful" tax increases and spending cuts, he said.

11. Totally irrelevant video - Lars von Trier has done a video promoting Danish tourism, The Onion reports... Apparently Denmark is an excellent place to begin a harrowing love affair... Denmark Introduces Harrowing New Tourism Ads Directed By Lars Von Trier