Top 10 at 10: Google's crystal ball into inflation; Roubini on money printing; Greek debt grief; Dilbert

Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please send suggestions for Friday's Top 10 at 10 to bernard.hickey@interest.co.nz 1. Chart of the decade - Felix Salmon at Reuters points to a chart produced by Mike Mandel showing what has happened to US household borrowing in the last 10 years. They describe it as the economic statistic of the decade. It certainly suggests that way too much borrowing was done and a lot of saving has to be done.

I like the time frame that Mike has chosen here, since it shows not only the huge increase in borrowing during the credit boom and the stomach-churning plunge thereafter, but also, for much of the 1990s, what "normal" should look like.

2. Google's crystal ball - Here's a curious data point that says something about the new online world we live in. It shows how many times people search for the phrase 'food inflation' to show when food inflation is about to strike. HT to FTAlphaville for this one. Does it show food inflation is a worry again? Is this the first sign of the inflation surge that many people have been warning about for a year or so after massive money printing? I'd love to pull some stats out of TradeMe on the price and volume of goods sold there, as well as hot searches, particularly on property.

Now, if you think Google Trends is far too whimsical a data set, VP reminds that the US Centers for Disease Control and Prevention (CDC) already use Google to accurately estimate influenza-like illness percentages in each of the nine public health regions of the United States in real-time. Despite the fall in food prices, there has been no improvement in agricultural fundamentals "“ yields are not rising, capacity utilization in farming is already extremely high, and emerging market demand for food is growing "“ so there will be another spike.

3. Greek grief - There is now real concern about Greece defaulting on its debt and tearing the euro zone apart, the WSJ reported.

Tthe Greek government said Wednesday it is considering all options to cover its financing needs this year, even as renewed worries about Greece's ability to borrow hammered the country's debt market and sent the euro to its lowest level in five months. In late afternoon trade in Europe, yields on Greece's benchmark 10-year bond"”which move inversely to prices"”briefly touched a record high, while the cost of insuring that debt also reached a new record. The credit concerns surrounding Greece once again weighed on the euro, which fell below $1.42 for the first time since August. Analysts say that the near-term uncertainty surrounding Greece's borrowing plans"”whether through a private placement, syndication, a popular bond for retail investors, or a foreign currency bond"”has helped stoke the nervousness in the market. "All these rumors about a private placement or syndication have created uncertainty and markets don't like uncertainty," said a finance ministry official. "Maybe the markets will calm down if we proceed with an issue. Maybe yes, maybe no."

4. Banks exposed - This is alarming chart from Deutsche Bank showing how exposed foreign banks (which means mostly European banks) are to Greek sovereign debt. The risks of a debacle in Greece are growing. Here's why, as FT Alphaville points out from this Deutsche research.

Such inflows leave an economy vulnerable to a sharp withdrawal of funds at some point in the future should foreigners lose confidence or face liquidity constraints that prevent them from maintaining this exposure. At end-Q3 foreigners held EUR216bn of Greek government debt (72.3% of the total market, 90.2% of GDP), having doubled their position since end-04. Given recent downgrades and another round of revisions to budget data from previous years, a sharp slowdown or even reversal of inflows from foreigners into the local debt market has become an increasing risk.

5. Chinese nerves - The Chinese are getting nervous about unnerving the world's very nervous stock markets. China's top banking regulator, Liu Mingkang, has denied reports that officials had told some banks to stop lending for the rest of the month, The Australian reported. It's almost hilarious that a report in an obscure (and state-run) journal from one person talking about verbal requests would spark the biggest drop in the Dow in 3 months. I suspect there's a lot of people who know in their bones that the stock market rally of the last year is fueled by hot air rather than anything substantial. Here's a nice collection of articles on this over at our sister site interestratenews.comau

Liu spoke briefly to Dow Jones Newswires on the sidelines of the Asian Financial Forum in Hong Kong. He didn't elaborate. The state-run China Securities Journal cited a person at a mid-sized lender as saying the CBRC gave verbal instructions to the big four state banks and several medium-sized banks to stop extending new loans for the rest of this month.

6. Print, baby, print - Nouriel Roubini talks at Project Syndicate about the real risk of political deadlock in the United States if the Republicans win the mid-term elections, as now seems possible after the Democrats lost the Massachusetts senate seat vacated by Ted Kennedy. Roubini warns this could result in a fiscal stalemate that forces the US government to print money to fund its deficits and inflate its way out of trouble. Down that path trouble awaits...

The US also faces political constraints to fiscal consolidation: Americans are deluding themselves that they can enjoy European-style social spending while maintaining low tax rates, as under President Ronald Reagan. At least European voters are willing to pay higher taxes for their public services. If America's Democrats lose in the mid-term elections this November, there is a risk of persistent fiscal deficits as Republicans veto tax increases while Democrats veto spending cuts. Monetizing the fiscal deficits would then become the path of least resistance: running the printing presses is much easier than politically painful deficit reduction. But if the US does use the inflation tax as a way to reduce the real value of its public debt, the risk of a disorderly collapse of the US dollar would rise significantly. America's foreign creditors would not accept a sharp reduction in their dollar assets' real value that debasement of the dollar via inflation and devaluation would entail. A disorderly rush to the exit could lead to a dollar collapse, a spike in long-term interest rates, and a severe double dip recession.

7. It's not over - Lex at FT.com points out the future for the US housing market remains dire because the demographics of home buyers is dire. Unemployment among those who tend to be first home buyers is rife and their numbers are dwindling also. This chart series here on the left is a cracker. We all forget about the power of demographics. When will all the McMansions bought by the Baby Boomers have to be sold by them to fund their retirement. That's due from about 2010 on. Oh look it's already 2010...

New household formation, spurred by rising employment, could yet save the day. However, the demographic group that tends to buy houses is suffering most "“ employment of 25 to 44-year-olds is down 8 per cent since the recession began, notes CreditSights (versus a 1 per cent decline for over-45s). It also calculates that if the past two recessions are a guide, finding jobs for those unemployed since December 2007 and for recent labour force entrants will take between six and 14 years. Houses rot slowly and steadily.

8. Who's buying? - ZeroHedge has been trying to work out who is buying all the Treasury bills being issued by the US government over the last 6 months. It appeared not to be the US Federal Reserve, which would amount to blatant money printing. Someone in Britain is the buyer, and it's not entirely clear who it is. ZeroHedge reckons the Chinese may be the buyers, which would mean China is helping America monetise its deficit, even though the official figures show China's buying has dried up somewhat.

The Fed has now informally offloaded the Treasury portion of Quantitative Easing to China, which does so via the elusive Direct Bid. It also explains why the Fed has generically been much less worried about TSY purchases under Q.E. (a mere $300 billion out of a total $1.7 trillion in monetization). It does beg the question of just how much Chinese holdings of US Debt truly are, as this number is likely hundreds of billions higher than the disclosed $799 billion. If true, this would imply that the UK "holdings" of $278 billion are highly suspect, as the country likely own a fraction of this total, with the balance held by Chinese and Petrodollar interests. One thing is certain: if someone is trying to hide their purchases, this is never indicative of a good thing, and much more analysis must be performed to determine just why international fund flows need to be below the radar.

The implications are that China's hold around the American throat is getting stronger, particularly because it is short term debt and the rollover risk is bigger and more frequent. How long before the Chinese ask for nuclear powered aircraft carriers instead of more paper? 9. Totally irrelevant picture - I want one, even if it is a creation in photoshop rather than something real. It is a jet scooter. There are more pictures here. 10. Totally irrelevant video - A box of slightly sparkling wine is put into a microwave. I am easily amused, but this made me laugh in a slapstick sort of way.