Top 10 at 10: ETS another burden for young; Peak Gold?; Call to boycott big US banks; Dilbert

Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Friday's Top 10 at 10 to bernard.hickey@interest.co.nz Are the baby-boomers the greatest generation? 1. Don't worry, the kids will pay - Brian Fallow has written another excellent column in the NZHerald on how the government is choosing to shuffle on today's costs to our children and young workers. It's not just super and health. Now it's the Emissions Trading Scheme, which exempts today's farmers and pushes the costs onto tomorrow's workers. Plus ca change.

It is clearly craven and irresponsible for the Government to refuse to even discuss a reduction in the entitlement parameters of the scheme, such as pushing xeback the age of eligibility. Instead it plans to just pass on the now much larger bill to future taxpayers. It is the same story with the costs of the Emissions Trading Scheme (ETS), the cornerstone of the official response to the challenge of climate change: a multibillion-dollar post-dated cheque on future taxpayers. The Sustainability Council's executive director Simon Terry and economist Geoff Bertram have analysed the Government's planned changes to the scheme which was enacted late last year in the dying days of the previous Government's ninth year in office. The questions they ask are basic: Who pays the charges the ETS imposes? How big are the subsidies to the trade-exposed sectors? And who pays the ultimate bill, New Zealand's Kyoto liability? The answers they come up with make it clear today's emitters are on the bludger's end of a transfer from future taxpayers.

2. Peak gold? - Ambrose Evans Pritchard at The Telegraph has another cracker that might affect global commodity markets. He cites the world's biggest gold producer Barrick Gold saying gold production is in terminal decline. HT Steven Jones via email. Gold hit a fresh record over US$1,100 an ounce overnight.

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run. "There is a strong case to be made that we are already at 'peak gold'," he told The Daily Telegraph at the RBC's annual gold conference in London. "Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," he said. Ross Norman, director of theBullionDesk.com, said exploration budgets had tripled since the start of the decade with stubbornly disappointing results so far. Output fell a further 14pc in South Africa last year as companies were forced to dig ever deeper - at greater cost - to replace depleted reserves, not helped by "social uplift" rules and power cuts. Harmony Gold said yesterday that it may close two more mines over coming months due to poor ore grades. Mr Norman said the "false mine of central banks" had been the only new source of gold supply this decade as they auction off reserves, but they are switching sides to become net buyers.

3. Boycott call - Karl Denninger at The Market Ticker has called on US savers to withdraw their money from the 'Too big to fail' banks, which include Bank of America, Wells Fargo/Wachovia, Citibank and JP Morgan/Chase. Denninger is very grumpy about these banks taking government guarantees, borrowing printed money at zero cost, paying themselves massive bonuses and then hiking fees for customers. Fair enough. HT Gertraud via email.

Place your business with a local community bank or credit union in their place, and tell the above four institutions to "piss off." I've resisted doing this, but the idea that banks are now going to try to penalize those who do not carry balances or pay late fees is the last straw. This is a call for a boycott. A call to break these institutions by destroying their deposit base and "net interest margin", one consumer at a time, as a protest against the outrageous actions these firms have taken in terms of risk and their shifting of the costs of that risk, which should have resulted in their failure and closure by The FDIC and OCC, onto the backs of their customers via outrageous fees, interest rates and costs, along with the direct subsidy being paid by all taxpayers generally. Are not 30% credit card interest rates enough, while these four banks all can and do borrow at near-zero from The Fed and have issued debt with an FDIC guarantee (that is, funded by you)? If that is not enough to dissuade you, how about Wells Fargo holding an unknown amount of Wachovia "off-balance sheet assets" at god-knows-what in terms of valuations - and justification for same - while cutting back HELOC lines and credit cards?

4. Food scraps for fuel - This is a curious report from USAToday about how one San Francisco waste treatment plant is turning food scraps into methane to generate electricity. Anything similar happening here? HT Gertraud.

While a handful of utilities, companies and universities nationwide have attempted to recycle food scraps into energy, less than 3% of those scraps are diverted from landfills, the EPA says. Most often, food waste that doesn't go to landfills is composted for use in fertilizers. Every year, more than 30 million tons of food waste goes to landfills, the EPA says, accounting for about 20% of landfill waste. The San Francisco-area utility district powers its wastewater plant, which serves about 650,000 Bay Area homes, by capturing methane gas by processing many kinds of waste, starting with wastewater. To take up excess capacity, the utility started collecting other waste in 2001, including that from wineries, dairies and chicken processors, says David Williams, director of wastewater for the utility. Food scraps from restaurants and hotels were added in 2004. The plant now processes 100 to 200 tons of food scraps a week. The goal is to do 100 to 200 tons a day "“ enough to power the equivalent of 1,300 to 2,600 homes "“ and rapid expansion is now expected. By the end of next year, the district expects to create so much power from non-traditional waste that it'll be able to sell excess power to Pacific Gas & Electric, a local electricity supplier, Williams says. If 50% of the USA's food waste went through a similar process as the one here, there'd be enough power for 2.5 million homes a year, the EPA says.

5. Chinese bubble - FTAlphaville points to evidence from RBC Capital Markets of a bubble building in China's property market, fuelled by easy and cheap lending. Will anyone ever learn?

China Real estate data showed continued strong growth, with investment +18.9% y/y YTD in Oct, property sales +48.4% y/y YTD and urban property prices +3.9% y/y. This is further evidence that strong bank lending and easy liquidity conditions are creating an overheated property market.

6. Inflation time bomb - Rolfe Winkler at Reuters points out that the US public debt will pass US$12 trillion this week and is up US$1 trillion since March. He says this is inflationary.

With Obama's left flank calling for a second stimulus "“ which is really a third stimulus if you count George Bush's tax rebates "“ there's still no serious discussion about how to deal with debt. The bond market is telling us not to worry. But if history is any guide, the bond market is wrong. 'm referring to Treasury Inflation Protected Securities, TIPS for short,in particular those that reflect long-run inflation expectations. The current spread tells us to expect annual inflation averaging a bit over 2 percent for the next 30 years. That would be fairly benign. And fairly wrong. Why? Because it assumes U.S. political leadership will put the country on a sustainable fiscal path. I highly doubt it will happen. In a note to clients last month, Société Générale strategist Dylan Grice explained the connection between debt and inflation. Turning Milton Friedman on his head, Grice argued that "inflation is always and everywhere a fiscal phenomenon." Money printing may be the vehicle, but the "root cause" of inflation tends to be "a government unable to pay its way." You see the real inflationary threat isn't the $12 trillion public debt, which on its own is serviceable. The problem is $63 trillion worth of unfunded obligations for healthcare and social security. Putting these figures in context, the U.S. government's total liabilities are 19 times current tax receipts. "Bear in mind that the U.S. consumer is widely seen as dead in the water with debt at 1.3 times income," says Grice.

7. It might not work - Caroline Baum at Bloomberg has a useful column on the challenges facing central bankers who pump up asset bubbles with unusually low interest rates. It's all very deja-vu. HT Gertraud via email.

"It's 2003 all over again," says William White, chairman of the Economic Development and Review Committee at the Organization for Economic Co-Operation and Development in Paris. White was referring to the "inflection point" in 2003 when, following an extended period of ultra-low interest rates - - 1 percent in the U.S., 2 percent in Europe, close to 0 percent in Japan -- monetary stimulus ignited a rally in asset prices, the mother of all housing bubbles and a crisis that brought the financial system close to the brink of collapse. It's very tempting to do what's worked before, even if it makes things worse in the long run, White says. "We're at the end of the road we embarked on in 1987, if not before, relying on credit bubbles, associated increases in asset prices and unwise spending every time there was a problem." Lowering interest rates, expanding the federal deficit: It may work in the short run but in the long run (yes, we're all dead, but our children aren't) it creates a mountain of debt and a lot of stuff no one needs or wants. No central banker or government official is brave enough to look the public in the eye and speak the truth, especially when presenting two, unappealing options: Either we suffer through a long period of stagnation, with easy money and government spending cushioning the fallout, even at the risk of creating new imbalances; or we take our medicine in one large dose and suffer a shorter, more painful period of contraction and restructuring that wrings the excesses out of the system. "It takes a very brave man if the choices are stagnation versus a painful adjustment," White says. "I suspect there are no takers for the second one." Zero percent interest rates and quantitative easing can work in one of two ways, White says. Either they have a direct effect on inflation expectations, prompting the public to spend today in order to front-run tomorrow's higher prices; or they raise asset prices, which makes people feel wealthier and want to spend more. Both channels pose obvious risks, but "it's so simple it might just work," White says, with a nod to Monty Python. It might. On the other hand, it could end badly. Bubbles usually do.

8. Finally - US Senator Chris Dodd's new bill to control the US Federal Reserve finally seems to taking some control back, Bloomberg reports.

The Federal Reserve faces the biggest blows to its authority and independence in five decades under legislation championed by its lead overseer in the U.S. Senate. The financial-regulation overhaul proposed yesterday by Senator Christopher Dodd would strip the Fed of its role as a bank supervisor and give Congress a greater voice in naming the officials who set interest rates. The measure opens the door to interference from politicians who might disagree with any move by the Fed to raise rates from record lows, former central bank officials said. Dodd's measure would also curb the Fed's ability to make emergency loans to individual companies. The Fed's response to the financial crisis prompted increased scrutiny of the central bank, especially after it used its emergency powers to bail out Bear Stearns Cos. and American International Group Inc.

9. The Asian mystery - Close watchers of the imbalances in global capital markets have always wondered why North Asian consumers and corporates (particularly in China) seem so keen on building up savings and not consuming. Anoop Singh at IMFDirect has a useful piece that concludes China needs better corporate governance and capital markets to encourage companies to hand back their cash piles to consumers and so they can trust that financial markets will work when needed. Hmmm. I wonder. New Zealand's corporate governance is arguably better than China's and our financial markets are more open and liquid, which would prove the point given our low savings ratio. But New Zealand consumers also lack faith in their own capital markets, so maybe it doesn't prove the point. HT David Chaston via IM.

We tried to analyze this mystery in Chapter III of the Asia-Pacific Regional Economic Outlook. We discovered two vital clues: Corporate governance. The higher the level governance, the more shareholders are able to exercise their rights and prevent firms from hoarding cash. Financial sector development. The more liberalized the financial market, the less firms hoard cash, because they have easier access to funding and are less worried about being shut out of financial markets. Financial liberalization also allows households to consume against their corporate wealth, because they can borrow using their financial assets as collateral. These finding have profound implications for policy. For example, the econometric estimates imply that if Asia were to reach the average level of corporate governance in advanced economies, it would be able to lessen corporate savings by as much as 2½ percent of GDP. Similar advances in financial sector liberalization could reduce savings by 5 percentage points. Resolving the conundrum of firms that save but do not invest, and households that hold this wealth but cannot consume may enable Asia to finally catalyze domestic demand. It could help to restore rapid growth, even in a "new world" of softer advanced country demand. Improved corporate governance and further financial sector development may be two remedies worth exploring.

10. For no relevant reason - The Onion reports on a new trend: US workers outsourcing their own jobs.