Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments in the comments below or please send your suggestions to bernard.hickey@interest.co.nz My apologies for the delay. OCR predominated today. And ANZ National results... and Treasury's Long Term Fiscal view.... and Alex is doing a microeconomics exam...enough excuses? (eds: way too many....) We have a creative environment at interest.co.nz that values the individual... 
1. 'Not even a dog's show' - Brian Fallow at the NZHerald has an excellent column on the challenges facing New Zealand as it tries to catch up to Australia. He makes the valid point that we seem destined for a hollowed out and poor future without politically brave reforms. Here's a taste, which include comments from some of the submissions to the 2025 Taskforce.
To close by 2025 the income gap, measured in GDP per capita, which had opened up by 2008, New Zealand would need to grow 1.8 percentage points a year faster than Australia, Treasury economist Michael Reddell points out. The lucky country has escaped recession during the global crisis. If you take the two countries' Treasury forecasts for 2013 as reliable, by then the gap will have widened to the point that it would require New Zealand to grow 3.2 percentage points a year faster than Australia to catch up by 2025. If history is any guide we haven't got a dog's show.
Fallow also makes interesting points about interest rates being too low and a looming shortage of management talent. Sigh. How much longer are we going to lament this stuff before our 'leaders' do something.
We are up against a combination of unfortunate facts. One is that the cost of capital is high in New Zealand and capital markets are thin. But evidently interest rates are not high enough to encourage households to save. They continue, in aggregate, to spend more than they earn. And now the Government is running deficits as well. All of which means New Zealand will continue to rely on imported capital, when our starting point is a level of external debt - 95 per cent of GDP - which is conspicuously high by international standards. Meanwhile, the tax system all but compels domestic investors to put their hard-earned dollars into bricks and mortar rather than enterprises which might help the country earn a living as a trading nation. According to the OECD, almost a quarter of all skilled New Zealanders live abroad and a sixth of the total New Zealand-born population do so. The Australian diaspora, by contrast, is relatively small. Executive search firm Seqel Partners in its submission points to a looming shortage of business leaders over the next 15 years as babyboomers retire and so many of their potential successors from Generation X are expatriates who, survey evidence suggests, are not particularly interested in coming home. "A very substantial leadership deficit of up to 40,000 people will hollow out the leadership capability of New Zealanders business," they conclude. Even now, the Institute of Management talks of New Zealand management as having "plateaued at a level of mediocrity".
2. WTF - It seems South Canterbury Finance had enough money to participate in the PGC rights offering, Marta Steeman points out in a Press (Stuff) report about George Kerr increasing his stake in PGC to 13.2% from just over 10%. I wonder what the government thinks of South Canterbury Finance spending cash on buying shares in a fellow finance company.
3. Into the mainstream - Now former FT journalist Clive Crook is talking loudly over at NationalJournal.com about the parlous state of the US budget deficit outlook. He captures the mood in Washington (complacent) well and talks about the failure of previous congressional approaches to limit spending growth. HT ymbfa on twitter
A group of Democratic senators is exploring another approach. They are calling for a special legislative process that would make it harder to stop or amend deficit-reducing measures. One idea is to have a bipartisan panel of lawmakers and administration officials come up with a deficit-reduction plan, which would then be fast-tracked to a final vote. Committee chairmen, especially in the House, are understandably opposed to the idea because it would usurp their powers. Though process reform has been a qualified success in the past, the risk is that it becomes a kind of displacement activity: something to talk about instead of cutting spending and raising taxes. And the rules stick, in any case, only if soaring public borrowing is seen as an overriding problem. Despite all the statements to the contrary, that sense of urgency is lacking -- partly for the good reason that slashing the deficit immediately, with the economy still weak and unemployment still rising, would indeed be a bad idea. It is asking a lot of politicians and voters to grasp these two ideas simultaneously: The budget deficit had to rise dramatically because of the recession, but steps to make it fall dramatically once the economy revives are indispensable. The discussion about where to find the savings and how to raise revenues needs to start now -- not least, to signal to the government's creditors that the issue is going to be addressed.
4. New currency? - One of America's biggest discount supermarket chains Costco has announced it will now accept food stamps, MSNBC has reported.
It's a big about-face for a retailer that has catered to the bargain-hunting affluent "” and a sign of the grim reality facing retailers and their customers. Food-stamp users recently hit a record 36 million. Costco Wholesale Corp. began accepting food stamps at its New York stores this year under political pressure. The company doubted many would use them butsaw a strong response and will accept them in at least half its stores nationwide by Thanksgiving.
5. Shitigroup update - Citigroup is now offering to wipe off half the credit card debts of delinquent credit card customers in the United States, ZeroHedge shows with this letter. HT Gertraud. 6. Aussie dollar woes - Alan Kohler at BusinessSpectator picks up on the disastrous rise in the Australian dollar. HT Rob Pharazyn via email.
The strong Australian dollar is a disaster for Australian manufacturing, and persistent credit restrictions are likely to depress engineering and construction for years. These are the two big, possibly permanent, losers from the aftermath of the 'Great Recession', but watching the action in Canberra there's a sense of Nero Claudius fiddling on his lyre during the Great Fire of Rome. Not that Australia is burning "“ far from it "“ but profound structural shifts are taking place in this country while our political leaders squabble endlessly and pointlessly about asylum seekers and emissions trading. This country has indeed come through the 'Great Recession' in good shape and our resource industries are looking forward to decades of boom on the back of China and India, but that picture masks some difficult and lasting problems. Every silver lining, it seems, has a cloud; complacency is unwarranted. In particular the 50 per cent appreciation in the currency from its long-term trading range could drive a manufacturing catastrophe.
7. More bailouts - GM will ask for another bailout from the US government, WSJ reports. GMAC, the financing arm debacle on wheels that spun out of GM, is also looking for another bailout. When will it all end? (When the Chinese finally lose faith) 8. Depression-esque debt - FT.com's FTAlphaville highlights how the pace of write-offs for bad debts by US banks is actually faster than it was at a similar stage in the Great Depression of the 1930s.
The banks incurred $45bn of loan charge-offs in the third quarter, collectively, which means they've racked up $116bn so far this year. That translates to an estimated annualised rate of 3.4 per cent in Q3, or 2.9 per cent year to date, Moody's says. Annual charge-offs hit 2.25 per cent in 1932 before peaking at 3.4 per cent in 1934.
9. Inside the beast - Ed Harrison at Credit Writedowns has highlighted a Seattle Times article that went beneath the ugliness at Washington Mutual, the massive mortgage bank that collapsed last year. Here's a sample.
By the summer of 2004, nearly 60 percent of the loans WaMu was making were the riskiest sort "” option ARMs, subprime mortgages and home-equity loans. Talk to people who worked with (CEO Kerry) Killinger, and the same phrases and adjectives keep coming up. Ambitious. Quick study. Smartest guy in the room. And always, always optimistic. "He's a cockeyed optimist to the nth degree," one former associate said. "He always thought he could get out of whatever trouble he was in." But Killinger also is repeatedly described as avoiding confrontation and uninterested in the nuts-and-bolts details of WaMu's business. And even more than most chief executives, insiders say, Killinger was focused on WaMu's stock price as the company's "” and his "” primary gauge of success. "Kerry's view of himself was tied to a constant increase in the stock price," Chapman said. "He was fixated on it."
10. Fix the currency? - Bruce Sheppard has sent an email to a bunch of big shots including John Key and Allan Bollard, saying it's now time to try to fix our currency to the US dollar or Australian dollar in the same way that China has. He cites the report below from the UN saying the massive global casino in foreign exchange helped create the global financial crisis.
Simple really: abandon the floating dollar, peg it to the USD or the AUD at a rate that is slightly undervalued and thus relieving Bollard of the worry of defending it. Do any of you seriously expect China to change anytime soon? An undervalued fixed currency is working wonders for them when combined with a low wage economy and a high savings rate. We are witnessing a change in the world that the systems we designed with such academic perfection are facilitating. Us mere mortals however must accept what is and plan to survive.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.