Top 10 at 10: RBA not timid on rate hikes; Path to hyper-inflation; Buell dumped; Krispy Kreme burger; Dilbert

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 suggestions for Monday's Top 10 at 10 to bernard.hickey@interest.co.nz Our website hardly ever explodes in our faces... 1. Not timid - Reserve Bank of Australia Glenn Stevens hit the right tone yesterday when he talked in Perth about how he had to be careful not to be too timid when putting interest rates back up, Bloomberg reported. I wish our Reserve Bank Governor was exhibiting a similarly non-timid streak. Stevens' talk was no doubt a factor in our own wholesale interest rates spiking up a full 25 basis points yesterday, helping trigger ASB's decision to hike mortgage rates today.

Australian central bank Governor Glenn Stevens's view that he can't be "too timid" in raising borrowing costs is stoking speculation the benchmark interest rate will be increased next month by the most in a decade.

Experience "counsels against" an approach where policy makers who cut rates rapidly in response to a threat become "too timid to lessen that stimulus in a timely way when the threat has passed," Stevens said in Perth yesterday.

The comments pushed Australia's currency to a 14-month high and prompted investors to triple bets policy makers will increase the overnight cash rate target on Nov. 3 by half a percentage point to 3.75 percent. Stevens became the first Group of 20 central banker to increase borrowing costs when he unexpectedly boosted the rate last week by a quarter point.

"Stevens has put 50 basis-point moves on the table," said Matthew Johnson, an interest-rate strategist at UBS AG in Sydney. "The safest time to raise rates quickly is when you know they are at the wrong level, and this is the first time a recession has ended with so little spare capacity.

2. Huge property bubble - Here is an excellent analysis of the Chinese property market by Stratfor's John Maudlin on Creditwritedowns. It is detailed and packed with juicy charts (my favourite!).  I was surprised at how much of the Chinese economy was linked to real estate -- even more than the United States. Here's the gist of it.

The real estate market in China, particularly the residential side, is a burgeoning bubble that is growing bigger and more breakable by the day. Land and housing prices were already rising steadily when Beijing's stimulus package hit the sector in early 2009. Now prices are surging, with developers, bureaucrats and investors cashing in while urban Chinese "“ once encouraged to invest in home ownership by the central government "“ become less and less able to buy.

Since 1998, real estate investment in China has accounted for more than 10 percent of the country's gross domestic product (GDP), compared to only 3 percent to 5 percent in the United States. Such investment is also closely associated with many other industries, such as construction and finance, and it provides an abundance of jobs. Therefore, it is seen as a critical pillar of China's economy and enjoys favorable policies from the government and state-owned banks (more than 70 percent of real estate investment in China comes from bank loans). At the same time, real estate developers, local government officials and investors have escalated housing prices across the country by acquiring massive land holdings, limiting the supply and inflating prices, creating a real estate bubble that is not sustainable in the long run.

3. 'Fool's Paradise' - Former British Financial Services Authority chief Howard Davies, who has been out to New Zealand a few times, has warned 'the British people are living in a fool's paradise and have yet to understand the gravity of the economic crisis', the Telegraph reported. Sound familiar?

"The next six months are going to be extremely delicate in the UK", he told a gathering of HSBC clients in London. "It is very clear that something dramatic has to happen to control spending: but is the economy robust enough to survive fiscal tightening?" The Government is already running out of weapons to fight the crisis. While the fall in the pound has helped boost exports and proved benign so far, Sir Howard said that past experience handling sterling crises had taught him that the matters can turn ugly fast once confidence is lost. "The pound never stops where you want it to," he said. What is disturbing is that the British people seem unwilling to face minimal belt-tightening. Even professors in higher education are balloting to strike, demanding a continuation of boom-time pay raises. "You have the best minds in the country planning to go on strike for 8pc. People are miles away from understanding what is needed."

4. Toys out of the cot - Harley Davidson's profit has imploded and it has abandoned production of its Buell sports motorbike division, MarketWatch reported. HT Troy Barsten via email. It seems the US consumption boom is well and truly over.

Continuing hard times at Harley-Davidson came to something of a head Thursday with the announcement that the company was killing its Buell line of sport bikes almost immediately and actively looking for a buyer for its MV Agusta and Cagiva machines, the New York Times reported. Harley, which is based in Milwaukee, also disclosed continuing losses at its finance unit and a decline in sales of its heavyweight Harley-Davidson motorcycles. Overall, Harley's net income for the third quarter plunged by 84 percent from last year, which was also a down year for the company.

5. Rents falling - US inflation data out overnight shows deflation may not be the huge problem some feared, but it also showed rents are falling for the first time in 17 years, Mish points out at his GlobalEconomicAnalysis blog. He reckons the CPI data understates the extent of the deflation evident in the US economy. He cites a landlord correspondent below.

Hi Mish, I'm a landlord here in NYC (as well as an avid reader of your blog) and I actually feel the 7-10% drop mentioned in the article understates the case somewhat. Based on what I'm experiencing, I'd say that rents are down 10 to perhaps as high as 20% from their peaks.

6. Tipping point? - This piece in Bearish News cites some research by economist Peter Bernholz on the issue of national hyperinflations and found that the tipping point is when any government's deficit exceeds 40% of spending. HT Troy Barsten via email

There have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland) has spent his career examining the intertwined worlds of politics and economics with special attention given to money. In his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, Bernholz analyzes the 12 largest episodes of hyperinflations "“ all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government's deficit exceed 40% of its expenditures

Guess what? The U.S. will hit the 40% mark in 2009

7. Hyperinflation - This is a useful step by step guide in Marketoracle about how hyperinflation develops.

Is this spiral increasingly likely? Below are four important indicators:

• Commodity price inflation;
• Large debts, particularly government debt;
• Long-term low returns for savers;
• A source of new money "“ usually the printing press.

Unusually, they are all now pointing in the hyperinflationary direction.

8. Middle class woes - Larry Summers, the most senior economic advisor to Barack Obama, has said the unsayable: America's middle class has been done over time and again by America's financial elites, the WSJ's realtime economics blog points out.

"Despite the extraordinary depth of this most recent crisis, the pattern it followed "” a pattern in which instability emanating from the financial sector ultimately resulted in hundreds of thousands of middle class families who had nothing to do with the financial sector losing their jobs or much of the their savings "” is disturbingly familiar," he said at the White House this week. He then ticked off this list:

• The Latin American debt crisis of the early 1980s
• The stock market crash of 1987
• The savings and loan debacle of the late 1980s
• The Mexican financial crisis of 1994
• The Asian financial crisis of 1997
• The bursting of the dot-com bubble
• The collapse of the hedge fund LTCM in 2000
• The fraud and bankruptcy at Enron
• And now the financial crisis that began in 2007

"All too often," he said, "a financial system that is intended to manage, distribute, and control risk has, in fact, acted as a source of risk. Risk that has resulted in severe consequences for millions of taxpayers, consumers, and investors through little fault of their own."

9. Drip Drip Drip - The news about various major economies working on various measures to reduce their reliance on the US dollar as their main trading currency continues apace. Dow Jones reports that China and Russia are working on ways to eventually settle their trade with the Chinese yuan and Russian ruble.

China Vice Premier Zhang Dejiang said both sides should expand local currency settlement in their border areas, and that China and Russia plan to set up a bilateral currency deal. As part of such moves, banks in China will be encouraged to set up outlets in Russia, and Russian banks will be encouraged to do the same in China, Zhang said. At the same time, Russian Deputy Prime Minister Aleksandr Zhukov said Russia and China are working on using their own currencies to settle trade instead of using the dollar and euro, but that such a move would take a long time. Some trade on the Sino-Russian border is already settled using the yuan. China earlier said it plans to embark on a yuan-settlement trial for trade with Russia and Southeast Asia, but didn't provide a time frame. It has already started a similar trial for trade with Hong Kong.

10. Friday Funny - I will never eat another Krispy Kreme donut ever. Jon Stewart at The Daily Show reports...