Here are my Top 10 links from around the Internet at 10am. I welcome your additions and suggestions in the comments below or please send suggestions to bernard.hickey@interest.co.nz Apologies for lateness again. Back on track tomorrow. We do a lot of technical writing. 
1. 'A government cannot tax itself into prosperity' - Here's an interesting piece in the Wall St Journal's (still free) opinion section from economist Arthur Laffer (yes of the Laffer curve fame) arguing that the Smoot Hawley trade tariffs and higher taxes were actually the reason why the early 1930s recession turned into a decade-long depression. The implication of course is that the Fed's obsession with loose monetary policy may not work if taxes are hiked and Trade Wars develop. HT Nick White via email
While Fed policy was undoubtedly important, it was not the primary cause of the Great Depression or the economy's relapse in 1937. The Smoot-Hawley tariff of June 1930 was the catalyst that got the whole process going. It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products. Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley. There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy's relapse in 1937.
2. 'Bailout yourselves out' - The US Federal Deposit Insurance Corp (FDIC) has asked banks to replenish its depleted deposit insurance fund, rather than taxpayers. Maybe there is a future yet. HT David via IM
"It's a nice irony," said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company. "Like so much of this crisis, this is an issue that involves the least worst options." Bankers and their lobbyists like the idea because it is more attractive than the alternatives: yet another across-the-board emergency assessment on them, or tapping an existing $100 billion credit line to the Treasury. The Federal Deposit Insurance Corporation, which oversees the fund, is said to be reluctant to use its authority to borrow from the Treasury.
3. Gold bugs beware. This piece in FTAlphaville highlighting a record level of net speculative long positions is ominous for the gold price, which could be in for a big fall. The chart is startling.
The weak physical demand for gold combined with the rapid rise in the speculative activity could give rise to a sharp correction, especially if the US dollar rallies.
4. Ken Fisher is nutsMish at Global Economic Analysis points to a great debate going on involving fund manager Ken Fisher, who reckons we need more debt. Read it and weep.
The U.S. has too little debt, not too much, Fisher says. The U.S.'s return on assets is high and interest rates are low, so our borrowing capacity is much higher than our current debt levels. Also, Fisher says, you have to look at the U.S. in the context of the world, because the U.S. is only 25% of world GDP. The world is way under-leveraged, so one country's particular debt-to-GDP ratio doesn't matter.
5. No money down - The US Department of Agriculture is making 100% loans to Americans to buy homes. Somehow it got a US$10.5 billion pot of money to lend out from the stimulus package, BusinessWeek reports. HT Felix Salmon at Reuters
The result: The number of home loans guaranteed by the USDA swelled to nearly 120,000 in the first nine months of 2009, up from roughly 35,000 in all of 2007. Given the rampant development during the boom, many communities where the USDA loans are available aren't technically "rural" anymore"”and include exurbs near big cities. Ashley-Gayle Boothe and her husband Scott have applied for a USDA-backed loan to buy their first home, a three-bedroom house 30 minutes north of Tampa, for $127,500. "We didn't want to put anything down," says Ashley-Gayle Boothe. "We figured we'd have to buy appliances."
6. In the medium term we're all retired - Here's another piece from former IMF Economist Simon Johnson at Baseline Scenario lamenting the G20's likely weasel words this weekend about reform.
It looks like the G20 on Friday will emphasize its new "framework" for curing macroeconomic imbalances, rather than any substantive measures to regulate banks, derivatives, or any other primary cause of the 2008-2009 financial crisis. This is appealing to the G20 leaders because their call to "rebalance" global growth will involve no immediate action and no changes in policy "“ other than in the "medium run" (watch for this phrase in the communiqué).
7. What happens next? Zerohedge points out that the US Federal Reserve was responsible for half of all US Treasury bond purchases in the June quarter. What happens when they stop printing money, or heaven forbid, put up rates?
The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases. This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs: with Households lapping up risky assets it is unlikely they will look at Treasuries absent some dramatic downward move in equities, while Foreign purchasers, which many speculate are in a game of Mutual Assured Destruction regarding UST purchases, have in fact been aggressively lowering their purchases of Treasuries (from $159 billion in Q1 to $101 billion in Q2, an almost 40% decline in appetite!).
8. Who's next. Apparently Barack Obama is seriously considering bailing out the newspaper industry, which is grappling with both the recession and the move of ads and news online, according to the Hill.com. Grrrrrr. That's all I can say.
The president said he is "happy to look at" bills before Congress that would give struggling news organizations tax breaks if they were to restructure as nonprofit businesses. "I haven't seen detailed proposals yet, but I'll be happy to look at them," Obamatold the editors of the Pittsburgh Post-Gazette and Toledo Blade in an interview.
9. Here's a video of Steve Keen talking to Max Keiser. Great viewing. 10. Where's the pizza? - Here's a bit of irrelevant fun about Boris Yeltsin on holiday at Bill Clinton's White House. God help us all. They both had their fingers on the nuclear trigger. This is from interviews Clinton gave to an old mate at the time, USA Today reported.
He also relayed how Boris Yeltsin's late-night drinking during a visit to Washington in 1995 nearly created an international incident. The Russian president was staying at Blair House, the government guest quarters. Late at night, Clinton told Branch, Secret Service agents found Yeltsin clad only in his underwear, standing alone on Pennsylvania Avenue and trying to hail a cab. He wanted a pizza, he told them, his words slurring. The next night, Yeltsin eluded security forces again when he climbed down back stairs to the Blair House basement. A building guard took Yeltsin for a drunken intruder until Russian and U.S. agents arrived on the scene and rescued him.
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