Top 10 at 10: The Vector cheque; debt alcoholism; CGT tax chance lost?; intor dollar?

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 me suggestions for Tuesday's Top 10 at 10 to bernard.hickey@interest.co.nz My apologies for severe lateness today. I've been a bit swamped. We don't sugarcoat anything... 1. It must be election time -  The Auckland Electricity Consumer Trust (AECT) has announced cheques worth $320 will be sent to about 307,000 customers in the old Auckland Power Board region, Matthew Dearnaley points out in the NZHerald. Trust Chairman Warren Kyd was pleased to associate himself with the 'handout'. I noticed this morning plenty of billboards out from the encumbents on the Trust board asking for re-election. I've always wondered why the 'dividend' is not simply 'repaid' to power users during the year as they consume power through lower prices. This is how other cooperatives work. Why doesn't the AECT do this? Could it be the annual cheque helps remind people to vote the encumbents back in? Could it be that Vector's move to the NZX made a cooperative style 'as-you-go' rebate impossible?

2. Sore heads -  There's was a great picture in Saturday's Herald of New Zealand's tallest man, Ron Bax. He is 2.25m tall. I think I'm a bit tall at 1.95m, but I have it easy compared to Ron who says he whacks his head two or three times a week on doorways, James Ihaka reports. My brother, Rob Hickey, is over 2m and has the same problem. However, he used his height and talent to become a basketball star. Rob marked Yao Ming off the court in the Tall Blacks' famous victory over China in the world champs a few years ago. Height has its benefits. 3. A stuttering recovery - The NZHerald's editorial has it about right on the strength of the recovery globally one year on from the collapse of Lehman Bros. The pain has really just begun because governments around the world will have to spend the next decade digging themselves out of this debt with cost cutting and increased taxes. We should all be hunkering down.

Having spent so much to stimulate their economies, Governments are confronted by snowballing debt and interest. If the recovery, helped along also by lessons learned from the Great Depression, has been swift, the overhang will linger. Governments will have to grapple with the need to rein in public spending for a significant period, and investment expectations will remain subdued. If the world shows signs of mastering the immediate response to financial crises, the aftermath is proving far more problematic." It's well worth a read.

4, Capital Gains Tax - John Roughan's column on Phil Goff's offer for a bipartisan approach to a capital gains tax is excellent. Roughan rightly points out that politicians must deal with the elephant in the room for the good of the nation and he praises Goff's courage. Hear hear.

There might never be a better time to start properly taxing property. The market would get a lift in volume as sellers moved to beat the tax start and first-home seekers would no longer face bids from capital gainers. Goff has given the country a golden opportunity. We'll see whether Key has the stature to match.

5. Partisan pain - Political columnist John Armstrong is always essential reading in the Weekend Herald, if only because of the little bits of insight he sprinkles through his column. He looks at National's deal with Maori to water down the carbon emissions trading scheme. Armstrong points out the Maori Party was pressured by iwi business interests with holdings in forestry and fishing. He also points out National's cavalier approach to a deal with Labour and says National doesn't trust Phil Goff in the wake of the Richard Worth shenanigans. That's a pity. New Zealand will need some bipartisan approaches to some issues such as tax reform if any changes are to made sustainable. My own view is that a carbon tax would have been a much cleaner option with less opportunity for lobbyists (like Fed Farmers) to weave their wicked magic to obtain exemptions. 6. It's an implosion - I usually try not to give advertisers advice because it means I can tell them politely not to give me advice with a clear conscience. But I can't resist with the ad in the Weekend Herald from Bond and Bond. It shouts about a "3 day only price explosion: complete price annihilation now!" When I think of a price explosion I think of prices shooting higher. Bond and Bond should have used the word 'implosion'. Seriously, it's something we should all become used to. The world is entering a Japanese style era of deflation, not inflation. We should all demand lower prices on most things. There are a lot of ads in the Weekend Herald shouting about deflation, including The Warehouse's 'buy one get one free' offer and Briscoes' 25-60% off everything sale. Retailers have the right approach to a recession. They cut their prices to clear stock. If only people in other industries would do the same New Zealand might be a cheaper place to live. 7. Why should all of NZ pay?- Andrew Laxon has a detailed and useful piece in the NZHerald about the push by Auckland's councils to get the central government to help pay their $6 billion bill for the leaky building disaster. It seems the council is often the 'last man standing' in the litigation game where developers and builders liquidate and move on. National is resisting and so they should. Why should the rest of New Zealand pay for the errors of builders and inspectors in Auckland? Isn't this just a big bailout for the Auckland property market? This would be a transference of wealth from other New Zealanders to Auckland property owners. We certainly need a national debate on this, which we're not having. Many of the cases of leaky homes are tragic, but there are also many where buyers put their money down in the last 7 years and should have known some of the risks. Why should the rest of New Zealand pay to increase the value of their properties? The juiciest little bit in the article is this.

A briefing document given to some council chief executives reportedly accused "cartels" of lawyers, experts and builders of fleecing home owners, who were left with no money to repair their homes. One expert was said to have quoted a $350,000 repair bill for a $160,000 house, which did not have extensive problems.

Yet again the lawyers win. We seem to want to be nation of landlords, lawyers and accountants. 8. Farmers reject NZX - I always make a point of reading Brian Gaynor's column in the Weekend Business Herald I may not always agree with him, but his column is usually the most insightful and provocative thing in the paper. This week he quietly laments dairy farmers' decision to reject an NZX float and instead do any capital raising themselves. He rightly points out the risks of Fonterra's debts. But I think he's a bit pessimistic about how much farmers will contribute to Fonterra's capital raising. I think most farmers will buy the 20% extra shares they are being offered by borrowing more from their banks against the value of their land. It will mean a transfer of debt from Fonterra's balance sheet to farmers' balance sheets. Depending on how much of the capital is used for growth and how much is used for debt reduction, it will also see the New Zealand dairy industry, and therefore New Zealand Inc, become more indebted. That's disappointing because New Zealand needs more equity investment, not more debt. We just can't shake our addictions to debt and our loathing of the stock market. 9. Here is an excellent Steve Keen piece on why the US government's attempts to restart the US economy with more borrowing and spending won't work. He starts by looking at the apparent recovery in stock markets and economic output after massive government intervention. He points out that the multiplier effect of massive bank bailouts is negligible.

While economic outsiders like myself, Michael Hudson, Niall Ferguson and Nassim Taleb argue that the only way to restart the economic engine is to clear it of debt, the government response, has been to attempt to replace the now defunct private debt economic turbocharger with a public one. In the immediate term, the stupendous size of the stimulus has worked, so that debt in total is still boosting aggregate demand. But what will happen when the government stops turbocharging the economy, and waits anxiously for the private system to once again splutter into life? This "multiplier effect" will only work if American families and businesses are willing to take on yet more debt: "a dollar of capital in a bank can actually result in eight or ten dollars of loans". So the only way the roughly US$1 trillion of money that the Federal Reserve has injected into the banks will result in additional spending is if American families and businesses take out another US$8-10 trillion in loans. What are the odds that this will happen, when they already owe more than they have ever owed in the history of America?

If the money multiplier was going to "ride to the rescue", private debt would need to rise from its current level of US$41.5 trillion to about US$50 trillion, and this ratio would rise to about 375%"”more than twice the level that ushered in the Great Depression. This is a rescue? It's a "hair of the dog" cure: having booze for breakfast to overcome the feelings of a hangover from last night's binge. It is the road to debt alcoholism, not the road to teetotalism and recovery.

This chart is a cracker and the whole article is well worth reading. 10. The US dollar should be replaced, argues Nobel prize winning economist Robert Mundell in the BBC's Thinking Big programme.

"My ideal and equilibrium solution would be a world currency (but not a single world currency) in which each country would produce its own unit that exchanges at par with the world unit. We could call it the international dollar or, to avoid the parochial national connotation, the intor, a contraction of "international" and the French word for gold."