Top 10 at 10: Tobin tax back on agenda; Chinese overcapacity; Bill's NZ$40 bln sales trip; Dilbert

Here are my Top 10 links from around the Internet at 10 am. I welcome your additions in the comments below or please send suggestions for Monday's Top 10 at 10 to bernard.hickey@interest.co.nz We love stories here at interest.co.nz 1. Bernard Condon at Forbes.com deflates the enthusiasm around apparently bullish new home sales figures in the United States. HT Reuel Newman via email.

For starters, new home sales appear to be up month-to-month. But not if you remove the distortions from adjustments to compensate for seasonal changes. And compared with a year earlier, both the adjusted and unadjusted figures showed new home sales actually fell more than 9%. What's more, new home sales for the year so far have also dropped, down a frightening 32% compared with the same period last year. The price of the average new home sold last month dropped, too--down 11%.

2. The head of Britain's Financial Services Authority (FSA) supports the idea of new global taxes on financial transactions known at the 'Tobin Tax', the FT reports. Adair Turner also wants to put a brake of the growth of financial institutions in London, which he says are too big and a danger to the UK economy.

Lord Turner's suggestion that a "Tobin tax" "“ named after the economist James Tobin "“ should be considered for financial transactions is also likely to reverberate around the world. The proposed tax, which has previously been championed by development economists and the French government as a means of funding the developing world, has been fiercely opposed by the finance industry. Lord Turner appears worried about a return to "business as usual" in the banking sector, suggesting that new taxes may be necessary to curb excessive profits and pay in the financial sector. "If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit," he says.

3. The news out of China is continuing to worry the 'green shoots' brigade. The central government there is now looking at putting curbs on industries with overcapacity, Marc Chandler at Seeking Alpha points out.

Official Chinese news is reporting that the State Council is studying curbs on industries that are plagued with over-capacity, including steel and cement. Separately, the Aluminum Corp of China (ACH), warned that Chinese smelters, traders and warehouses hold as much as 600k metric tons of inventories because of excess production. The Shanghai Futures Exchange warehouse holdings are about a third of that. And the problem is being aggravated by Chinese smelters coming back on line to take advantage of a 30% increase in prices.

Up until now the focus has been on the surge of bank loans in H1 and the government's efforts, largely through moral suasion, to bring the loan growth to more reasonable levels. While some of the loans apparently helped fuel the stock market rise and real estate speculation, some of the loans financed investment.

4. The Federal Deposit Insurance Corp (FDIC) has reported its reserves are now down to US$10.4 billion after blowing almost all its fund cleaning up 84 bank failures this year, NPR reported. FDIC chairman Sheila Bair says she has no plans to borrow more from the US Treasury, but can't rule it out. The other option is increasing insurance fees for banks.

The list of problem banks rose from 305 to 416 from the first quarter to the end of June "” the most in 15 years. The troubled banks had nearly $300 billion in assets. FDIC-insured banks and thrifts had aggregate net losses of $3.7 billion. The 8,195 federally insured banks and thrifts set aside $66.9 billion in the second quarter to cover potential loan losses, up from $60.9 billion a year earlier. Analysts have warned that failing financial institutions could leave the FDIC's insurance fund so depleted that it could fall into the red by the end of the year. That has happened only once before "” during the savings and loan crisis of the early 1990s, when the FDIC was forced to borrow $15 billion from the Treasury.

5. Bill English is about to go on a whirlwind tour of Tokyo, Boston and New York next week with officials from the NZ Debt Management Office. He has a big task on his hands: convincing overseas investors to lend us a lot of money at the same time as they're lending everyone else a lot of money.

"The aim of this trip is to assure international lenders that the Government has a realistic plan to control debt, lift growth and rebalance our economy towards greater investment and exports. Taken together these measures will put New Zealand on the road to recovery." Based on Treasury's Budget 2009 forecasts the Government will have to borrow about $40 billion over the next four years to fund budget deficits. "Governments all over the world are going to the market to borrow large sums to support their economies. To secure the funds we need to make sure we are out there telling our story."

6. What is wrong with the Americans and their bonuses? They just won't give them up even when their companies are bankrupt, this report from the Detroit News.com shows. When are executives going to get the message (Paul Reynolds should take heed here too): You can't go on like this.

A growing number of bankrupt auto suppliers are seeking court approval to pay tens of millions of dollars in bonuses to key executives, as they shed employees and cut costs. Some of the bonuses have come under sharp criticism from General Motors Co. and Ford Motor Co., as well as the trustees named by the Justice Department to monitor bankruptcy cases. "Considering the condition of the automotive industry and the adverse effect on auto suppliers, it is unclear why payments are even needed to retain employees who may have limited options to find employment elsewhere," said Diana G. Adams, the U.S. trustee in objecting to a plan by Lear Corp.

7. The US Federal Reserve is again threatening Armageddon if it is forced to disclose details about who it has loan trillions of dollars to, Yves Smith at Naked Capitalism points out.

In a show of how much our government thinks that serving the financial oligarchy, rather than the citizenry, is its prime duty, the Fed is fighting to stop the court-ordered disclosure of who borrowed money under the Fed's various lending facilities. The reason I lump the Fed in with "the government" is that the central bank has been serving as an off-balance sheet entity of the Treasury for quite some time. And not only are the Fed and Treasury acting in near lockstep, but there has been no meaningful change in the government stance towards the banksters. Yes, Team Obama makes more of a show of trying to rein them in, but push comes to shove, it's merely Paulson version 2.0: same content, better packaging. Paulson's success in muscling through the TARP shows that "when in doubt, claim the economy will fall apart.." That worked so well that now the Fed has the temerity to assert that revealing such delicate information as who is into the Fed most deeply might send the markets into a tailspin. The idea that the recovery is so fragile that a little disclosure would prove damaging is at odds with the official line that the economy is recovering and we no longer need to worry about banks. The Fed has asked the judge's order to be stayed until it can file an appeal.

8. This is a great paper from Hoisington Investment Management explaining why the massive monetary stimulus has not produced inflation or really got the US economy going. Essentially, all the money is being hoarded by the banks and they are reducing lending to deleverage their balance sheets. HT Mish at Global Economic Analysis. The chart below tells the story of how much money is parked.

For example, total commercial bank loans have declined over the past 1, 3, 6, and 9 month intervals. Also, recent readings on bank credit plus commercial paper have registered record rates of decline (Chart 1). The FDIC has closed a record 52 banks thus far this year, and numerous other banks are on life support. The "shadow banks" are in even worse shape. Thus far in this unusual business cycle, excessive debt and falling asset prices have conspired to render the best efforts of the Fed impotent. The 100% plus expansion in the Fed's balance sheet (monetary base) has done nothing to rekindle borrowing and lending or revive even the smallest spark of inflation. What is clear is that as long as private market factors in the monetary/credit creation process are shrinking, as they are now, the risk for the economy is deflation, not inflation.

9. Ambrose Evans Pritchard from The Telegraph is deeply sceptical about the 'green shortest's' thesis that we're headed for a V shaped recovery. HT John Henderson via email

There is something wrong with the entire recovery tale, which ignores the fact that excess plant is still at the highest level since the Great Depression (capacity use is 70pc in Europe, 68pc in the US, 65pc in Japan, and as low as 50pc in some countries, according to the World Bank's Justin Lin). Companies will have to cut jobs and investment. Soaring "confidence" indicators have decoupled from reality. The world economy is still prostrate. GDP has shrunk 4pc, 6pc, 8pc, even 12pc or more in a large group of countries. There it more or less sits, like a deflated soufflé. An end to technical recession in France, Germany, and Japan because Q2 ( and undoubtedly Q3 to come) ekes out a rise from a collapsed base does not mean anything "“ except that zero interest rates worldwide, and a massive fiscal stimulus that is pushing public debts towards 100pc across the OECD states (and cannot easily be repeated once the first sugar rush subsides), has mercifully prevented the Great Contraction from turning into an immediate catastrophe.

10.  Ambrose also has his nose close to the ground in Germany, where the Finance Minister Peer Steinbruck has given up trying to force the banks to lend more and is now looking at state governments lending directly. HT John Henderson via email

Axel Weber, the Bundesbank chief and until recently the arch-hawk, last week spoke of a second wave of the credit crisis as home-grown problems come to light, triggered by ratings downgrades that force banks to put aside more capital. "The first round of disruption in the bank balance sheets from structured credit products is behind us. Now we are threatened by stress from our domestic credit industry," he said. "They are in panic," said Hans Redeker, currency chief at BNP Paribas. "They know the money supply and credit figures coming out are going to be awful." He added that Germany's stimulus measures have put off deep problems until after the election in September. The car scrappage scheme has brought forward demand, implying a cliff-edge drop when the scheme expires. Kurzarbeit (short work) schemes that subsidise companies to keep idle workers on their books are slowly bleeding corporate balance sheets. "This has delayed the restructuring that needs to occur," he said. Mr Steinbrück said markets are awash with liquidity again, but little is going into the real economy. "The banks evidently prefer to put their money into securities rather then granting new loans because they can get a higher return. After two years of financial crisis the gambler mentality is gaining the upper hand again."