Top 10 links: Obama's reckless plan; UK house prices down 21%; US farm subsidies cut; Amex keen to shed US customers; US Congress corrupt; Ukraine bankrupt

Here's my top 10 links from around the Internet for the last day or so. I welcome any gems you've seen. Please pop them into the comments below. Let's spend our way out of this debt problem Barack Obama unveiled a US$1.75 trillion budget deficit plan for 2009 overnight, which is 12.3% of GDP. To give you an idea of how big this is, New Zealand's budget deficit is forecast to rise to 3% of GDP, although it may well go higher. This is just plain wrong. Adding more debt to a problem created by too much debt simply can never work. All this means is that longer term interest rates will rise globally because of the extra bond supply coming on to the market. All the details are here in the WSJ story. US farm subsidies to be cut But there is one good thing in Obama's budget package. He is planning to slash payments to large agribusinesses as part of the attempt to reduce the budget deficit size over the long term. On the face of it this looks good for attempts to get the Doha WTO trade round going again. However, some experts think it's still tinkering and will do little to restart the talks, particularly with the anti free trade sentiment now coursing through the western world's political systems. This in Reuters. UK house prices down 21% Britain's Nationwide House Price Index shows house prices fell 1.8% in February from January and were down 17.6% from a year ago. British house prices are now down 21% on average from their October 2007 peak. New Zealand median house prices are down 7-8% from their November 2007 peak, according to the REINZ and QV.  A separate report today by uk property Web site findaproperty.com showed the number of rental properties listed rose 43 percent in the last six months, pushing average rents down an annual 4.8 percent. British mortgage approvals fell 43% in January from a year ago.  There are differences between New Zealand and Britain. Britain's banking system has essentially failed and is under severe stress. New Zealand's banking system is stable and our Australian owned banks are strong and are not having to deal with the threat of collapse most weeks. But othewise there are similarities. Our housing market was just as over valued as the UK market, although our new housing supplies were not as heavy.

Right said Fred, I'm off with 16 million pounds It turns out Sir Fred "the shred" Goodwin, the guy who blew up Royal Bank of Scotland and may cost British taxpayers hundreds of billions of pounds, is now receiving 650,000 pounds a year in pensions after being pushed out late last year. This pension, which was agreed as a golden parachute by the UK government, has now been exposed and is creating great public anger. Meanwhile, the monster he built has just posted the biggest loss in British corporate history of 40.7 billion pounds (NZ$120 billion or 67% of our GDP) and asked for yet another 25.5 billion pounds in bailout money. This stuff will start causing riots soon.  Here's the FT.com on the loss, the bailout and the pension deal. We don't want you anymore (we'll let you out of this Faustian bargain) The US division of Amercian Express is now paying some customers who have big debts and don't use the cards much to close their accounts. Amex is offering a US$300 gift card to some customers deemed to be too risky and not profitable enough.  Here's what Amex spokeswoman Molly Faust (I kid you not) said in this WSJ story.

"The intention is to help cardholders lower their debt and encourage responsible management of their credit. It's being promoted as a means for customers to simplify their finances."

Amex also needs to simplify its finances. Amex had to ask for US$3.4 mbillion from the US Government's TARP programme last year after it couldn't roll over its wholesale funding. This is de-leveraging in action. Why Congress is corrupt I watch the US Congress a bit because what comes out of there often affects us in one way or another. The messing around with the TARP (which should have been rejected straight away) was one example. The useless Obama stimulus package (too many tax cuts and pork; not enough infrastructure) was another example. Here's a great story that helps explain the lobbyist-driven culture in Washington. There are 4 climate change lobbyists for each member of Congress, says this blog "The Climate Change Lobby", which monitors lobbying activity. These 2,340 lobbyists spent US$90 million lobbying on Climate Change.  This is another good reason why New Zealand should avoid a Free Trade Agreement with the United States like the plague. As soon as the agriculture, movie, music and pharmaceutical lobbies get a sniff that they could gang up on New Zealand they would be all over us like a rash. We would have to kill or restrict Pharmac and Fonterra may as well dump the milk powder in the Pacific for all the access it's going to get. There's also a strong suggestion that Hollywood's lobbyists pressured the US government to press for the Section 92a abomination that almost made it into law this week. It's incredible that our parliament almost passed a law that would have forced ISPs and many others to cut off their customers without a right of appeal if a rights holder even suggested someone was abusing copyright.  For those wanting to dig further, the Centre for Responsive Politics watches Washington lobbyists closely. Lobbyists spent (and you won't believe this) US$3.2 billion lobbying Congress in 2008, up (!) 13.7% from last year. Here's the detail on the dairy lobby. Latvia and Ukraine's credit ratings cut to junk and really junky The news out of Eastern Europe is getting worse. Standard and Poor's cut Ukraine's sovereign credit rating to CCC+, which is seven levels below investment grade, and cut Latvia to a junk rating of BB+ from an investment grade BBB-. This is a big worry for Europe's banks, which have lent heavily to Eastern Europe. Here's the Bloomberg story. Fannie Mae asks for yet more money America's biggest mortgage provider, the now nationalised Fannie Mae, is asking for another US$15.2 billion to shore up its balance sheet after another monster loss. When will it end? When foreign lenders stop lending money to the US government. That's unlikely as long as the US dollar remains the world's reserve currency. It's a free 'get out of jail' card for America. Obama can always say: "If in doubt simply print money and borrow from the rest of the world.' This is the 'deficits don't matter' thinking that got America into such trouble. Here's the Gloomberg story. There just isn't enough money in the world Alan Kohler at BusinessSpectator makes the obvious but still interesting point that governments around the world should be careful about issuing mountains of bonds because the US Treasury bond mountain will dominate everything, driving up long term interest rates. Here's a taste.

Sovereign debt spreads are now blowing out. US credit default swap spreads went above the psychological barrier of 100 basis points for the first time ever a couple of days ago. Around the world there has been increase in the amount of sovereign CDS traded, as well as an increase in the spreads, which effectively equates to an increase in the cost of insuring government debt.

Mr Smith goes to Washington... The ultimate CEO of ANZ National, Mike Smith, has put his head above the parapet for international bankers by saying the big US and UK banks need to be nationalised urgently. Speaking in an interview with BusinessSpectator's Robert Gottliebsen, Smith said:

"The problem banks are like a "cancer" on the industry and need surgery. Until you do it, the whole system will be undermined."