Top 10 at 10 past 10: 'Debt saturation'; A 'mancession'; Trade war chatter; Dilbert; Jon Stewart

Here are my Top 10 links from around the Internet at 10 past 10. I welcome your additions and comments below or please send suggestions for Tuesday’s Top 10 at 10 to bernard.hickey@interest.co.nz Thank goodness we don't have a photocopier at interest.co.nz 1. 'Debt saturation' - Nathan's Economic Edge is very excited about what he calls the Chart of the Century. It shows the marginal GDP created from each extra dollar of debt added to the US economy and how it has reached 'saturation point'.

In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP. This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.

2. Germans won't budge(t) - Chancellor Angela Merkel has again downplayed expectations that Europe could agree at a summit on Thursday on a bailout package for Greece, FT.com reported. She slung the cats into the pigeon nest late last week by seriously raising the prospect of Greece going cap in hand to the IMF rather than the rest of Europe.

In a Sunday morning interview on German radio that appears to put her at odds with José Manuel Barroso, president of the European Commission, she insisted that no money has been asked for by Greece, and no decision had been taken. She said the subject was not even on the agenda for the summit of European Union leaders that opens in Brussels on Thursday.

3. 'Euro fire brigade' - The IMF is throwing its weight around inside Europe. IMF head Dominique Strauss-Kahn has called for Europe to have its own 'fire brigade' to deal with failing multi-national banks.

European Union-wide authority to deal with failed banks is needed to strengthen the region’s post-crisis banking system, the head of the IMF, Dominique Strauss-Kahn said in a speech on March 19. Speaking to a European Commission conference in Brussels, Strauss-Kahn said existing schemes for dealing with failed cross-border banks have proved inadequate. As a result, national and cross-border bank failures have been difficult to handle effectively and have been costly for governments and taxpayers. “Europe needs a fire brigade,” said Strauss-Kahn, to extinguish banking problems when they erupt, and intervene when things get out of hand.

4. 'We can't help' - The drums are beating in the United States for trade sanctions against China and now not even the US corporate lobbyists think they can turn the tide. Things must be serious. Here's the FT.com on the growing trade war chatter.

The US business community can no longer resist political pressure for Washington to take a tougher stand against China on trade issues, according to a senior figure from the US Chamber of Commerce. Myron Brilliant, senior vice-president for international affairs, who has previously helped to protect Beijing from hawkish trade policies, told the Financial Times: “I don’t think the Chinese government can count on the American business community to be able to push back and block action [on Capitol Hill].”

5. Year of the spike - Nouriel Roubini says in this PBS video interview (that I can't embed) he reckons 2011 could be the year global bond vigilantes push up longer term interest rates.

I expect that long-term bond yields in the U.S. are going to remain low because growth is going to be weak. You'll have deflation. You'll have bouts of risk aversion. The Fed is committed to keep zero rates. The Fed might do more QE. The rest of the world is buying and accumulating reserves to the rate of $1 trillion annualized to prevent their currency from appreciating. That's going to U.S. Treasury, and for the first time in a decade, we have some domestic financing of the U.S. fiscal deficit because savings have gone up, so we don't depend on the kindness of strangers. Given all that, I don't expect bond yields to spike for the time being, but if after the election, we're a divided government, we have run-away fiscal deficit. It may have to monetize them, then at some point even in the U.S., the bond market vigilantes may wake up the way they did in Greece and UK, around Europe and then you could have a spike in rates. That's a 2011 story, not this year.

6. 'It's a mancession' - The global recession has hit men harder than women, the OECD points out on its blog. Try out the tool below to check out NZ and other countries. You can click around inside it. NZ is slightly 'mannish' but not as much as others.

Across the OECD area, the number of men in employment has fallen by 3% during the recession; among women, the decline is just a tenth of that, or 0.3%. That’s why some people are calling this a mancession. Why the difference? In large part it’s because men are more likely to work in sectors of the economy that are more prone to job losses during a typical slowdown – for example, construction and manufacturing of things like cars, TVs and kitchen appliances. During this recession, these sectors have been particularly hard hit: In particular, there’s been a sharp fall in construction in countries like Spain, Ireland, the United Kingdom and the United States. By contrast, job losses have been less severe in services, where women are more likely to work.

7. Stern treatment - Here's the Sydney Morning Herald on the treatment in prison of Rio Tinto executive Stern Hu . It's not pretty. China is often an ugly place to do business.

STERN HU and his three Chinese colleagues have spent most of the past nine months sitting upright or sleeping on a communal board, wearing orange DayGlo uniforms, in the Shanghai Detention Centre in Pudong. Each shares a cell with about a dozen others but otherwise they have been kept in near isolation. ''Our chief research analyst left because of that case,'' said a manager at one of the world's larger commodities trading firms in Beijing. ''And our junior researchers will no longer go out for karaoke nights with officials from the [National Development and Reform Commission] to find out what's going on. We just don't have the market information flow that we did before Stern Hu.''

8. 'Crippled growth' - Nouriel Roubini has a nice overview in Project Syndicate on the problems facing many developed economies. The only way out now is higher taxes, lower consumption and slower growth.

At the end of the day, resolving private-sector leverage problems by fully socializing private losses and re-leveraging the public sector is risky. At best, taxes will eventually be raised and spending cut, with a negative effect on growth; at worst, the outcome may be direct capital levies (default) or indirect ones (inflation). Unsustainable private-debt problems must be resolved by defaults, debt reductions, and conversion of debt into equity. If, instead, private debts are excessively socialized, the advanced economies will face a grim future: serious sustainability problems with their public, private, and foreign debt, together with crippled prospects for economic growth.

9. Policing failure - Brian Gaynor has a useful piece in the NZHerald detailing the history of Strategic Finance and how regulators failed investors. A former Equitcorp director sold Strategic some stuff at a high price at one stage...

Unfortunately most of these deficiencies have been evident for a long, long time - and have resulted in large investor losses in the past - but successive regulators and governments have done nothing to address these problems. The unwillingness of these organisations to set some basic principles regarding investment products, and then police these principles, is a national disgrace.

10. Totally irrelevant video - Jon Stewart impersonates Glenn Beck. Stand back. It's loud.

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