Top 10 at 10 to 1: Greeks may need IMF bailout by Easter; Axel Buffett; Trade war brewing; Dilbert

Here are my Top 10 links from around the Internet at 10 to 1. I welcome your additions and comments below or please send suggestions for Monday’s Top 10 at 10 to bernard.hickey@interest.co.nz We have no poltergeists at interest.co.nz 1. Easter meltdown? - Germany is now openly saying it wouldn't mind if Greece applied to the IMF for a bailout, while Greece is saying it may have to apply for an IMF bailout as early as the Easter weekend. This could easily get very ugly very quickly. Hold onto your hats people. If this happens the Greeks will rightly ask if there's much point in being in the Euro at all, as will the Germans. Who wants to bet on a broken euro by Christmas? Maybe not me yet, but we have a hairy few months ahead with the UK election in May too. Here's the latest from the Wall St Journal.

Germany signaled it was open to supporting a joint bailout of Greece by European governments and the International Monetary Fund should the country need assistance, as Greece called on Europe for concrete help by next week. Chancellor Angela Merkel is "open to a financial participation by the IMF" in any aid package for Greece, a senior German official said, while stressing that no final decision had been made. The official added that Greece hasn't asked for a rescue and that Germany still wants Greece to solve its debt crisis alone through budget cuts. The German finance ministry had raised objections to an IMF program for Greece as recently as last week. Germany's shifting stance sets the stage for a potential confrontation with other European countries at a summit meeting in Brussels next week. The comments come amid an increasingly contentious debate between Germany and its EU partners over how and when any rescue of Greece should occur. France and other members of the 16-nation euro zone have vociferously opposed a financial role for the IMF in Greece. Greek Prime Minister George Papandreou said in Brussels on Thursday that he wants guarantees of financial support to come out of the summit, which is set for next Thursday and Friday. But European officials say privately that a decision on Greek aid may not be reached at next week's EU summit, despite Greek pressure.

2. Trouble brewing - Ed Harrison at Credit Writedowns has a nice summary of the growing tensions in political systems globally after two years of the worst global recession since the end of WWII.

There is more than just a whiff of economic nationalism in the air. Is this not exactly the same spectacle we witnessed in the 1930s? I see all of this as an inevitable consequence of the first truly synchronized global recession since the 1930s. After two plus years of economic stagnation, we’ve reached a point – everywhere it seems – where policy making is increasingly dominated by domestic political concerns. People are fed up with the status quo. They want no more economic pain. And they’re willing to throw the bums out unless this ends. Politicians respond to this sort of thing. And it’s my feeling that this has led people to crawl back into their ideological positions and hold firm. This is what I see happening in Europe. This is what I see happening in the healthcare debate, on stimulus and on deficits in the U.S. and it is what I see happening in the U.S. – China debate as well.

3. What a lot of paper - This interactive chart from the Wall St Journal showing how much securitised mortgage debt is on the US Federal Reserve's balance sheet is a cracker. Now the Fed has stopped buying this junk many are worried US long term interest rates will rise. Some think domestic savers will step up to the plate to stop that happening. So far long term US rates haven't picked up yet. We'll see. 4. Nein...but softly - European nations are starting to get grumpy with Germany's 'cult of austerity', the New York Times reports in this overview piece.

To protect the value of the euro, satisfy investors and appease Europe’s economic taskmaster, Germany, the region’s most heavily indebted nations consider that they have no choice but to slim down. Reviving economic growth and reducing unemployment must wait until countries put their fiscal houses in better order, the thinking goes. But some argue that Berlin is pressing too hard, and that the region’s new fixation on debt has created a “cult of austerity” that could make it harder to recover from the slump. Drastic budget cuts, if carried out as promised, could set off deflation, send already high unemployment rates surging, bring governments down and even create popular opposition to the euro, critics say. The pressure “will impose terrible strains on the government and society” for years to come, said Jean-Paul Fitoussi, professor of economics at the Institut d’Études Politiques in Paris. “It’s self-defeating, because if you have austerity and deflation in Greece, Portugal and Spain, then the European economy will not recover; firms will fail and jeopardize the banks.”

This is the key quote from German Chancellor Angela Merkel. This lady is not for turning. Good on her.

“The euro is facing the strongest challenge it has ever had to cope with,” ChancellorAngela Merkel told the lower house of the German Parliament on Wednesday. “A quick act of solidarity is definitely not the right answer. Rather, the right answer is to seize the problem at the roots; therefore there is no alternative to the Greek savings program.”

5. Axel Buffett - Warren Buffett is a funny old guy. Now he has appeared sporting an Axel Rose style haircut and bandana in an in-house rock video by staff at Geico, the insurer that is owned by Buffett's company Berkshire Hathaway. This act of corporate leadership is right up there with Rob Fyfe appearing naked in the Air NZ videos. The best closeups are about 1 min 45 secs in. HT Dealbook 6. Trade war anyone? - Credit Suisse reckons China is closer to a trade war with the United States than at any time in the last 5 years, Bloomberg reports.

Five U.S. senators including Charles Schumer of New York and Lindsey Graham of South Carolina introduced legislation this week to make it easier for the U.S. to declare currency misalignments and take corrective action. Chinese Premier Wen Jiabao rebuffed calls on March 16 for an end to the currency link, saying he doesn’t think the currency is “undervalued.” “In the near future, given the political tension between China and the U.S., it is unlikely that we will see much of an appreciation,” Tao told Bloomberg Television. “If the U.S. launches trade sanctions, China is likely to retaliate.” The U.S. economy is in a “much worse” situation compared with five years ago and the Obama administration doesn’t have officials “who know China well” to influence decision-making, said Tao, a Hong Kong-based chief regional economist.

7. Just add capital - Former Federal Reserve Chairman Alan Greenspan reckons the best way to strengthen banking systems is for them to add 40% more capital, Bloomberg reports. Think about what that means. Banks will have to curtail lending growth and bank future profits rather than pay them out as dividends. They will struggle to raise fresh equity capital. This is all part of the de-leveraging story. 40% more capital is an awful lot of de-leveraging. American banks are already slashing lending to do this, despite all the money printed for them by the US Federal Reserve. This will happen globally too as regulators force banks to put aside more capital and leverage less.

“The most pressing reform that needs fixing in the aftermath of the crisis, in my judgment, is the level of regulatory risk-adjusted capital,” Greenspan said in a paper prepared for a Brookings Institution conference today. “Adequate capital eliminates the need for an unachievable specificity in regulatory fine-tuning.” Banks may need to hold capital equal to 14 percent of their assets, compared with about 10 percent in mid-2007 before the financial crisis, Greenspan said. Lawmakers are considering an overhaul of banking regulation, including the biggest revamp of the central bank’s powers since its creation in 1913.

8. Don't blame me - Meanwhile Alan Greenspan, who can shoulder a large chunk of blame for the debt-fueled global housing bubble because he ran interest rates too low for too long, reckons the fall of the Berlin Wall is to blame. Also in the Brookings paper, he says the entry of hundreds of millions of workers to the global marketplace pushed up savings in developing countries and this fueled easy lending... Sheesh. What a cop out. The Globe and Mail has the story.

The former Fed chief defended the central bank's actions, saying that the seeds of the housing boom were sown by geopolitical events that were out of the Fed's control, an argument he has presented a number of times in the past. The fall of the Soviet Union led to hundreds of millions of workers entering the global marketplace, he said in a paper to be presented to a Brookings Institution conference. This new market-based workforce, Mr. Greenspan said, helped push up growth in the developing world. This in turn fueled a global savings glut that drove down long-term interest rates, leading to an “unsustainable boom” in house prices, he said. That housing boom, Mr. Greenspan stressed, was not a phenomenon in the United States, alone with 20 other countries also witnessing huge run-ups in home values. While he acknowledged that markets and regulators misread the risk embedded in the complex financial products that triggered the crisis, he said no regulator can be expected to consistently forecast if a specific product will turn toxic.

9. Coal to fuel - Scientists in Texas say they've found a way to turn coal into gasoline for less than US$30 a barrel, The Globe and Mail reports. This could prove a godsend for all our coal reserves in Southland. Does this mean peak oil is not here yet...given the enormous supplies of coal out there. Australia, in particular, must be licking its lips.

Researchers at the University of Texas at Arlington (UTA) announced last month that they have developed a clean way to turn the cheapest kind of coal - lignite, common in Texas - into synthetic crude. "We go from that [lignite coal] to this really nice liquid," Brian Dennis, a member of the research team, said in describing the synthetic crude that can be refined into gasoline. Assuming that these Texas folk are correct, this advance in technology could represent a historic moment in energy production - for Canada as well as for the United States. Canada has huge reserves of lignite coal in Manitoba, Alberta and Saskatchewan (which already gets 70 per cent of its electricity from this common coal) - not to mention in Nova Scotia. The Texas researchers, who worked on the project for about 18 months, expect the cost to drop further. "We're improving the cost every day. We started off some time ago at an uneconomical $17,000 a barrel. Today, we're at ... $28.84 a barrel," Rick Billo, UTA's dean of engineering, told an Austin television reporter.

10. Totally irrelevant video - Germany v Greece. Topical. Karl Marx is coming off the bench. Socrates has scored! The Greeks are going mad... I'm a Monty Python fan... HT Ed Harrison