Here are my Top 10 links from around the Internet at 10 past 11 am. I welcome your additions and comments below or please send suggestion for Tuesday’s Top 10 at 10 to bernard.hickey@interest.co.nz 
1. 'Nuclear option?' - Europe is set to create a 645 billion euro 'stabilisation' fund to fight off the wolf packs of bond vigilantes circling the euro, Bloomberg reports this morning. We'll see whether it's enough to save the currency and Europe's financial system, or whether it's just another roadbump along the way to a full meltdown of the Euro banks.
“In the night, when the markets are opening, we cannot afford a disappointment,” said Finance Minister Anders Borg of Sweden, one of 11 EU nations not in the euro. “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”
This is interesting, too, in the same story. I wonder if Standard and Poor's and Moody's have a future in the new world. Our Reserve Bank thinks they do...
Plans for a European credit-rating authority are already under consideration at the European Commission, the bloc’s Brussels-based executive agency. It also is investigating whether ratings companies such as Standard & Poor’s wield too much power over investors’ perceptions of governments.
2. 'Suicidal policy' - Ambrose Evans Pritchard at The Telegraph has a (euro) sceptical look at the 'nuclear option' being considered. He reckons the Germans need to print (a lot more) and hope, and the Southern Europeans need to keep spending. He is worried about a 1930s style slump in Europe.
It is not a cure. The rot set it when the South joined EMU before it was ready to cope with ultra-low interest rates or match German wage-bargaining. The ECB made matters worse by gunning M3 at an 11pc rate during the bubble. Club Med lurched from credit boom to bust. It is now trapped in debt deflation at an over-valued exchange rate, like Argentina with its dollar peg in 2001 until air force helicopters rescued President De La Rua from the roof of the Rosada. The answer to this -- if the objective is to save EMU -- is for Germany to boost its growth and tolerate higher `relative' inflation. This would allow the South to close the gap without tipping into a 1930s Fisherite death spiral. Yet Europe will have none of it. The weekend deal demands yet more belt-tightening from the South. Portugal is to shelve its public works projects. Spain has pledged further cuts. As for Germany, it is preparing fiscal tightening to comply with the new balanced budget amendment in its Grundgesetz. While each component makes sense in its own narrow terms, the EU policy as a whole is madness for a currency union. Stephen Lewis from Monument Securities says Europe's leaders have forgotten the lesson of the "Gold Bloc" in the second phase of the Great Depression, when a reactionary and over-proud Continent ground itself into slump by clinging to deflationary totemism long after the circumstances had rendered this policy suicidal. We all know how it ended.
3. Rejected - Angela Merkel's centre-right coalition was defeated in key state elections in Germany over the weekend, Bloomberg reported. Germans are voting against Southern European bailouts. They clearly want out of this mess. Eventually the political will determine the financial, assuming, of course, democracy continues...
The results may give the Social Democrats and Greens a slim majority, ending the CDU-led coalition that has governed North Rhine-Westphalia, or NRW, since 2005. That would cost Merkel her majority in the upper house of parliament in Berlin, where Germany’s 16 states are represented. “This is a double blow to confidence in Merkel’s party: a rout at regional level that’s sent a huge wave to the national coalition,” Hans-Juergen Hoffmann, managing director of Berlin- based polling company Psephos, said in an interview. “Her own bedrock CDU voters are worried. The crisis is spinning out of control and confidence in her ability to tame it is evaporating.”
4. 'The Grasshopper Generation' - Thomas Freidman at the New York Times has written a perceptive piece about how the European and British debt crises are a precursor to a looming 'clash of the generations'. He cites a description of the 'Baby boomers' as the 'Grasshopper generation' that ate through all the abundance created by their parents.
We baby boomers in America and Western Europe were raised to believe there really was a Tooth Fairy, whose magic would allow conservatives to cut taxes without cutting services and liberals to expand services without raising taxes. The Tooth Fairy did it by printing money, by bogus accounting and by deluding us into thinking that by borrowing from China or Germany, or against our rising home values, or by creating exotic financial instruments to trade with each other, we were actually creating wealth. Now we and our kids together need to become “The Regeneration” — one that raises incomes anew but in a way that is financially and ecologically sustainable. It will take a big adjustment.
5. 'The markets are beating the nation states' - John Robb, a former USAF special ops pilot and author on 'open source warfare, has written a piece on his 'Global Guerillas' blog saying the Greek and European crises are another sign that the global markets are winning in their war against nation states. I'm not sure I agree, but it's a novel point of view. HT Siobhan Bulfin via Twitter.
When this war ends, and it won't be long, the global economic and financial system will be the victor. Once that occurs, the nation-states of the West will join those of the global south as hollow states: mere shells of states that serve only to enforce the interests of the global economic system. These new states, more market-states than nation-states, will offer citizens a mere vestige of the public goods they offered historically. Incomes will fall to developing world levels (made easy to due highly portable productivity), and wealth will stratify. Regulatory protections will be weak. Civil service pensions will be erased and corruption will reign. The once dominant militaries of the West will be reduced to a small fraction of their current size, and their focus will be on the maintenance of internal control rather than on external threats. The clear and unambiguous message to every citizen of the West will be: You are on your own. You are in direct competition with everyone else in the world, and your success or failure is something you alone control.
6. Euro credit markets seizing up - There are ominous signs in the inter-bank markets in Europe that banks there have stopped trusting each other, in the same way they did immediately after Lehman collapsed. HT Stephen Walker via email.
The cost of insuring against losses on European bank bonds soared to a record, surpassing levels triggered by the collapse of Lehman Brothers Holdings Inc., as the sovereign debt crisis deepened. The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers soared as much as 40 basis points to 223, according to JPMorgan Chase & Co. The index closed at 212 basis points March 9, 2009. Swaps on Greece, Portugal, Spain and Italy rose to or near all-time high levels. Credit risk rose for a sixth day on concern the Greek debt crisis is spiraling out of control and triggering concern banks may face losses on their sovereign bond holdings. The spread between the three-month dollar London interbank offered rate and the overnight indexed swap rate, a barometer of the reluctance of banks to lend that’s known as the Libor-OIS spread, is at 18 basis points, up from 6 basis points on March 15 and near the highest level in more than five months. It’s still far from the record 364 basis points in October 2008, almost a month after Lehman’s bankruptcy.
7. Paper turning yellow - New York's dominant Phone company Verizon has asked regulators to allow it to stop sending phone books to customers. Our Yellow Pages is up for sale at the moment. It is not a long term business...
The company estimates that it would save nearly 5,000 tons of paper by ending the automatic distribution of the books. Only about one of every nine households uses the hard-copy listings anymore, according to Verizon, which cited a 2008 Gallup survey. Most have switched to looking up numbers online or calling directory assistance. The phone book for many people, it seems, has gone from indispensable tool to unavoidable nuisance. “Phone books have been a very visceral issue,” said Scott Cassel, executive director of the Product Stewardship Institute, an environmental group in Boston. “They do tend to pile up, particularly in apartments. More and more, people are finding that they don’t need them, but they can’t find a way to make them stop.”
'8. Sick of the renovations' - Mark Hotchin seems mightily sick of New Zealand and the renovations on that bloody Paritai Drive mansion, which is the focus of so much attention. The Sunday Star Times reported he has beetled off to Hawaii with his family for a few months and is staying in an US$18,000 a month holiday house there. New Zealand winters can be tough, particularly in Auckland...
It seems, however, he has a few money issues. He can't afford to pay the contractors on the Paritai Drive project until he sells houses elsewhere. I remember talking to him in July 2008 and saying I thought the housing market was overvalued by 20-30% and that we were in for a rough time. He thought the downturn was an abberation and would be over shortly and prices would never fall that much. Valuations on his developments seem to have fallen at least that much...
9. The real problem - Underlying the entire European mess is the debt held by German and French banks. If the euro collapses and Southern Europe defaults, then a bunch of European banks will collapse. The Germans and French are stuck between a rock and a very hard place. Der Spiegel has a nice piece detailing the problem. HT Stephen Walker
European governments agree that saving Greece is imperative. They are worried about the euro, and the Germans are concerned about their banks, which, lured by the prospect of high returns, have become saturated with government bonds from Greece and other southern European countries. They are also terrified that after a Greek bankruptcy, other weak euro countries could be attacked by speculators and forced to their knees. There are, in fact, striking similarities to the Lehman bankruptcy. This isn't exactly surprising. The financial crisis isn't over by a long shot, but has only entered a new phase. Today, the world is no longer threatened by the debts of banks but by the debts of governments, including debts which were run up rescuing banks just a year ago.
10. Totally relevant audio - Listen to this recording of the S&P 500 futures trading pit in those few minutes on Friday morning (our time) HT Kevin via IM. It is an audio portrait of a very stressed man with a shredded pair of vocal cords. It's a cross between a horse race and 911 call. Pure audio panic.
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