Top 10 at 10: Krugman sees 3rd Great Depression; S&P downgrades Moody's; Bjork's mate the Mayor; Dilbert

Here are my Top 10 links from around the Internet at 10 past 12pm. I welcome your additions and comments below or please send suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz

1. 'Third Great Depression' - Paul Krugman writes in a New York Times Op-Ed there is now a risk of a third Great Depression because governments on both sides of the Atlantic have chosen to tighten their belts rather than keep spending. He takes a distinctly Keynesian approach to the world.

He refers to the 'Long Depression' that followed a financial panic in 1873 and the one we remember from the 1930s.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

2. Worrying China news - This is a stunner. A New York based research group that produces a closely watched leading indicator of Chinese economic growth has corrected its April reading to a 0.3% rise from a 1.7% rise, Bloomberg reported. This drove down Asian and European stocks sharply and pushed the New Zealand dollar lower too.

The Conference Board said in an e-mailed statement today that the previous release contained a “calculation error” for total floor space on which construction began. Stocks tumbled after the statement, which added to evidence that China’s acceleration in growth has passed its peak after an 11.9 percent jump in gross domestic product in the first quarter from a year before.

3. There's a golden angle - The story of the FBI's arrest of 10 alleged Russian spies embedded in US suburbia is a cracker, including allegations the spies gathered information on the gold market, FTAlphaville reports.

The stuff of cheap thrillers, this one. FT Alphaville reports that a Russian-Irish spy ring supposedly eyed the `global gold market’ in, err, New Jersey. The US complaint – part of a fast-developing spy story, allegedly involving various Russians, some of whom are said to have been operating under Irish names, includes accusations that certain ‘New Jersey conspirators’ used New York contacts to convey information on the market for the yellow metal.

They also appear to have targeted an unnamed NYC financier.

4. Default in an orderly fashion - Nouriel Roubini writes at FT.com that it's time for Greece to default in an orderly manner. I wonder what an orderly default looks like. Do people queue up quietly? Do they agree to wait on the line for the next available operator? Are they happy to hear the cheque is in the mail? Nouriel thinks it's possible.

I think a few people should hang onto their hats for the next few months.

When official money is used to keep a country afloat, those lucky investors whose debt claims are about to come to maturity often exit scot-free as IMF/EU support allows them to be paid in full. But when the eventual default comes, losses to the remaining creditors are more severe, because public creditors get the first slice of what remains. In short, orderly restructurings – as happened in Pakistan and Ukraine in 1999 and Uruguay in 2002 – are better for most private creditors, the debtor nation and multilateral institutions than an Argentine-style botched bail-out.

Pakistan, Ukraine and Uruguay all restructured their debt by swapping old obligations to creditors with new deals that extended for many years the time over which the countries had to pay back. These agreements also capped the interest rates on the new debt to sustainable and below-market levels. Importantly, the total face value of the debt was not reduced, as normally happens in abrupt defaults.

5. Things must be desperate - Americans are now so desperate for money they crash their cars deliberately to make fraudulent medical claims, Bloomberg reports.

Florida had the highest rates for bodily-injury and personal-injury-protection fraud in the review of 12 states which allow people to be reimbursed for accidents without proof of fault, the bureau said. The number of questionable claims for all insurance fraud jumped 15 percent in the state to 7,447 in 2009, compared with the year earlier, the group said.

The economic slump in the state may contribute to fraud, according to the group. Florida’s unemployment rate of 11.7 percent in May compares with a national rate of 9.7 percent, and is near the highest in the state in three decades. “Florida is way out in front of the rest of the country in the number of questionable claims submitted,” said Ron Poindexter, director of operations for the NICB in the southeast U.S. “There is a link between the downturn in the economy and the increase in all types of insurance fraud.”

6. The Irish problem - NYTimes.com has an evocative piece about the recession in Ireland that is now two years long and counting.

Signs of the decline encrust Dublin’s streets. Boisterous crowds still mash onto the cobbles of Temple Bar. Yet farther out, “To Let” posters obscure the hollowed shells of once-vibrant cafes and clothing shops. Fifteen minutes north of the city center, hulks of empty buildings form stark symbols of why Ireland must now hunker down.

At Elm Park, a soaring industrial and residential complex, 700 employees of the German insurer Allianz are the lone occupants of a space designed for thousands. In the impoverished Ballymun neighborhood, developers began razing slums to make way for new low-income housing. Halfway through the project, the financing dried up, leaving some residents to languish in graffiti-covered concrete skeletons. “Welcome to Hell,” read one of the tamest messages.

Now the government is debating whether to demolish developments it inherited from the banks it nationalized, and restore them to green pasture.

7. Bjork! - I've mentioned this guy before, but the NYTimes has a nice profile of the new mayor of Reykjavik, who is an anarchist singer that is good friends with Bjork. Or at least his wife is.

Well worth a read to see what happens when the populace get very, very grumpy about the state of the world.

They reject everyone and anyone associated with the establishment.

In his acceptance speech he tried to calm the fears of the other 65.3 percent. “No one has to be afraid of the Best Party,” he said, “because it is the best party. If it wasn’t, it would be called the Worst Party or the Bad Party. We would never work with a party like that.”

With his party having won 6 of the City Council’s 15 seats, Mr. Gnarr needed a coalition partner, but ruled out any party whose members had not seen all five seasons of “The Wire.”

A sandy-haired 43-year-old, Mr. Gnarr is best known here for playing a television and film character named Georg Bjarnfredarson, a nasty, bald, middle-aged, Swedish-educated Marxist whose childhood was ruined by a militant feminist mother.

8. You wouldn't read about it - Except you can. Standard and Poor's has put Moody's on review for downgrade, Zerohedge takes great glee in reporting. HT Troy via email.

We believe there may be added risk to U.S.-based credit rating agency Moody's business profile following recent U.S. legislation that may lower margins and increase litigation related costs for credit rating agencies. We are placing our 'A-1' short-term rating for Moody's on CreditWatch with negative implications.

9. Bailout number two - The IMF is preparing two new types of credit line just in case the global financial markets go pear shaped again, WSJ reports. It may well be needed soonish.

The International Monetary Fund is developing two new types of credit lines, one a "precautionary" measure with fewer conditions than existing funding and another that would be applied regionally, IMF Executive Director Dominique Strauss-Kahn said Tuesday. Strauss-Kahn said a regional approach would help avert the stigma of an IMF loan and the subsequent market reactions that can raise borrowing costs for countries.

The IMF executive director said he hopes the precautionary line, designed as a sister to the flexible credit line and regional credit and the regional funding, could be completely developed by the Group of 20 summit in the autumn. Strauss-Kahn said the precautionary mechanism would target countries experiencing external shocks and market jitters that do not qualify for the flexible credit line but that still have good fiscal policies in place.

"There are a rather large set of countries likely to use it as a precautionary measure," the IMF chief said, speaking at an event at the Peterson Institute for International Economics.

10. Totally irrelevant video - This is stunning. It's a video of automatic origami. I kid you not. You have to click through to see it. HT David via email.

Researchers have created flat sheets of composite material that can fold themselves into toy boats, tents, and even paper airplanes. Based on the ancient art of origami, the sheets are edged by foil actuators--thin, solid-state motors--that contract or expand when they receive an electric current from flexible electronic circuits embedded in the sheets. After they achieve their preprogrammed shape, the sheets are held in place by tiny magnets on the edges of the fold joints.

Bonus relevant video - Jon Stewart talks about the OMG20 and America's loss to Ghana. He uses a vuvuzela to make his point. Obama gets given a Hobgoblin beer.