sign up log in
Want to go ad-free? Find out how, here.

Top 10 at 10: Krugman wants 'kitchen sink' thrown to avoid depression; Allan Crafar confident; Dilbert

Top 10 at 10: Krugman wants 'kitchen sink' thrown to avoid depression; Allan Crafar confident; Dilbert

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 suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz

1. 'I can do it mate, I can do it' - Allan Crafar still thinks he can come up with a cool NZ$200 million to keep his banks happy by 4 pm today, the NZHerald's James Ihaka reports. He also thinks he's a better farmer than Landcorp and would prefer the Chinese bid because it would leave him in his house. I make no comment. Best to let Allan Crafar do the talking...

Mr Crafar was yesterday refusing to name who would provide him with the money he needs to clear his debts with receivers Korda Mentha but said: "I've done it before and I'll do it again. "I have a deal for the receiver and it will be a very attractive one but they [the backers] want to stay confidential. I have thousands of backers, mate, most of the country in their right mind would back us."

"Landcorp won't get production like I could and they have wasted hundreds of thousands of dollars on due diligence," he said. "If they ran their template over our farms the nation's income would drop ... corporates don't work efficiently in farming. You've got to have your skin in the game and your guts on the line."

2. 'Throw the kitchen sink at it' - US Keynesian Paul Krugman is getting very worried.

He is now saying to Bllomberg the US authorities should throw everything at the economy to avoid a third depression.

He thinks a US debt default is "extremely unlikely"

“We are looking at what could be a very long siege here,” Krugman said in an interview today in Princeton, New Jersey, with Carol Massar of Bloomberg Television’s “Street Smart.” “We really are at a stage where we should have a kitchen-sink strategy. We should be throwing everything we can get at this.”

 “The most effective things you can do, in terms of actual bang for the buck, is actually having the federal government go out and hire people,” he said. “We are deep in the hole here, and you need to be unconventional to get out of it.”

The projected U.S. budget gap in 10 years can be brought under control with a “combination of modest tax increases and reasonable spending cuts,” particularly on health care, Krugman said, adding it’s “extremely unlikely” the U.S. would ever default on its debt.

\“I’m not aware of any example of a country that got into fiscal difficulty because it began a stimulus program and couldn’t take away the stimulus program,” he said. “If you’re serious about fiscal responsibility, you should not be saying, ‘let’s skimp on aid to the economy in the middle of a financial crisis.’”

3. Ticking time bombs - A lot of people in financial markets right now are looking through the entrails of Spain's Caja state-owned building societies and it's not a pretty sight. Here Zerohedge points out an influential piece of research that came out this week on what is under the hoods of the Cajas. All sorts of toxicity is being hidden away, it seems. Here is the Bloomberg report on the same research, if you worry about Zerohedge's apocalyptic biases...

A new report by CreditSights' David Watts indicates that investor worries about the Spanish banking system are very well founded and likely underestimate just how bad the true situation actually is.

In "Spanish RMBS: Insider Caja Loan Books", Watts concludes that the Cajas are likely hiding losses on home loans by taking non-performing mortgages out of securitized pools. Absent this unsymmetrical onboarding of risk, the overall deterioration of the broader pool would have become ineligible as collateral in ECB refi operations.

In essence, Watts says, "by buying the loans out of the mortgage pool, the cajas would be taking those weaker loans onto their own books."

This implies that the 3.7% serious delinquency rate reported by the cajas is in reality far higher, and likely "underestimates their potential losses."

And what's worst: as ever more delinquencies mount courtesy of austerity, and the Cajas run out of cash to constantly buy up the weakest performing loans, all of Spain is about to lose ECB collateral access to its hundreds of billions in securitized RMBS, completely locking the country out of any access to liquidity, even that of the ultimate backstop, the European Central Bank.

 4. Couldn't resist - Trace Hodgson is one of my favourite cartoonists. His visceral drawings of Ruth Richardson and Jenny Shipley as Dominatrixes cutting benefits in th earlyy 90s were memorable. This one captures the popularity of the Vampire thing and National's bevy of women cabinet ministers. HT to Red Alert

5. Way too many people - China is experiencing a heat wave at the moment. We could do with some of that here. It's so hot oop north everyone is jumping into the pool. And that means everyone. At the same time. The Daily Mail has the story HT My wife in our cold old house.

6. The peak oil chart that got an official oil forecaster...er...reassigned  - This chart here was produced by Glen Sweetnam, director of the International, Economic and Greenhouse Gas division of the Energy Information Administration at the US Department of Energy. He produced this chart below last year warning that we face oil shortages from 2012 onwards without heavy new investment in exploration and a lot of luck. HT John Rushworth.

He has since been "voluntarily reassigned." Here's the report on the chart in the English language version of  Le Monde.

Glen Sweetnam acknowledges the possibility of a close-by and unexpected fall of world liquid fuels production in an email interview, after several requests of details about a round-table of oil economists that Mr Sweetnam held on April 7, 2009 in Washington, DC. The DoE April 2009 round-table, untitled “Meeting the Growing Demand for Liquid (fuels)“, was semi-public.

Yet it remained unnoticed and unjustly, as it put forward forecasts that are far more pessimistic than any analysis the DoE has ever delivered. Page 8 of the presentation document of the round-table, a graph shows that the DoE is expecting a decline of the total of all known sources of liquid fuels supplies after 2011.

The graph labels as “unidentified” the additional supply projects needed to fill in a gap that is expected to grow after 2011 between rising demand and decline of known sources of supply that the DoE supposes will start that year. The declining production foreseen by the DoE concerns the total of existing sources of liquid fuels plus the new production projects that are supposed to come on-stream before 2012.

7. One tiny wafer thin after dinner mint - Ever wondered how the millionaires in the factory at Macquarie Bank managed to survive and then thrive through the crisis? The Sydney Morning Herald points out they were very good at lobbying for a big fat government guarantee to help them keep making their millions. It seems there was a swanky dinner in Macquarie's boardroom where ministers were wined and dined. An after dinner mint was provided. Within days Macquarie had its guarantee and a bonus ban on short selling of financial stocks.

In response to a freedom-of-information request, Senator Sherry's office confirmed the minister dined at Macquarie's Sydney Martin Place headquarters as the guest of Macquarie's chief executive along with other bank executives on October 7, 2008. Five days later the government announced a deposit guarantee and wholesale funding agreement that would shore up the banks after turmoil sparked by the collapse of Lehman Bros three weeks earlier.

The move helped end the rout in Macquarie's share price that had slumped by half since August amid a crisis of confidence and fears of its liquidity position. Under the wholesale funding guarantee, Macquarie was able to use the taxpayers’ AAA-rated backing to access money on credit markets at a cheaper rate than it otherwise could before lending it at a higher rate to make a profit on the spread.

The bank paid $200million to use the rating. Its corporate and asset finance division tripled its profit last year, in part by using the cheap funding to buy loan books at a discount. The risk to the taxpayer AAA rating remains until all the loans are repaid in full.

 

8. Here it comes - The Australian banks are now beating the drums about higher funding costs and the need to pass on mortgage rate hikes in addition to anything the Reserve Bank of Australia does. We should expect the same here too soon. Funding costs for longer term debt issues have surged in recent weeks to well over 160 basis points over swaps. They were around 30-40 basis points before the Global Financial Crisis and had fallen back towards 100 bps earlier this year, but the European Crisis is blowing costs out again. Here's the Business Spectator report of the AFR (paywalled) report. HT Kevin via IM.

Commonwealth Bank of Australia Ltd chief financial officer David Craig has warned growing wholesale funding costs are likely to see banks increase lending rates faster than Reserve Bank of Australia (RBA) rate hikes, the Australian Financial Review reports.

Mr Craig declined to say if CBA would raise rates separately from the RBA within the the next year, but said European debt problems were pushing up the total wholesale cost of funding by up to 0.02 percentage points a month. New funding costs had risen by 0.20 to 0.80 percentage points in the past two months, he said, according to the AFR.

9. Greenpeace for banking reform ?- The European parliament realises it faces a massive battle against bank lobbyists who want to keep the status quo in Europe and the United States. So some in the parliament want to see lobbying organisations, a la Greenpeace or Amnesty International, set up to combat the banking lobbyists, according to David Cronin at 'The Story Underneath'

The call -- signed by 70 of the Parliament's 736 elected members -- was prompted by concerns over how the financial lobby had marshalled its ample resources over the past few years in a bid to dilute legislation drafted in response to the global economic crisis.

According to the MEPs, the pressure they have been placed under by the financial industry is so intense that it represents a threat to democracy, especially as public interest groups have generally lacked the means or the expertise to mount a robust counter- offensive to the banks' efforts.

10. Totally irrelevant video - Here's Jon Stewart having a go at the Republican Party's national party boss Michael Steele. It really is totally irrelevant, although suggests the Republicans are in a mess despite Obama's unpopularity. The main reason I like it is includes one of favourite Muppet characters. "I shoot my own broccoli."

The Daily Show With Jon Stewart Mon - Thurs 11p / 10c
Steele Crazy After All These Years
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

6 Comments

Here's another one from The Economist on how much some farmers (but not in NZ) still get in state subsidies. Incredible in this day and age. And the Europeans wonder why they have budget crises... NZ is at the bottom of the list.

http://www.economist.com/node/16507149?story_id=16507149&fsrc=rss

"FARMERS are getting by with fewer subsidies in many countries around the world compared with 20 years ago. Yet subsidies still accounted for more than three-quarters of farmers’ incomes in Norway, Switzerland and Iceland between 2007 and 2009. And farm subsidies in the EU made up a slightly greater proportion of farmers' incomes in 2007-09 than two decades beforehand. OECD countries spent $253 billion on farm subsidies in 2009—22% of gross farm receipts, the first increase since 2004."

Up
0

Hard to say Les. Farmers don't get much explicit tax support, apart from the usual subsidy for leveraged ownership of property.

The level of R&D support from the government for farming is very low, relative to others.

I suspect NZ would move further down the list, but can't say without doing the research.

cheers
Bernard

Up
0

And here's Ambrose at the Torygraph warning about the results of the European stress tests being meaningless because they seem to ignore the toxic Greek and Club Med debt... Oy Vey

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/78737…

"RBS and other City institutions have warned that Europe’s stress tests for banks are almost useless and may further damage confidence if they fail to cover the risk of large losses on sovereign defaults by Greece and other Club Med states."

cheers
Bernard

Up
0

And the Bloomberg version of the same stress test problems. The results are due by the end of July. Anyone planning for the European crisis to be over anytime soon should wait until after these stress tests are out and we've seen the reaction.

http://www.bloomberg.com/news/2010-07-05/losses-buried-in-european-bank…

cheers
Bernard

Up
0

Ruru,

But I put in all the cartoons and videos to cheer everyone up...

cheers
Bernard

Up
0

Thanks Chris_j

We've got the heat pump ordered. And we just put in the insulation. Been saving up for it.

Working hard now to make sure we can pay for the extra electricity for the heat pump. I'm told they're more efficient but you can't help using it more often, thus using more power...

cheers
Bernard

Up
0