Monday's Top 10 with NZ Mint: Minding the gap with Australia; Feltex Five not guilty; Credit Sails debacle; Forsyth Barr's starring role;; Dilbert

Here are my Top 10 links from around the Internet at 10 past 1pm brought to you in association with New Zealand Mint for your afternoon reading pleasure.

I welcome your additions and comments below, or please send suggestions for Tuesday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.

I'll pop any surplus suggestions I get into the comment stream under the Top 10.

1. Minding the gap - Colin James has written in The Press about the gap between Australian and New Zealand incomes.

We lack high value, high wage jobs.

I've always wondered why NZ is so keen on farming and tourism. Neither offer high value jobs.

James refers in particular to the divergent paths of Brisbane and Auckland.

HT Les Rudd via email.

The trajectory has been clear for most of our two spendthrift decades. The issue is not "tenants in our own land". The issue is getting investment - some desirably from foreigners even when we do save - which boosts higher-income activities.

That is the strategy Brisbane Lord Mayor Campbell Newman outlined to the local government conference last Monday.

Not too long ago Brisbane and Auckland were on a par. Now Queensland is well above Auckland and mining is only part of the reason. New analysis by Motu Research shows why: the share of jobs in "high-value, non-routine, knowledge-intensive activities" increased markedly less in Auckland than in Brisbane (and in Melbourne, Adelaide and, to a lesser extent, Sydney and Perth).

It finds that within New Zealand "Auckland is functioning as a core city" for those activities "but is peripheral within Australasia".

2. Feltex Five not guilty - A court has found Feltex's directors not guilty, NZHerald reports. The float of Feltex was the major reason why a whole new generation of investors don't trust the NZX anymore. This result won't do much to engender confidence in the NZX. The directors blamed the auditors for not noticing that a bunch of debt was current. This debt caused the collapse of Feltex.

Forsyth Barr promoted Feltex. It is also closely associated with investments with Allan Hubbard's various vehicles. And Credit Sails.

Auckland District Court Judge Jan Doogue has just delivered her verdict in the case, where former Feltex chairman Tim Saunders, former chief executive Peter Thomas, John Feeney, Peter David Hunter and John Hagen all plead not guilty to claims the listed carpet maker didn't fully comply with regulations under International Financial Reporting Standards (IFRS).

The men said that when the accounts were filed they believed the company met all the relevant standards and regulations. During a lengthy trial the Crown alleged the directors failed to disclose that Feltex was in breach of its A$100 million ($122.2 million) loan deal with ANZ and that it incorrectly classified its debt with the bank as non-current. The debt should have been classified as current, meaning it was on call. During the trial the defence argued that it was Feltex's auditors Ernst & Young who failed in their professional duties and not the company's directors.  

3. Auditors lose faith in Watson - Deloitte has dumped Eric Watson's US listed company American Apparel, citing "material weaknesses in internal control over financial reporting, NZHerald reports, also noting his NZ$10 million Karaka mansion is up for sale.

4. Credit Sails - Tim Hunter at Fairfax has found the trustee for Credit Sails has dug up potential breaches of the trust deed. Forysyth Barr was the promoter of Credit Sails.

5. How sovereign defaults might play out - This piece from 'some investor guy' at Calculated Risk is a useful list of what might happen in the event of sovereign defaults.

It includes a couple of useful charts derived from the Rogoff/Reinhart work on deleveraging and defaults.

The charts below suggest that debt crises inevitably follow banking crises and that inflation over 20% inevitably follows sovereign defaults. Hmmm.

6. 'The financial system is broke' - It's official. Alan Greenspan reckons the financial system is broken and that's why we face deflation. What happens when the financial system starts working again? Inflation? Here's the interview he gave on Meet the Press. HT Gertraud. HT ZH

Visit msnbc.com for breaking news, world news, and news about the economy

7. Here's how broke it is - The fundamental reason why the US Federal Reserve's money printing has not created inflation yet is that banks are choosing to leave their money on deposit with the US Federal Reserve rather than lend it out.What happens when they do start lending it out? Inflation? Or maybe they won't lend it.

Either way, it looks difficult for  the Fed to actually print its way out of trouble, apart from through Treasury bond buying, which is essentially monetising deficit spending. There are a few political constraints with that one...

8. Left hand and right hand - China's property boom looks more and more like a Ponzi scheme the closer you look. This excellent New York Times piece (HT Hugh P via email) points out just how involved the State Owned Enterprises have been in pumping up land values.

The details are extraordinary, including how a state owned salt miner and a military owned manufacturer of ambibious assault weapons (!) are amont the biggest property developers in Beijing.

Anhui Salt is hardly alone among big state-owned companies. The China Railway Group is developing residential complexes in Beijing after winning the auction for a huge piece of land there.

Likewise, the China Ordnance Group, a state-led military manufacturer best known for amphibious assault weapons, paid $260 million for Beijing property where it plans to build luxury residences and retail outlets. And in one of China’s biggest land deals yet, the state-run shipbuilder Sino Ocean paid $1.3 billion last December and March to buy two giant tracts from Beijing’s municipal government to develop residential communities. All around the nation, giant state-owned oil, chemical, military, telecom and highway groups are bidding up prices on sprawling plots of land for big real estate projects unrelated to their core businesses.

By driving up property prices, the state-owned companies, which are ultimately controlled by the national government, are working at cross-purposes with the central government’s effort to keep China’s real estate boom from becoming a debt-driven speculative bubble — like the one that devastated Western financial markets when it burst two years ago. Land records show that 82 percent of land auctions in Beijing this year have been won by big state-owned companies outbidding private developers — up from 59 percent in 2008.  

9. The pain in Greece - Greece has been out of the news lately, but the political and economic pain of its austerity measures is severe. Here Global Geopolitics.net details the pain involved. Big strikes forced the government to call in the military to ensure petrol supplies over the weekend. HT Gertraud

The last line made me laugh. But it was a pained laugh.

Aristedes G, a 58-year-old steel worker, has not had a single day of employment since 2008.

"After being unable to pay up my debt for a bank housing loan, bank authorities confiscated the property and put it on auction," he says. "Look, this is my food," he says, raising a plastic bag with leftover cheese pies donated to him by owners of the café at the entrance of the zone. Such stark stories have become all too common, says Kistikidis.

He points at a line of men idling around the café. Many of them have endured economic hardships for months.

"Atmosphere at home is often bad and many just prefer to spend time outside to avoid the nagging at home," he says.

10. Totally relevant video - Jon Stewart picks on Goldman Sachs again. The word shitty is used an awful lot