Friday's Top 10 with NZ Mint: Wheat prices up 69%; Easing land limits may slice land prices; China's global land grab; 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 Monday'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. Commodities inflation anyone? - Global wheat prices have jumped 69% since June because of a drought in Russia, which produces a quarter of all the wheat grown for export.

Ambrose Evans Pritchard points out at The Telegraph that the ban announced overnight on Russian wheat exports by Vladimir Putin has triggered another surge in wheat prices.

The implications for us are an increase in the price of bread and other foods, but also yet more pressure for New Zealanders to emigrate to Australia because Australia is the big winner from a surge in wheat prices.

It is not having a drought and is the other big wheat exporter.

One other side effect might be a reduction in supply from New Zealand's dairy exporting competitors as their feed costs increase, which may help support the Fonterra payout.

The rise in the oil price recently again suggests inflation is returning. At least for commodity prices.

Perhaps we are set for asset price and wage deflation alongside commodity price inflation? And a global land grab. More on that in Number 9 below.

"This is very serious," said Abdolreza Abbassanian, chief grain economist at the UN Food and Agriculture Organization.

"It's a desperate situation because it has caught everybody off guard. We're not facing the situation of two years ago but there is a risk of destabilising panic."

The shortage may trigger a bout of "agflation", posing a quandary for central banks. Professor Charles Goodhart from the London School of Economics fears that rising food prices will add 0.5pc to Britain's sticky inflation, already testing market tolerance. Wheat prices surged by their maximum daily limit of 60 cents to $7.86 a bushel on Chicago's exchange, with knock-on effects across the nexus of tradable grains.

Corn futures rose 5.8pc, oats rose 4pc, and rice rose 2.8pc on the news. "Food markets are linked. This is going to put further strains on corn. Animal feed prices will go up, affecting meat," said Mr Abbassanian.Commodity spikes can be inflationary but also deflationary, depending on context.

Central banks in Europe and the US misjudged events two years ago, mistaking oil and food rises for the start of a 1970s price spiral. In fact, it drained demand from economies already tipping into recession. "This is more deflationary than it looks," said Albert Edwards from Societe Generale. "The risk is that central banks will hold off from further easing that I think is needed, increasing the risk of a hard-landing."

2. Europe's housing boom (as big as New Zealand's) - Ambrose Evans Pritchard also forcefully points out that Europe's house price boom was every bit as big as America's on a real price basis, excluding Germany, which is on another planet.

We thought we'd have a bit of fun and overlay New Zealand's real house price chart onto the European and US one. Our's is the grey/black line.

Lo and behold our house prices have risen in line with Spain's (orange dashed line). But of course it's different there because lots of new houses were built in Spain...

Whereas those arguing our house price boom was justifiable say New Zealand has a legitimate supply problem, thanks to leaky buildings, new council-imposed building costs and 'Smart Growth' policies restricting land availability for new houses here. Maybe. See number 7 below for more on that. HT Kevin via IM.

France had the most extreme price rises from 1997 to 2009, followed by Spain and Italy some way below. The Anglo-Saxons were more moderate. The US bubble was tame by comparison (measured by price: inventory overhang is another matter) and has largely corrected. This the American way, a short sharp purge.

The Club Med bubbles have not corrected, by a long shot.

The UK is sui generis (unique). Chronic lack of construction (nimbyism, and draconian planning laws) means that the equilibrium price of houses is higher. There has not been a large glut of unsold properties. This is not to condone Anglo credit excesses in the Greenspan era of silly money. But the fact is that real interest rates were as low – or even lower (Spain, Greece, Italy, Ireland) – in the eurozone than in Greenspan-land for much of the boom.

Indeed, the eurozone debt bubbles were larger in aggregate, if you add sovereign bubbles to household credit bubbles, and corporate loan bubbles (Spain) –and if you add euro-peggers (Denmark, Baltics, Balkans, etc) and dirty-floaters (Hungary) in Eastern/Central Europe where countries acted like eurozone states because they were “pre-ins”.

3. 'We need more boatpeople' - The debate over immigration is dominating the election debate in Australia. Many people in business, who want migration to boost growth and solve their labour shortages, wish the debate would go away, The Australian reports. HT Gareth via IM.

One of Australia's most senior corporate figures says that "we are all fundamentally boatpeople". Transfield Services and tollroad operator ConnectEast Group chairman Tony Shepherd said the debate was "terrible" and he was amazed the country was having it.

"If you've got the gumption to go across in a leaky boat across the Timor Sea and arrive here, it is almost a pre-qualification," Mr Shepherd said.Chris Lynch, chief executive of tollroad owner Transurban, said: "Surely we've got to continue to grow or we start to decay."

Baulderstone managing director Rick Turchini said politicians were sending out a confusing message about the country's population ambitions. "On the one hand, we are talking about restricting boatpeople, and on the other hand, we are paying baby bonuses."."

4. More bank fraud - Now it's Scott Kendall at Westpac. Yesterday it was Zamir Zane Hussain at ANZ New Zealand and a few months before it was Stephen Versalko at ASB

This one is about women and fast cars, but in a peculiarly Palmerston North sort of way. Kendall wanted money to get married and to buy remote controlled toy cars... I wonder if they were toy Porsches...

Apparently there was a pretty racy culture of cutting corners too at the Broadway branch of the Westpac bank in Palmerston North.

I lived in Palmerston North for five years so I know how exciting it can be there...

Bronwyn Torrie at the Manawatu Standard has the story.

At the time Scott Kendall allegedly defrauded Westpac Bank of more than $100,000 he was under serious financial pressure, a jury has been told. Kendall, 29, had taken out a home loan and was about to marry his former partner, and to fund his expensive remote control car hobby.

During cross examination, Crown Prosecutor Esme Killeen put it too Kendall that he was "dreaming" if he thought he was going to claw his way out of the massive hole of debt by shuffling money between personal accounts and the fake accounts created using the alias Peter Thompson. Kendall agreed but said he intended to pay back the debt.

He amassed more than $68,000 in debt using the fake name but said the money was used to set up a radio-control car club. He is on trial for seven counts of computer fraud between December 2005 and December 2007 relating to personal account transactions.

But Kendall's lawyer Steve Winter's told the jury it didn't make sense for Kendall to admit some charges and deny others if he did the transactions dishonestly. He warned the jury not to jump to conclusions when looking at the offending his client had admitted. Mr Winter said corners were cut and attitudes were relaxed at the bank's Broadway branch. It was in this "culture" that the women did not check Kendall's debt, which could have been done with the press of a button, Mr Winter said. 

5. Good banks and bad banks - South Canterbury Finance has talked a lot about good banks and bad banks lately. The first one to do this recently was Northern Rock in Britain, which almost went under after a run on the bank. It separated its 'bad' assets into a bad bank and restructured the good ones into a 'good' bank.

Trouble is, now the results show the bad bank is profitable and good one is unprofitable, The Economist reports.

Part of the problem is that most of the British banking system is now government owned, which is distorting the playing field...

South Canterbury knows all about distortions in the playing field too. It has a month left before it's playing field is upended in one way or another.

In this topsy-turvy world, government support of banks is clearly interfering with competitiveness and the play of market forces. Northern Rock plc might make its way if it, and its ilk, did not have to compete with banks artificially propped up by government funding.

Royal Bank of Scotland and Lloyds Banking Group, respectively 68% and 41% government-owned, have an enormous grip on the mortgage market through multiple brands, such as NatWest, Cheltenham & Gloucester, Halifax, Bank of Scotland.

Smaller banks and building societies have to offer top dollar on their savings accounts to attract new depositors and jog big-bank customers out of their natural inertia. Northern Rock plc, the government’s own attempt at creating a viable and simple bank, will not thrive in this government-created environment.  

6. QE II won't work - There's been a lot of talk about the US Federal Reserve preparing for more money printing to boost the flagging US economy. We'll find out more tonight with key non-farm payrolls figures.

But it's not clear yet how it would print the money and whether it would work. If the Federal Reserve simply created more reserves for banks to lend it may not work because the banks don't have anyone creditworthy to lend to. This leaves open the suggestion the Federal Reserve could create reserves and use it to buy US Treasury bonds off the government, allowing Obama to go on a spending spree to boost the economy.

Marshall Auerback at Credit Writedowns explains why the Fed's money printing won't work if it relies on the banking system to distribute the money using private credit growth. He says the government needs to deficit finance America out of depression, just like it did from 1933 to 1937. This seems politically impossible now.

What is required to drive lending is a creditworthy borrower on the other side of the bank lending officer’s desk, which means an employed borrower, whose income allows him to sustain regular repayments. Absent that, there will be no lending activity. It is pointless to blame the evil bankers for this of state affairs, since they don’t control fiscal policy, which is the remit of the Treasury.

For all the talk from policy makers about not repeating the mistakes of Great Depression, we seem to be perilously close to doing precisely that. This is largely based on a poor understanding of the economic dynamics of that period, even by that noted scholar of the Great Depression, Ben Bernanke.  

7. Urban limits and house prices - Patrick Smellie at BusinessDesk has written a nice overview of how some New Zealand government moves to relax urban limits could hit house prices. Oh dear. House prices, and more importantly land, prices might descend to reasonable levels. Hurrah for the government if they can achieve this.

Hugh Pavletich will be beaming inside. HT John Walley via email.

In the last week, with a barely audible thud to the outside world, two highly significant taskforce reports on infrastructure and urban planning have landed in ministerial in-boxes. The recommendations of the urban planning document, in particular, have the potential to play a major role in setting the value of urban land.

Housing Minister Phil Heatley touched on it in a speech earlier in the year when he said the Government was determined to do something about the difficulty today's would-be first-home buyers face when trying to get on the first rung of the property-owning ladder. "Property prices have increased hugely in the last five years.

"The biggest proportion has been the land cost, not the cost of building," he said. Likewise, Environment Minister Nick Smith identified the impact of rigid city boundaries as one of the most pressing issues requiring reform in the Government's sprawling "phase two" review of the Resource Management Act. "There are major question marks over the way the Resource Management Act is working in urban areas," Dr Smith said in January.

"I don't think we have the incentives right for developers to do the best urban design in our largest cities. "There are also questions about the policy of metropolitan urban limits, the effect they have on section prices and the negative flow-on effects to the broader economy.  

Patrick Smellie makes the following point.

If urban limits are relaxed, the cost of new infrastructure should fairly fall to the property's developers rather than local governments.

What's clear, however, is that when Finance Minister Bill English continues talking down the prospects for housing investment - which he has been - it's almost certain that this little-noticed stream of Government policy-making is no small part of the mix.  

8. A stress map - This is a fascinating interactive graphic showing levels of economic stress in the various parts of America. You have to click through to see.  HT Troy via email.

9. The great global land grab - Paul B Farrell at Marketwatch (where I used to work a long time ago) has written a fascinating piece on the drama around commodity Exchange Traded Funds (ETFs) in the United States and how the investment bankers are set to screw over small investors and the global economy all over again.

But it was this passage below which caught my eye and a big HT to Kiwidave for pointing it out. Maybe we should be very careful before we sell our land.

Capitalists of Chaos have a warped sense of the long-term, out beyond the micro-myopic brains of Wall Street's commodity traders whose algorithms limit thinking to milliseconds. He sees a fatal flaw in Wall Street's short-term brain.

The 2008 meltdown was the turning point: Wall Street's in "the death knell of the financial instrument, of the paper world" and "the rise of the commodity." Big investors demand hard assets. Proof: When Funk was in New York and London he met "leading investors who, like Heilberg, are stepping away from the paper world to make commodity plays." And the new players include nations as well corporate giants: China, Russia, Australia, Kazakhstan, etc.

A global land grab is on. And while commodity ETFs are making bankers and traders rich today, most know that soon the ETF business will go the way of a small farmer hedging the season's crop in a grain silo. T

hey also know that the "Food Bubble" they're collectively blowing will also explode, triggering wars across the planet, wars fought over ever-scarcer non-renewable commodities.

That's why the new Capitalists of Chaos -- not just Heilberg and Goldman, but Monsanto, Exxon, China -- and their competitors are in the short race to buy up and hoard rights to hard assets, positioning themselves for global catastrophes dead ahead.  

Click through the Telegraph to see the big size Alex cartoon. I'm a fan.

10. Totally irrelevant video - Here's Eva Mendes' sex tape...sort of. All very meta. HT Kevin via IM.