Friday's Top 10 at 10 with NZ Mint: Aussie banks tell foreign house price doubters to rack off; The United States of Inequality; Old Father Hubbard; Dilbert

Here are my Top 10 links from around the Internet at 10 to 1 pm, brought to you in association with New Zealand Mint for your 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. Remember that registered commenters can more easily include links out in their comments. Use the box in the right hand column to register. We're turning off unregistered comments from this Sunday September 12.

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

1. 'Methinks thou doest protest too much' - Reserve Bank of Australia Deputy Governor Guy Debelle said yesterday that international investors and creditors were increasingly asking whether Australia's housing market was set for a big fall that woud damage its banks. This followed comments by GMO's Jeremy Grantham and others that Australia's housing bubble was about to pop.

Now the biggest home lender, Commonwealth Bank of Australia, has come out with a detailed rebuttal of the housing bust fears. It prepared a powerpoint presentation for a road show it is taking to investors globally to respond to these fears. No wucking furries mate.

It included NZ stats alongside the Australian ones. Our numbers are just as bad good.

Our housing markets are not in bubble territory.

No way.

Absolutely not.

Please look the other way.

Please.

Here's what CBA said:

Concerns of a potential residential housing price bubble in Australia are often based on a superficial/incomplete analysis of the Australian market. Taking into account geographic differences, the ratio of house prices to income in Australia is not that much different to most other comparable countries.

Population growth and excess demand relative to supply has been a key driver of Australian house price appreciation –these factors are unlikely to reverse in the near term. Other factors driving house price appreciation are structural, rather than cyclical, in nature, including the broader accessibility of credit and larger average house sizes.

The household debt ratio in Australia is similar to many other developed countries, and debt increases have largely been taken up by customers in the strongest position to service it. The strong fundamentals of the Australian economy provide a firm underpinning to the housing market, reducing the risk of a sudden and dramatic collapse in house prices.

Historically, home loan losses have been very low notwithstanding house price movements, reflecting strong portfolio credit quality. Given the high quality of the CBA mortgage book, even under the most highly stressed scenario, potential losses would be modest (~0.2% of total home loan balances).  

2. 'No worries then' - The Basel III global banking capital reforms have been watered down so broken US and European banks don't have to raise as much fresh capital and so the Northern Hemisphere can continue to extend and pretend. Under these new watered down capital reforms the Australian banks are also ok, David Walker writes at Banking Day.

Australian banks are unlikely to face any problems meeting Basel III capital hurdles after several key capital ratios were eased in Tuesday’s meeting of the Basel Committee.A proposal taken to the committee on Tuesday was reported to have set a minimum level of 6.0 per cent of risk-weighted assets for banks’ Tier 1 capital.

However, Banking Day understands that the meeting compromised on a lower figure of 5.5 per cent, under pressure from nations including Germany, France, Italy and Japan. Those countries all want to reduce the pressure on their troubled banks.

The Australian Prudential Regulation Authority said this week that Australian banks had reported an average tier one ratio of 9.2 per cent in their 2009 financial statements. Under the new rules that ratio would fall to 8.6 per cent, comfortably above the 8.0 per cent set to be required by the new Basel III rules.

For Australian banks, the sole remaining issue in the Basel III discussions is how the planned liquidity ratios will be dealt with in Australia and other countries (Singapore, Hong Kong and Saudi Arabia among them) whose low debt limits the likely future supply of government bonds.

3. The United States of Inequality - Timothy Noah writes with authority at Slate about the great divergence in America's society between rich and poor. He points out that America is now more unequal than it was at the beginning of the 1900s when many worried about a communist style revolution.

Where have all the Marxists gone? The chart below says it all. Here's a useful series of slide shows too.

Noah writes how at the beginning of the 1900s around 18% of the nation's income was concentrated in the hands of the richest 1%. HT Eric via twitter.

This was the era in which the accumulated wealth of America's richest families—the Rockefellers, the Vanderbilts, the Carnegies—helped prompt creation of the modern income tax, lest disparities in wealth turn the United States into a European-style aristocracy. The socialist movement was at its historic peak, a wave of anarchist bombings was terrorizing the nation's industrialists, and President Woodrow Wilson's attorney general, Alexander Palmer, would soon stage brutal raids on radicals of every stripe.

In American history, there has never been a time when class warfare seemed more imminent. That was when the richest 1 percent accounted for 18 percent of the nation's income. Today, the richest 1 percent account for 24 percent of the nation's income.  

Noah has a series of articles looking for the causes of this inequality. He concludes firstly it's not because of the change of the role of women or racism, or because of the growth of immigration. or because of the rise of the computer.

4.. A poem about Allan Hubbard - This came in from a reader. HT Garry via email.

Allan Hubbard went to the cupboard

down there in Timaru

but the cupboard was bare

there was nothing there

and the taxpayers are in the pooh.

Poor Hubbard in the cupboard

is now starting to blub

"its not funny

I have no money

all that's left is my old VDub".

But JK also has plenty to say

from the PM's podium

"there was no other way

but the depositors to pay

to avoid voter odium "

Hubbard in the cupboard

was asleep at the wheel

he is on dialysis

for financial paralysis

with no chance of an appeal.

SCF Finance has no chance

of a Resurrection

Hubbard is broke

was a pig in a poke

No chance for re-election.

5. 'Please don't buy our stuff' - Japan is now begging China to stop buying its bonds so the Yen will stop rising and killing its exporters, Bloomberg reports. This is the problem with China's massive trade surpluses and underconsumption. It can move it around the world, but wherever it turns it causes damage. Let's hope the Chinese don't try to buy our bonds.

China said its purchases of foreign bonds including those of Japan are based on its needs at any given time. “Our management always adheres to security, liquidity and good value,” Jiang Yu, a spokeswoman at the Foreign Ministry, told reporters in Beijing today.

“We will decide whether or not to buy one country’s bonds according to our own needs.” While Japan has sought to boost foreign purchases of its government bonds, such a shift would erode its advantage over countries such as Greece, which have seen bond yields soar as external investors fled. Less than 10 percent of Japanese debt is held by foreigners.

6. The risks in China - China's main bank regulator, Liu Mingkang, has warned of serious risks inside China's banking system, the FT reported.

The banks mostly dismissed concerns about risks building up on their balance sheets following an unprecedented credit boom over the last two years. Mr Liu said financial institutions needed to improve the design, implementation and application of "stress tests" conducted recently to assess how vulnerable they are to a downturn in the economy or a crash in the property market

"The risk management system in the Chinese banking sector still has many weaknesses," Mr Liu said in comments published Wednesday. "We must not ignore the hidden systemic risks and dangers."

7. 'About to throw up' - The bond market is nearing the end of the party, Mark Gilbert at Bloomberg writes persuasively.

Like a drunk at a party, the bond market is starting to bump into tables, telling off-color jokes, talking too loudly and spilling drinks. The smart guests will steer clear before he starts screaming at his shoes and wanders off to pray to the porcelain.

Next week, it will be the two-year anniversary of the collapse of Lehman Brothers Holdings Inc. Sadly, the bond market suggests the investment community has learned none of the lessons of the misguided adventures of recent years that prompted the biggest bankruptcy in history.

The problem with hangovers is that once they fade, the prospect of getting drunk all over again starts to seem like a great idea. This fixed-income party will end badly.

8. A Vulcan death grip - Albert Edwards from Societe Generale reckons global stock markets are in denial about the economic pain still to come. Zerohedge as the full version. V.entertaining.

"The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%!

The recent reaction to data suggests the market is in a similar deluded state of mind. Yet again, equity investors refuse to accept they are now locked in a Vulcan death grip and are about to fall unconscious."  

9. Totally irrelevant video - Wile E Coyote gets his man. Finally. But then what?

10. Totally irrelevant video - There's a whole lotta rockin' and rollin' goin on this Pacific Sun Cruise liner on its way to Auckland.