Here are my Top 10 links from around the Internet at 10 to 9 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. I'll pop any surplus suggestions I get into the comment stream.
1. It's a generational issue - Boston University Economics Professor Lawrence Kotlikoff writes persuasively at Bloomberg that America's declining national savings rate is due to increased spending of young peoples' taxes on the aged. Doesn't seem fair does it...
Our propensity to consume, privately and publicly, continues to rise. The rates of personal and government consumption are both higher now than they were in 2007, although the government consumption rate has risen by more of late. If personal consumption is the main villain for the long- term savings rate decline, whose consumption has risen? The answer is the elderly. Over the past five decades, our policy of taking ever larger sums from young savers and giving them to old spenders has more than doubled the ratio of average consumption of oldsters to average consumption of youngsters.
Much of this redistribution has taken place through Social Security, Medicare, and Medicaid. Collectively, these three programs spent $1.2 trillion on the elderly last year. Their total payment per oldster equaled a whopping $30,000, which is three-quarters of U.S. per-capita income. And, about half of this total constituted Medicare and Medicaid benefits, which are provided to the elderly directly in the form of personal consumption of health-care goods and services.
The bottom line? If we are serious about reversing the decline in national saving, we need to stop expropriating the young for the benefit of the old.
2. A couple of movies about Wall St - A documentary called 'Inside Job' looks like a cracker about the scandal on Wall St and I'm going to be sure to watch it when it gets here.
Yves Smith from Naked Capitalist gives it top marks.
Inside Job is an ambitious picture, clearly aiming to stir public anger and action by showing how criminally corrupt the financial services has become and how it has subverted government and the economics discipline. Despite minor errors and occasional oversimplification, overall Inside Job does an extremely effective job in covering a lot of ground in a compelling manner.
In addition to highlighting how the financial services industry has bought and paid for not only considerable political influence but academic endorsement of its favorite causes, it also calls to attention an overlooked factoid I’ve long considered damning: that there was no preparation on behalf of the officialdom for a Lehman bankruptcy. And by “no preparation” I mean not the foggiest understanding of what it meant.
And here's the trailer below for Oliver Stone's sequel to his famous 1987 film Wall St. "Wall Street: Money never sleeps" may not be such a good movie though according to the Wall St Journal.
Few accused it (the original Wall St) of excessive grace, but its antihero was a memorable scoundrel and his greed-is-good credo cut to the culture's quick. Mr. Douglas's performance in the sequel measures up to Gekko's rep, but the rest of the movie is pumped up to the bursting point with gasbag caricatures, overblown sermons and a semicoherent swirl of events surrounding the economy's recent meltdown.
The story certainly holds your attention, but it's a dramatic bubble about a financial bubble.
3. Will free trade rob America of its empire as it did for Britain? - Economist Ian Fletcher writes at HuffPo that America's embrace of free trade will kill its empire, just as it killed off Britain's from the mid 1800s on. Here's the thinking. Worth a read for those willing to have preconceptions challenged. HT John via email.
One of the most inexcusable things about America's ongoing economic decline by means of free trade is how clear the historical portents are. For example, we are today treading the same path trodden by a nation that Americans know reasonably well: Great Britain. It is easy to forget that until about 1850 Britain, not the U.S., was the world's leading economic power.
But then, of course, they blew it. There were, of course, many causes of this decline, but free trade was undoubtedly a major one.
Britain, like the U.S. and every other developed nation, initially rose from agricultural backwardness by way of mercantilism, the opposite of free trade. As late as the beginning of the 19th century, Britain's average tariff on manufactured goods was roughly 50 percent, the highest of any major nation in Europe. And even after Britain embraced free trade in most goods, it continued to tightly regulate trade in strategic capital goods, such as the machinery for the mass production of textiles, in order to forestall its rivals. Even the famed Adam Smith--who made his living as a customs collector!--was only in favor of free trade after Britain had consolidated its industrial power through protectionism.
4. 'A very nervous time' - Russell Brown from Public Address interviews Reserve Bank Governor Alan Bollard for nearly 23 minutes for TVNZ's Media7 on how the Reserve Bank deals with the media and how it dealt with the global banking crisis.
A fascinating watch where Bollard says he keeps an eye on international blogs, how the mainstream media was responsible during the crisis and how he likes to be transparent rather than deliberately oscure in a Greenspan sort of way.
Bollard also talks about his excellent book "Crisis", which I enjoyed reading.
5. US long term unemployment is at record highs - Smart Money points to the depths of the problems in America's jobs market. HT Troy via email.
6. Australia's last gasp of debt - There's always a moment at the end of any boom where a few people dive just that little bit deeper into debt. BusinessDay reports that Australia's share of debt-free households hit a nine year low in the September quarter.
According to a Melbourne Institute survey, only 36.2 per cent of households held no debt in the September quarter, the lowest since the series began in 2001. With the ratio of household debt to disposable income at record levels, the figures have raised concerns for the growing number of consumers living beyond their means.
Amid a debate over whether the country has a property bubble, the survey also found the proportion of people who owned their home outright had reached a five-year low of 37.5 per cent. A research fellow at the Melbourne Institute, Edda Claus, said the high debt level was a worrying trend and the financial position of households had worsened in the quarter.
''The big danger would be if people lost their jobs. If they're very highly indebted, then things can go very bad very fast,'' Dr Claus said.
7. Peak everything - Aeldric at Energy Bulletin.net writes a thoughtful piece on how resource restraints in a globalised economy might express themselves. It's long but worth a read. HT Murray via email.
If we assume a technical ability to synthesize, extract and substitute, is Peak Production of any given resource even a theoretical possibility? Yes. Because of the increasing cost of extraction of resources of a steadily reducing quality, and the reduced utility of substitution there is an absolute theoretical limit to how far these processes can be pushed.
We will have few warnings as we approach that limit. And the warnings will look like .... errr .... what we are seeing right now.
Some conclusions that this argument seems to be pushing us towards:
1. Production of any given resource is supported by a network of dependencies. These dependencies are, in turn supported by a network of further dependencies. In an environment of unconstrained availability of resources, this is not a problem. However, in an environment in which multiple resources may be approaching their economic production limit, a cascading failure can be initiated. There will be few clear, unambiguous warning signs, because our tendency to use substitutable resources with networked dependencies can easily obfuscate the nature of the problem.
2. Production Peaks may be delayed by substitution and improved extraction, but the network of dependencies that result mean that peaks may come all at once - "Peak Everything".
8. A Celtic dragon's death rattle - The Telegraph reports Ireland faces a double dip recession. And we thought we had a bad June quarter. HT AndrewJ.
The Irish economy shrank by 1.2pc between April and June compared with the first three months of 2010, the Central Statistics Office said. This followed a rise of 2.2pc in the first quarter - the first gain since 2007. Thursday's data came as a shock as most economists had expected a further quarter of growth to show the country was building on its recovery.
9. The problems of small businesses in America - Bernie Marcus, the co-founder of Home Depot, talks to CNBC about the struggles of small business in America. HT Ian via email.
10. Totally relevant video - My daughter likes the Mary Poppins movie and this song about the Fidelity Fiduciary bank is fun. If only Mark Hotchin and Allan Hubbard had taken all this to heart.
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