Wednesday's Top 10 with NZ Mint: The individual vs the corporate; Australia's hunger for (our) skills; Allan Hubbard's workaholism; Oral stimulation or inflation; Dilbert

Here are my Top 10 links from around the Internet at 10 past Midday, 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 Thursday'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. The Individual vs the Corporate - Barry Ritholz over at The Big Picture has written a fascinating post about a change in the political landscape in America that resonates.

This is all very topical as it's clear the growth the Tea Party movement funded by big corporate money and the actions of the last two years in Congress show that corporates (particularly banks) are subverting the democratic process to protect their own interests.

A recent Supreme court decision has unleashed a wave of corporate money in the current election campaigns. There's more on these 'Political Action Committees here at the Washington Post.

And here's Barry.

Every generation or so, a major secular shift takes place that shakes up the existing paradigm. It happens in industry, finance, literature, sports, manufacturing, technology, entertainment, travel, communication, etc. I would like to discuss the paradigm shift that is occurring in politics.

For a long time, American politics has been defined by a Left/Right dynamic. It was Liberals versus Conservatives on a variety of issues. Pro-Life versus Pro-Choice, Tax Cuts vs. More Spending, Pro-War vs Peaceniks, Environmental Protections vs. Economic Growth, Pro-Union vs. Union-Free, Gay Marriage vs. Family Values, School Choice vs. Public Schools, Regulation vs. Free Markets.

The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual.

These two “interest groups” – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts.

Where there is massive concentrations of wealth and influence, there will be abuse of power. The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights. This may not be a brilliant insight, but it is surely an overlooked one. It is now an Individual vs. Corporate debate – and the Humans are losing.

Keynes vs Hayek? Friedman vs Krugman? Those are the wrong intellectual debates. Its you vs. Tony Hayward, BP CEO, You vs. Lloyd Blankfein, Goldman Sachs CEO. And you are losing . . .  

2. America's mortgage mess - The scale of the foreclosure crisis in America is mind boggling. The depths of pain that have yet to ripple through the American financial system from the implosion of the housing market there is only now starting to be felt. Banks are realising many of the loans they made and bought were fraudlent, as were the securities they created from these loans.

This is a huge story in America. The banks thought they had cleaned their balance sheets. Now it's clear they may have to take the dreck back.  Here's the 14th banker at HuffPo.

They guy then laughed nervously and said, "Well, if you're right, we're f****d. We never transferred the paper. No one in the industry transferred the paper." So here we are back to 2007-8. If you and I make a serious mistake at our jobs, we get fired, and if we make a really serious error, our company could perish.

But when bankers screw up, and leave a lot of collateral damage in their wake, they are confident that their sugar daddies in DC will clean up the mess for them. Now you understand why everyone is resorting to fabricated documents and bogus affidavits. There is no simple way to fix this mess.  

3. Australia's real problem is a problem for us - Alan Kohler from Business Spectator has his finger on the pulse of what Australia's business people are really thinking. He says they face skills shortages and are ready to increase wages to fix it.

Guess what that will mean? More New Zealanders jumping on a plane and the wages gap widening even more.

We are lucky living next to the lucky country, but sometimes we're not so lucky.

The word from the CEOs is that the greatest danger they face is not being able to grow their businesses because they can’t find the managers and skilled staff they need. And the critical danger for the economy, and one that the Reserve Bank is clearly alert to, is that they will eventually respond to the pressure by paying higher salaries, leading to a wages blow out and inflation.

The issue most likely to keep CEOs awake at night all year, according to the Business Spectator Accenture CEO Pulse surveys, has been sourcing skilled staff. But in the latest one, the number citing this as the most important has jumped 55 per to 64 per cent. At the start of the year it was 48 per cent. But 84 per cent of CEOs report that they are having trouble finding staff with technical or specialist skills and 72 per cent are finding it difficult to hire managers.

On the other hand hiring unskilled staff is relatively easy – 75 per cent report that that’s not very hard. And this has led to a big difference in CEOs’ mood about the economy generally – optimism about the next 12 months is up from 54 to 70 per cent – and about their own companies, where optimism down from 82 to 77 per cent.  

4. Some ancient history - Back in 2005 the (then) NZHerald's Andrea Fox wrote this article about Allan Hubbard that included some interesting detail, in hindsight. HT Alex via IM.

A close business associate says Hubbard drove without a licence for 20 years and also uses the old car to thwart nosy journalists trying to tally his fortune each year.

"I fell in love with it [accounting]. It always balances - the debits always equal the credits."

Another business associate says Hubbard is a "workaholic - and I mean a workaholic". Hubbard concedes that his recreation is work and reading business material and history.

Just when you're thinking that all this makes him a very dull fellow and that he may indeed fit his own description as "essentially just a country accountant", a close associate opens the door on the other Hubbard. "He's an entrepreneur. He's a huge risk-taker and he's fearless. "He's absolutely fearless with the banks. But he always knew when to close a deal.

"One of the reasons he's fearless is that he started with nothing. He's been poor so he's not afraid."

He works from 6.30am to 10.30pm. Where does he get his energy from? "I enjoy it and there's a lot to be done."'

He thinks the South Island may have produced more than its share of millionaires because its culture is one of hard work, thrift and saving. North Islanders have "too many distractions" he says.  

5. A doozey of a mea culpa - It seems to be a season for mea culpas. I issued mine yesterday.

Ambrose Evans Pritchard at The Telegraph issues his own mea culpa on the US Federal Reserve.  He previously argued in favour of money printing because the Federal Reserve was doing it for the right reasons, to stop deflation and a debt-deflation spiral.

Now Ambrose is calling for the Fed to be shut down because it wants to create inflation. He has a point. Part of the reason for my Mea Culpa is I have lost faith in the ability of other central banks to do the right thing and that it is pointless for us to sit by and be done over.

Here's Ambrose with an absolutely cracking article. HT Andrew via email.

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION.

If the Federal Open Market Committee cannot see the difference, God help America. We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.

Ben Bernanke has not only refused to abandon his idee fixe of an “inflation target”, a key cause of the global central banking catastrophe of the last twenty years (because it can and did allow asset booms to run amok, and let credit levels reach dangerous extremes). Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills.

As dissenters at the Minneapolis Fed remind us, you cannot solve a structural unemployment crisis with loose money. The Fed is trying to conjure away the hangover from the last binge (which Greenspan/Bernanke caused, let us not forget), as if to vindicate its prior claim that you can always clean up painlessly after asset bubbles.

Are the Chinese right? Are the Americans and the British now so decadent that they will refuse to take their punishment, opting to default on their debts by stealth? Sooner or later we may learn what the Fed’s hawkish bloc of Fisher, Lacker, Plosser, Hoenig, Warsh, and Kocherlakota really think about this latest lurch into monetary la la land, with all that it implies for moral hazard and debt contracts.”

6. Inflation is a lot like oral stimulation - That's according to France's very toothy former Justice Minister Rachida Dati (left), the Daily Mail reports.

Ooh La La.

HT My wife.

The 44-year-old former justice minister and MEP is frequently nicknamed ‘Rachida Barbie’ because of her poor understanding of complicated political issues. But nobody expected her extraordinary mistake on the national Europe 1 radio station on Sunday.

Asked about overseas investment funds profiteering during a period of economic uncertainty, she said: ‘I see some of them looking for returns of 20 or 25 per cent, at a time when fellatio is almost non-existent.’

In French, fellatio – a sex act performed on a man – is ‘fellation’, which sounds a bit like inflation, which is the same word in French and English. Apologising for the hugely embarrassing slip on her Facebook site, Miss Dati said: ‘This kind of thing happens if you speak too quickly on this kind of programme.’

7. A vice-like grip of death - The BBC's Robert Peston writes about why Ireland is so reluctant to force its banks and foreign banks to share the losses now raging through its economy in the wake of a debt-fueled property bubble and bust.

Essentially, the Irish establishment is so scared of alienating its foreign creditors it won't force them to take a haircut. That's because the scale of what is owed is enormous. This is a must-read on Ireland.

Ireland's dependence on credit from abroad is so great that the economic consequences of that credit being withdrawn would be catastrophic. Take a look at the latest figures from the central bankers' bank, the Bank for International Settlements, on just the exposure of overseas banks to Ireland (in other words, credit provided by pension funds, hedge funds and wealthy individuals would be on top of this).

Total foreign bank exposure to Ireland's economy is $844bn, or five times the value of Ireland's GDP or economic output. Of that, German and UK banks are Ireland's biggest creditors, with €206bn and €224bn of exposure respectively. To put it another way, German and British banks on their own have each extended credit to Ireland greater than Irish GDP. Which doesn't sound altogether prudent, does it?

As for direct bank-to-bank lending, overseas banks have provided Ireland's banks with €169bn of loans, which is also greater than Irish GDP. Here's the point: an economy as open and as dependent on foreign finance as Ireland's cannot afford to alienate its creditors. If those overseas lenders asked for their money back now, Ireland's recent fall back into a modest economic contraction could spiral into dark deep prolonged recession or even depression.

There are two big conclusions to be drawn. First Ireland's inability to let market forces take their course will be seen by many as another example of why the banking industry has lost any semblance of right to operate according to normal commercial freedoms. Second, the Irish economy is hideously and perilously balanced between recovery and Armageddon.  

8. A sea of US dollars  - Independent US banking analyst Chris Whalen comments at ZeroHedge about the huge wodge of cash sitting in non-interest bearing accounts in the United States that will eventually go hunting for yield in other currencies. New Zealand dollar anyone?

No interest looks pretty good when others are getting haircuts -- including some skin and muscle tissue with the cut. When banks are shrinking 4-5% annually, there is no place for the mountain of new dollars minted by the FOMC. We are about one quarter of the way through the foreclosure mess.

That means another 10-20 percent shrinkage in the U.S. banking system.

Regardless of QE or no, the markets seem to believe that the next move in rates is up. The action in the currency markets regarding the dollar suggests that this may be right. Thus fiat dollars are bubbling up from the floors in search of yield -- and moving into other currencies.  

9. The problems in Europe - Author of the excellent Traders, Guns and Money Satyajit Das has a good look in this CNBC interview below at the problems with Europe's rescue fund, which is all very topical as everything comes to a head again in Ireland, Greece and Spain.

Das describes the Greek rescue plan as a band aid on a bullet wound. He describes the European crisis fund as a giant Collateralised Debt Obligation. Watch this space. HT Yves Smith at Naked Capitalist.

10. Totally irrelevant video - Australia's next top model is not really the top model. Tres, tres amusant. I'd just like to thank Foxtel for this wonderful cockup.

The moment of car crash television is about 1 mins 45 seconds in. Sarah Murdoch is the host. The loser/winner or is that loser (I've forgotten now)  is being flown to New York as well.

"OMG. I don't know what to say about this. I feel a bit sick about this. It was a complete accident. It's Amanda. I'm so sorry. It was fed to me wrong. This is what happens when you have live TV."

folks."`