Here are my Top 10 links from around the Internet at 10 past 10am, 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 Wednesday'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 Global Banking System is broken' - The mood of anger is building in the Northern Hemisphere is building against the 'Too Big To Fail' banks that were bailed out and then promptly went back to their old proprietary trading and bonus-raking games while restricting lending.
The shock is now starting to settle in. The bailout didn't work.
America is going into a double dip recession, forcing its central bank to print money.
Yet the bankers still make their bonuses and complain about high taxes. See below.
Something ugly is brewing over there.
Here's Ann Pettifor at HuffPo. HT John via email
A report out today, "Where did our money go?" from the London-based new economics foundation ( declaration of interest: I am a Fellow of NEF) -- reveals that net lending to households and firms is negative. British banks are currently borrowing £12 billion ($18bn) a month to maintain existing levels of activity.
According to the Bank of England, by 2011 they will have to borrow £25 billion ($39bn) a month -- and the Bank is sceptical they can continue to raise that level of funding. According to the Bank of England UK banks are not alone in facing a significant refinancing challenge.
Global banks are estimated to have around US$5 trillion of medium to long-term funding maturing over the next three years, and 'the scale of competition for funds in global markets' is intense. By borrowing from the real economy, and then refusing to lend, except at high rates of interest, bankers are effectively performing a lobotomy on the real economy. They are cutting critical credit connections to and from the vital 'cortex' -- the region of the economy responsible for investment and the creation of jobs.
Without a sound banking system and cheap, carefully regulated credit, the public and private sectors will not invest in e.g. green jobs or infrastructure. Output will continue to plummet, and unemployment and poverty to rise.
2. 'Things will unravel faster than you think' - Independent banking analyst Chris Martenson is a very close observer of America's banking system and economy.
He thinks we're on the brink of something big. He's not sure when or how much or what will trigger it. A must read.
Far too many people expect events to unfold in a more or less orderly manner, with plenty of time to adjust along the way. In other words, linearly. The world does not always cooperate, and my concern rests on the observation that we still face the convergence of multiple trends, each of which alone has the power to permanently transform our economic landscape and standards of living.
Three such trends (out of the many I track) that will shape our immediate future are: Peak Oil, Sovereign insolvency and Currency debasement
Individually, these worry me quite a bit; collectively, they have my full attention. History suggests that instead of a nice smooth line heading either up or down, markets have a pronounced habit of jolting rather suddenly into a new orbit, either higher or lower.
3. 'My class is winning' - Warren Buffett acknowledges in this interview in the New York Times that the rich don't pay nearly enough tax in America and it's not fair. He's onto it.
Tell that to the Tea Party though, which is having its strings pulled by the uber-rich.
Mr. Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all. It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office.
Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees.
“How can this be right?” Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.
“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
4. '19 facts about the Deindustrialisation of America that will make you weep - BusinessInsider has one of those fancy slide shows to make you click a lot. A bit cheeky but basically right. HT Blair via Twitter.
The United States is rapidly becoming the very first "post-industrial" nation on the globe. All great economic empires eventually become fat and lazy and squander the great wealth that their forefathers have left them, but the pace at which America is accomplishing this is absolutely amazing. It was America that was at the forefront of the industrial revolution. t was America that showed the world how to mass produce everything from automobiles to televisions to airplanes.
It was the great American manufacturing base that crushed Germany and Japan in World War II. But now we are witnessing the deindustrialization of America.
Tens of thousands of factories have left the United States in the past decade alone. Millions upon millions of manufacturing jobs have been lost in the same time period. The United States has become a nation that consumes everything in sight and yet produces increasingly little. Do you know what our biggest export is today? Waste paper.
5. 'Concrete plans' - CNN reports on how a protestor at Ireland's bailout of Anglo Irish Bank tried to ram the gates of parliament with a concrete mixer truck. Things are getting ugly in Europe too.
An outbreak of national gaiety ensued, from the streets to the Twittersphere: "Finally the government has some concrete plans," said one; "The government must be mortarfied," said another. But there was not much merriment in Mr Lenihan's speech.
After a battering in the bond markets, where the theoretical cost of government borrowing rocketed last week to record highs of 6.9 per cent and bond yields became virtually the only topic of conversation in Dublin, the finance minister desperately needed to draw a line under a banking crisis that has come close to sinking the economy. There have been many "moments" in Ireland's crisis, but this looks like the make-or-break one.
6. 'The Fed will not survive' - Nassim Taleb has a few thoughts on the future of the US Federal Reserve, HuffPo reports.
"This transformation from private debt ... to public debt" is "bad" from a risk standpoint and "immoral" from an ethical standpoint, Taleb -- a member of the Derivatives Hall of Fame whose book became a bestseller -- told a crowd at the Washington Ideas Forum, an event held by The Atlantic and The Aspen Institute.
Deficits "will break the Fed" and it will be replaced, he predicted. "The Romans had a saying," Taleb added: "The grandchildren should not bear the debt of the grandparents." That debt is made more dangerous, Taleb said, by the increasingly complexities of the financial system, a problem that he said has not been ameliorated during the last three years.
"Debt and complexity are not friends," he said, because "complexity causes unpredictability," and heavy debt burdens mean one false move, whether by an individual actor or a system, could spell disaster.
7. Alternative currency - China and France are working on building an alternative reserve currency, Zerohedge points out. They had better get a move on./
The FT reported that France and China had been in secret talks over "heightened co-ordination of exchange rates" which is another way of saying finding alternatives to the rapidly debasing US Dollar.
"The talks and their content have been kept secret, in an attempt to draw China into a discussion on global currency co-ordination, a subject that Beijing has been reluctant to countenance in the past. In an ambitious move reminiscent of the currency accords of the 1980s, President Nicolas Sarkozy hopes to open a debate on the subject when France takes over the presidency of the G20 group of leading nations in November, according to people familiar with the matter."
Yet China's desire to engage in a currency axis away from the US is no secret, and many have alleged that Beijing has approached both Russia and Germany in the past about a USD substitute
8. A recurring meme - This Newsweek article from August about how renowned billionaire hedge fund trader Stephen Schwarzman complained about a higher tax by comparing Obama to Hitler has turned into a recurring theme.
Public anger in America is growing at how the bankers drove through bailouts and are back to their merry bonus-raking ways while the public (eat cake) suffer with high unemployment and monstrous debts. We'll hear more about this.
I'm still amazed frankly that many of the Manhattan bankers still believe they have a right to earn gazillions and that the little people should just shut up. In ancient times their heads would already be on pikes.
The chairman and cofounder of the Blackstone Group, one of the world’s largest private-equity firms, amped up the rhetoric. Stephen Schwarzman—the leading John McCain supporter in a firm that, in 2008, gave more money to Obama—was addressing board members of a nonprofit organization when he let loose. “It’s a war,” Schwarzman said of the struggle with the administration over increasing taxes on private-equity firms. “It’s like when Hitler invaded Poland in 1939.”
9. Currency wars bulletin board - The New York Times has a nice wrap on where the currency wars are at right now. Everyone is joining in.
Some economists argue that the standoff over China’s currency could herald a new era of protectionism reminiscent of the 1920s and ’30s, which they say they fear could undermine trade and make a weak recovery even weaker. But others argue that it was the free-market consensus of the 1980s and ’90s that weakened American competitiveness and was exploited by rising powers like China, calling for a more assertive policy to protect jobs, increase exports and keep industry at home.
“Everyone’s playing beggar-thy-neighbor games, willingly or unwillingly,” Michael Pettis, a Peking University professor and economist at the Carnegie Endowment for International Peace, said in an interview. “This is very similar to what happened in the ’30s, when the collapse in Europe’s ability to finance itself also meant a collapse in its trade deficit, and the world rushed around trying to find a new equilibrium in which every country tried to grab a larger share of the dwindling global demand.”
10. Totally irrelevant video - It seems the main marketing vehicle for airlines these days is the safety message video. Air NZ went naked (in an ad).
Here Cebu Pacific's attendants get jiggy with it. The next step is for the Air NZ hosties to really go naked. Or maybe not...certainly not unless they're as good looking as this hostie. HT Ken Freer via twitter.
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