Wednesday's Top 10 with NZ Mint: America's housing market 'robo-meltdown'; Allan Hubbards 'stellar' (and expensive) team; Currency wars raging; Dilbert

Here are my Top 10 links from around the Internet at 10 to 2 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 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. Has Old Man Hubbard really run out of money? - Fran O'Sullivan writes in the NZHerald that Allan Hubbard does seem to have a few shekels to pay high priced lawyers, lobbyists and PR people.

You'd have to wonder how stellar they are, judging from the quality of the support from the supporters behind Hubbard. They seem mired in their own internal battles right now. I'm not so sure this is a 'careful social media strategy'.

But Fran seems to think there are greater and wiser heads at work well behind the scenes.

Hard to see how wise and great they are, given they seem so deep behind the scenes, but here's the interesting detail.

Behind the scenes a stellar team has been deployed on what is probably the biggest reputation management exercise mounted on behalf of a single Kiwi businessman. The "Hubbard team" does not come cheap.

Russell McVeagh's Tim Clarke who is the "go to" Wellington lawyer who has been investigating a potential legal challenge to the Government's decision to impose statutory management.

Long-time public relations expert Sue Wood who has a backroom role. Wood is not prepared to speak publicly about what she is doing on behalf of Hubbard and is also keen to ensure that other Hubbard teamsters - such as Clarke - stay off-limits to media. But the former National Party president is understood to have been instrumental in the careful social media strategy that has been employed to ensure Hubbard supporters' maintain their rage against the Government for putting the founder of South Canterbury Finance into what is effectively a commercial strait-jacket.

Public law practitioners Chen Palmer. The Wellington-based lobbying firm recently circulated a letter to Commerce Minister Simon Power on behalf of 71 Hubbard investors asking him to terminate the statutory management of the Hubbard companies. The letter was copied to all other Cabinet ministers.  

2. Gold at US$2000/oz? - Famed commodities fund manager Jim Rogers tells CNBC  gold should be at US$2,000/oz in the next five to 10 years.

He also likes sugar, agriculture and rice.

"Agriculture has a wonderful future for the next 5, 10 and 15 years," he says.

3. They're actually saying it in public now - The President of the Federal Reserve Bank of Chicago, Charles Evans, told the WSJ in an interview he wanted the Fed to aggressively buy US Treasury bonds and to target inflation higher than 2%.

Oh boy. Open the gates of money printing hell right now.

It seems a sure thing that the Fed will announce a massive new round of Quantitative Easing on November 3, shortly after the mid-term elections.

Cue competitive devaluations, currency and capital controls, followed by tit-for-tat tariff wars. That or a complete rewrite of the global currency system along the lines of Bretton Woods or the Plaza Accord.

"In the last several months I've stared at our unemployment forecast and come to the conclusion that it's just not coming down nearly as quickly as it should," Mr. Evans said Monday in an interview with The Wall Street Journal. "This is a far grimmer forecast than we ought to have," he added.

As result, he said, he favors "much more [monetary] accommodation than we've put in place." The comments are significant because Mr. Evans tends to reflect the broad center of gravity at the central bank. His prescription for aggressive action, though not uniformly held by his colleagues, suggests a shift in the mood at the Fed.

On the heels of remarks by Fed Chairman Ben Bernanke and New York Federal Reserve Bank President William Dudley, it is likely to reinforce a growing conviction among investors that the Fed will restart a bond-buying program when it meets Nov. 2 and 3.

It also suggests Fed deliberations are going beyond resuming bond-buying plans to contemplating new strategies for talking about inflation and for communicating the Fed's stance to the public.  

4. And the Japanese fire back - The Bank of Japan cut its official rate to zero % and announced a US$60 billion programme of money printing, NYTimes reports. Anyone wonder where Japanese investors might want to put their money if they want to avoid more devaluation of their own currency and actually want to receive a return (any return).?

Couple of guesses. Brazil? Australia? New Zealand? Are we ready for this?

Check out the comments below from the unnamed American officials. It's now a big joke. It's extraordinary now for the Americans to be lecuturing anyone about not engaging in competitive devaluations.

Some sort of end game is approaching. The November G20 talks look crucial.

Although American officials, at the Federal Reserve and the Treasury Department, declined Tuesday to comment on the Bank of Japan’s interest rate decision, a senior Treasury official suggested that Japan’s efforts to devalue the yen were a source of concern. It “will be something that we’ll want to discuss this weekend,” when finance ministers from around the world gather in Washington for the annual meetings of the International Monetary Fund and the World Bank, said the official, who spoke to reporters on condition of anonymity under ground rules set by the Treasury.

The official said the United States expected big economies to abide by commitments they made in September 2009 at the Group of 20 leaders’ meeting in Pittsburgh, to support the “rebalancing” of the global economy. In practice, that means that export-oriented surplus economies like China, Japan and Germany should foster domestic demand and encourage imports, while debt-burdened deficit countries, like the United States, should trim their trade and budget deficits.  

5. How fake money saved Brazil - This is a fascinating piece on NPR.com describing how Brazil changed its currency to solve its inflation problem. HT Troy via email. I had no idea of the story of the real. A cracking read about four drinking buddies who changed Brazil's economy.

It essentially shows how money is a psychological concept. When that breaks down people hunt for other things such as gold, which of course hit a record high again overnight of US$1,342/oz.

The four friends set about explaining their idea. You have to slow down the creation of money, they explained.

But, just as important, you have to stabilize people's faith in money itself. People have to be tricked into thinking money will hold its value. The four economists wanted to create a new currency that was stable, dependable and trustworthy. The only catch: This currency would not be real. No coins, no bills. It was fake.

"We called it a Unit of Real Value — URV," Bacha says. "It was virtual; it didn't exist in fact." People would still have and use the existing currency, the cruzeiro. But everything would be listed in URVs, the fake currency. Their wages would be listed in URVs. Taxes were in URVs.

All prices were listed in URVs. And URVs were kept stable — what changed was how many cruzeiros each URV was worth. Say, for example, that milk costs 1 URV. On a given day, 1 URV might be worth 10 cruzeiros. A month later, milk would still cost 1 URV. But that 1 URV might be worth 20 cruzeiros. The idea was that people would start thinking in URVs — and stop expecting prices to always go up.

"We didn't understand what it was," says Maria Leopoldina Bierrenbach, a housewife from Sao Paulo. "I used to say it was a fantasy, because it was not real."

Still, people used URVs. And after a few months, they began to see that prices in URVs were stable. Once that happened, Bacha and his buddies could declare that the virtual currency would become the country’s actual currency. It would be called the real.  

6. Inside and outside - Inside America markets are trusting the US Federal Reserve. Outside America markets believe a great devaluation is beginning. Caroline Baum at Bloomberg has a nice summary of the madness that is a declining US dollar, rising US stocks and falling US Treasury yields. Interestingly, the S&P500 measured in gold actually fell overnight, rather than rose as suggested by the Index.

Here's Baum.

While stocks and bonds have been savoring the benefits of QEII, the message from currency and commodity markets is altogether different. The dollar has been sinking while gold sets new highs almost daily. Commodities overall have embarked on a bull run, just as in late 1993, when a jobless recovery finally kicked into gear.

If deflation -- that is, persistent, 1930’s like deflation; not a CPI decline of 1 percent -- were a threat, you would think folks would want to hold the currency, which buys more when prices fall. Instead, the currency market is forewarning of too many dollars in circulation.

7. New Bretton Woods? - The mood in global financial markets is turning febrile as it becomes clear a big shakeup in the Global Financial architecture is required. The G20 meeting in November looks like being the first real opportunity to talk about a new Bretton Woods or Plaza Accord.

8. Foreclosure moratorium? - There is growing talk in America about completely shutting down foreclosures across the country for 90 days in the wake of revelations of 'Robo-signers' of foreclosure documents causing mass injustice, Zerohedge reports. The really interesting development is that title insurers are stopping covering titles. The banks face being wiped out by this, forcing a second bailout by the US government. The CNBC video below is instructive.

And here is Gretchen Morgenson at the NYTimes with all the wretched detail.

The byzantine mortgage securitization process that helped inflate the housing bubble allowed home loans to change hands so many times before they were eventually pooled and sold to investors that it is now extremely difficult to track exactly which lenders have claims to a home. Many lenders or loan servicers that begin the foreclosure process after a borrower defaults do not produce documentation proving that they have the legal right to foreclosure, known as standing.

And Zerohedge.

CNBC's Diana Ollick confirms various so far unfounded rumors, that the government is planning to institute a 90 day foreclosure moratorium as it deals with the realization of just how big and pervasive the mortgage problem is, and even worse, will soon be. It is so bad that even a typically ebullient Larry Kudlow is forced to note that this is the "housing equivalent of the credit financial meltdown" and that "this is going to go on for ever."

The biggest issue that is now developing, as we noted last week, is the fact that title insurers (firms such as Fidelity National, First American, Stewart Info and Old Republic) are refusing to insure mortgages in foreclosure or otherwise, uncertain as to who actually owns the title.

And for all those who believe this will merely keep prices artificially high, we have very bad news - the problem with the title insurers walking away on fears of lawsuits is that no lender will be willing to write a mortgage without title insurance, meaning that suddenly the up-front component of home purchases will either necessarily have to surge, or home prices will have to plunge by a like amount, as there is simply not enough equity (read money) to cover the resulting debt deficiency.

Alas, this mess is just starting, and as people realize how bad it is, it very well may lead to a total collapse in the housing market

9. Causing chaos - Joseph Stiglitz is reported by Reuters as saying the US Federal Reserve and the European Central Bank are causing chaos on global markets.

He's right there.

A "flood of liquidity" from the Fed and the ECB is bringing instability to foreign-exchange markets, forcing countries such as Japan and Brazil to defend its exporters, Stiglitz told reporters in a conference at Columbia University. "The irony is that the Fed is creating all this liquidity with the hope that it will revive the American economy," Stiglitz said. "It's doing nothing for the American economy, but it's causing chaos over the rest of the world. It's a very strange policy that they are pursuing."

Stiglitz reckons government spending is the solution. I'm not so sure on that. I don't think it's our solution.

"Lowering the interest rates may help a little bit, but that's much too weak to address the problems facing the United States and Europe," Stiglitz said. "We need fiscal stimulus."  

10. Totally irrelevant video - Stephen Colbert talks about Germany finally paying off its debts from World War I debts. 'We world war won it..."