Here are my Top 10 links from around the Internet at 10 to 12 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.Here's the problem - The Nation points to the end of globalisation because the consumption engine is broken in America.
It's every country for themselves in the Currency Wars.
This is today's must-read.
It shows that old thinking about globalisation is dying.
Even Andy Grove of Intel is disillusioned.
"I admire the Chinese for recognizing the world economy is still a jungle, despite all of its legal trappings," says Alan Tonelson, a conservative trade critic at the US Business and Industrial Council.
"But here's the problem. They don't seem to understand that unless the US economy recovers its financial and economic health, the entire world will come crashing down. The reason is, we won't be able to serve any longer as the import sponge that buys from everyone else."
We have reached the endpoint of globalization as we have known it. It cannot continue as before, because the United States is essentially tapped out. Goliath has fallen and cannot get up. Who will lend a hand?
Not China, obviously, but also not Japan and the Asian Tigers, or the European nations. All are dealing with their own problems. All but the smallest economies run perennial trade surpluses with the United States. Giving up some of those surpluses means surrendering some portion of domestic growth in order to stabilize the system. No one wants to go first. This is a dangerous impasse, the kind that can easily slip into a general unwinding—that is, depression—if not resolved smartly.
"The world is no longer in a common foxhole...but in many different foxholes," observes economist Paul McCulley of PIMCO, the world's largest bond house.
Japan and South Korea devalue their currencies to protect their exports (so has the United States). Brazil puts limits on capital inflows to stop foreign money from destabilizing its economy. Currency war is a surrogate for trade war, one of the few levers governments can still manipulate unilaterally.
2. Debt restructuring issues - Iceland is at the bleeding edge of the curve when it comes to dealing with the financial crisis. Here's some sobering detail from Bloomberg on what's going on oop north in the land of fire and ice.
Iceland’s first female Prime Minister, Johanna Sigurdardottir, will present what may be the world’s biggest debt relief proposal next week, risking alienating the International Monetary Fund and bank creditors. The 68-year-old is trying to prevent the 39 percent of households that are technically insolvent from losing their homes.
She was forced to back down from proposals requiring lenders to forgive $2 billion in mortgage debt -- 15 percent of Iceland’s economic output -- after pension funds blocked them. Now she’s looking for other ways to help families reeling from last year’s 20 percent drop in incomes.
The job has required “literally resurrecting Iceland from the ruins of collapse,” Sigurdardottir said in an e-mailed response to questions. “It’s demanded a new modus operandi -- new ethics.”
3. The Fed's backfiring blunderbuss - Mohamed El Irian from global bond fund Pimco nails the problems with the Fed's QE II programme.
Other government agencies are paralysed by real and perceived constraints, seemingly happy to retreat to the sidelines and let the Fed do all the heavy lifting. But liquidity injections and financial engineering are insufficient to deal with the challenges that the US faces. Without meaningful structural reforms, part of the Fed’s liquidity injection will leak right out of the US and result in yet another surge of capital flows to other countries.
The rest of the world does not need this extra liquidity, and this is where the second problem emerges. Several emerging economies, such as Brazil and China, are already close to overheating; and the eurozone and Japan can ill afford further appreciation in their currencies. Despite polite rhetoric to the contrary in the lead up to the Group of 20 leading economies summit in Korea this month, other countries are likely to counter what they view as an unnecessarily disruptive surge in capital flows caused by inappropriate and short-sighted American policy.
The result will be renewed currency tensions and a higher risk of capital controls and trade protectionism.
4. The 99ers - Many American unemployed people are nearing the end of their unemployment benefits after the requisite 99 weeks. Some are getting a bit nervous about what happens next. Here's Christian Science Monitor.
The 99ers are growing fast. Some 2 million to 4 million Americans have already exhausted their benefits, according to Michael Thornton, writer/editor of an online publication, the Rochester Unemployment Examiner.
This month, some 91,000 UI claimants join their ranks every week, he estimates. Many 99er activists aim to keep fighting for UI benefits until jobs start growing robustly. "We are desperate," says Mignon Veasley-Fields of Los Angeles, who exhausted her UI benefits in June. King says she became a "zealot for the unemployed" as an antidote to her previous "deep depression" caused by joblessness.
A former legal compliance officer at a San Diego mortgage-lending firm, she couldn't land any full-time work before her UI benefits ran out this March. "I said I'm not going down without a fight," she says. Last year, learning about the possibility of legislation extending unemployment benefits – what became Tier 3 and Tier 4 of the Emergency Unemployment Compensation program – she got involved.
Her activism eventually led to her joining examiner.com to produce a blog, launch a blog-talk radio show, and create the website Jobless Unite Tier 5 to Survive!!!!, among other projects. "I am back to having a happy persona," she says. "Even though I'm scared to death, I am able to keep a joyous attitude, and through contact with others in my position, I can keep a perspective on how blessed I am."
5. The problem with Bank of America - Jonathan Weill from Bloomberg asks some uncomfortable questions about Bank of America.
The problem for anyone trying to analyze Bank of America's $2.3 trillion balance sheet is that it's largely impenetrable. Some portions, though, are so delusional that they invite laughter. Consider, for instance, the way the company continues to account for its acquisition of Countrywide Financial, the disastrous subprime lender at the center of the housing bust, which it bought for $4.2 billion in July 2008.
Here's how Bank of America allocated the purchase price for that deal. First, it determined that the fair value of the liabilities at Countrywide exceeded the mortgage lender's assets by $200 million. Then it recorded $4.4 billion of goodwill, a ledger entry representing the difference between Countrywide's net asset value and the purchase price. That's right. Countrywide's goodwill supposedly was worth more than Countrywide itself.
In other words, Bank of America paid $4.2 billion for the company, even though it thought the value there was less than zero. Since completing that acquisition, Bank of America has dropped the Countrywide brand. The company's home-loan division has reported $13.5 billion of pretax losses. Yet Bank of America still hasn't written off any of its Countrywide goodwill.
6. The battle of the Aussie banks - First it was the bigger than OCR rate hike. Now it's the unpaid tax. The battle between Australia's big four banks and politicians from both sides of politics is raging across the Tasman. Here's the latest from the SMH.
THE major banks managed to lower the proportion of tax they paid over the past year, with some, such as Westpac, paying just a fraction of the overall corporate tax rate.
The revelation is expected to reignite calls for a super profit-style tax across major banks, similar to a big bank tax levy which is being introduced across Britain, France and Germany.
The British tax scheme is forecast to raise tens of billions of pounds in additional revenue.
The calls come as shadow treasurer Joe Hockey yesterday pressed the opposition's political advantage in the bank row by proposing a private member's bill to give the Australian Competition and Consumer Commission further powers to investigate price signalling that ''leads to collusion and anti-competitive behaviour among the big banks''.
7 .Speed dating financial advisors - The Eureka Report picks out some astonishing stories about the 'soft dollar' commissions paid to Australian financial advisors, including tickets to Disneyland and 'speed dating' sessions for single financial advisors. Seen similar things here besides the usual golf trips to Fiji for finanancial advisors funnelling money into Bridgecorp.
# In November 2008, BT subsidised a “speed dating” function for single advisers in Queensland.
# Suncorp issued one lucky ANZ adviser special accommodation at SeaWorld in 2007; while another ANZ planner was given “tickets to Disneyland” in 2005.
8. Spectacularly irrelevant video with great NZ music - Here's a timelapse photography video with music from Nigel Stanford, one of the founders of TradeMe. HT Sam via Twitter.
9. Utterly irrelevant video - This is a legendary Kiwi music video from 1984 when I was young and cared more about these things. It's still hilarious. Elephunk in my soup.
10. Totally irrelevant video - Lady Gaga never did it like this. Good thing too.
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