Monday's Top 10 with NZ Mint: World Bank calls for return to gold standard; Europe smoulders again; Green belt madness; Dilberts

Here are my Top 10 links from around the Internet at 10 to 3 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 Tuesday'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. 'Go back to gold' - The current president of the World Bank, Robert Zoellick, has called in this FT OpEd for a return to some sort of global gold standard.

Now even the grownups are talking about it.

Zoellick is part of the establishment.

For him to start talking about a return to the gold standard is quite something.

The G20 is highly unlikely to do anything this weekend, but the drums are beating.

This is all about a collapse in faith in the world's reserve currency since 1944 when the first Bretton Woods agreement was dicated by the winners...

The question is: what next?

Here's Zoellick's view.

The G20 should complement this growth recovery programme with a plan to build a co-operative monetary system that reflects emerging economic conditions. This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account.

The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.

The development of a monetary system to succeed “Bretton Woods II”, launched in 1971, will take time. But we need to begin. The scope of the changes since 1971 certainly matches those between 1945 and 1971 that prompted the shift from Bretton Woods I to II. Serious work should include possible changes in International Monetary Fund rules to review capital as well as current account policies, and connect IMF monetary assessments with WTO obligations not to use currency policies to remove trade concessions.  

2. Watch out for Europe - Bloomberg reports Ireland's latest austerity moves have not convinced bond markets and investors are nervous again in the Euro zone.

Ireland led a surge in the cost of insuring sovereign debt to a record as the government struggles to convince investors it can avert a European Union-led bailout. Credit-default swaps on Ireland rose for a ninth day, soaring 18 basis points to 587, according to data provider CMA.

The Markit iTraxx SovX Western Europe Index rose 6.5 basis points to a record 171.5. Austerity measures in Europe’s so-called peripheral countries are failing to reassure investors that fiscal crises are under control. Ireland yesterday accelerated plans to cut its budget to avoid the fate of Greece, which was rescued earlier this year, and Portugal is suffering higher borrowing costs after agreeing the biggest spending cuts since the 1970s.

“Peripheral Europe is burning again,” said Sanjay Joshi, who oversees about $500 million as a money manager at London & Capital Group Ltd.

“Ireland talking about more austerity cuts, it just makes the whole situation worse, not better.”  

3. 'All he understands is printing money' - Currency and commodities guru Jim Rogers has ripped into Fed Chairman Ben Bernanke in the wake of QE II.

“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers, 68, said in a lecture at Oxford University’s Balliol College yesterday.

“All he understands is printing money.” “His whole intellectual career has been based on the study of printing money,” said Rogers, who predicted the start of the global commodities rally in 1999. “Give the guy a printing press, he’s going to run it as fast as he can.”  

4. Until death does us part - The Daily Mail reports a survey in Britain has found 8.6% of British pensioners are still repaying their mortgage.

I wonder what the stat is for New Zealand.

This is what happens when a nation tries to borrow its way to greatness.

High debt can change they way people live and plan. It means people having families later and postponing retirement.

Dr Ros Altmann, director general of Saga, said: ‘There are a lot of people who are going to have to keep on working just to pay their debts. They have no choice.’

A separate report, from the economic research group Policis, suggests the problem will get worse. It found that 53 per cent of over-50s with a mortgage have a loan which stretches past their 65th birthday. Nearly two-thirds said they ‘intend to borrow into retirement to support their financial plans for later life’.

5. Dumping exit fees? - The reaction to Ralph Norris' decision to put up CBA's mortgage rates by more than the OCR increase is rumbling on.

Politicians over the Tasman are now calling for the removal of exit fees, which include fixed mortgage break fees. The Daily Telegraph is reporting three of the big four banks there are talking about taking a pre-emptive strike to calm down the ugly political environment there.

We'll see. The last time a bank pre-emptively removed fees (NAB dropped exception fees) it spread around the banks and moved across the Tasman.

Senior officials at three major banks said yesterday that exit fees, which cost customers upward of $900, would soon be a thing of the past in a surprise act of appeasement making it easier for customers to switch banks. It follows a week of bank bashing by angry customers and politicians after the Commonwealth Bank jumped on an official rate rise of 0.25 per cent on Tuesday to lift its rates by 0.45 per cent.

Asked if banks would act themselves on exit fees, one major bank official who asked to remain anonymous said: "Oh yeah, absolutely. Don't be surprised if you start to see the end of them very soon. "I'm not sure the Government can really tell us to get rid of them, but I believe there will be some movement on that before the Government steps in anyway."

6. Rising world food prices - The Guardian reports Another one of the unintended consequences of the Fed's QE II is higher food prices, particularly in those parts of the world still pegged or connected to the US dollar. HT Troy.

The US central bank was accused today of adding to soaring food prices with its new programme of quantitative easing, after oil and commodities surged on world markets. Critics said the $600bn (£370bn) of QE announced by the Federal Reserve would hurt consumers by pushing up prices of soy, wheat and other staple foods, along with oil, copper and zinc.

The jump in commodity prices raised the prospect of an inflationary bubble reminiscent of 2008, when oil and other industrial raw materials struck all-time highs just before the crash.

7. Green belt madness - Tim Black writes at Spiked about how new British home building has dropped to 100,000 a year from 450,000 a year in 1967.

Why is house-building so limited? Because, in contrast to the low political esteem in which construction is held, nature has never been so highly prized. Hence, since being established in 1955, the Green Belt, protected by the legislation of successive governments, has doubled in size. Such has been its growth that it now accounts for 1.6 million hectares in England alone – 13 per cent of the total land available.

As the housing shortage tightens its grip, the swathes of countryside encircling our towns and cities symbolise the strangulation of the construction industry. Ranged against those who would quite like somewhere to live, then, is an anti-growth, anti-construction lobby that has grown in strength over the past couple of decades. It comprises groups such as the Campaign to Protect Rural England and the Green Party, and has been given governmental approval in Lord Rogers’ Urban Task Force, which decreed that new housing should be confined to the few vacant lots that become available in the city. So, the housing needs of people have come a poor second to the sentimental needs of an elite basking in the righteousness of an environmentalist agenda.

Preserving the countryside from people has become more important than meeting people’s needs. Ever more complicated sets of planning rules and regulation, designed to put off prospective house-builders, have merely compounded matters. Yet while the mortgage bubble inflated, the few construction companies that could afford to indulge the planning authorities’ sustainable whims were more than happy to build fewer homes and flog them at extortionate prices. It was just that when the asset bubble popped over two years ago, the UK’s construction industry imploded with it.  

8. Nice soup, shame about the US dollar - Michael Hudson,  an economics professor at the University of Missouri, hits the nail on the head with his assessment of the Fed's QE II and the likely outcome of the G20 meeting later this week. This is today's must-read in my view. HT Paul and Darryl via email.

"The object of warfare is to take over a country’s land, raw materials and assets, and grab them," Hudson says. "In the past, that used to be done militarily by invading them. But today you can do it financially simply by creating credit, which is what the Federal Reserve has done."  

The world is dividing into two currency blocs. And over the last few months, China has gone to Turkey, Malaysia, Thailand, and said, "We want to avoid using the dollar altogether." They’re treating it like a pariah currency.

They’re saying, "Well, let’s make a currency swap. We’ll give you our Chinese RMB, you give us your currency, the baht, and we’ll do our trade in our own currency. We are isolating the dollar, so that people are not going to use the dollar anymore." That’s why the dollar is plunging on world foreign exchange markets.

The whole world that America created after World War II of open markets is now closing off. And it’s closing off, really, because the United States is trying to rescue the real estate market from all the junk mortgages, all the crooked loans, all of the financial fraud, instead of just letting the fraud go and throwing the guys in jail like other economists have suggested.

JUAN GONZALEZ: And what do you expect to happen at the G20 meeting that’s coming up now?

MICHAEL HUDSON: The same thing that happened two weeks ago: absolutely nothing. They will all agree that the soup was very good, that the food was nice, and that they will have further discussions. But America will not get any of what it’s asking for from them, because they’re going to say, "Look, we’re not going to let you create electronic keyboard credit and buy out our real estate and our industry and empty out our bank reserves like you did in the 1997 Asia crisis." That’s never going to happen again, and the world is going to begin splitting into two currency blocs: the BRIC bloc and the dollar bloc.

9. How it compares - America's employment recession is worse than any seen in the post-War era, this excellent chart from Calculated Risk shows.

10. Totally irrelevant video - Jon Stewart on Barack Obama's 'walk of shame'. 'Mr President how much do you suck?'