Here are my Top 10 links from around the Internet at 10 to 1 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 Friday'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. From Celtic Tiger to Celtic Chimera in a few short years - Former US banking regulator Bill Black has been a trenchant independent critic of central banks and banking regulators through the crisis. He's well worth reading.
Now he has taken a close look in BusinessInsider at the Irish banking and economic debacle.
He makes some equally pungent points about the European Union and the Euro Zone's longevity.
He suggests the Euro zone and its banking system is contributing to systemic "accounting control fraud."
It's a good independent analysis of the Irish problem and what it means for global economy.
He has a good go at the German banks.
The nation whose banks have large, unrecognized losses on debt among each of the PIIGS is Germany. German banks acted like drunken “Girls Gone Wild” as soon as they were approached by a foreign borrower. Germany's Bank Gone Wild were hooked on yield – for a trivial increase in yield, without any meaningful due diligence, they made massive unsecured loans to many of the most fraudulent borrowers throughout Europe.
Borrowers engaged in control fraud have two great attractions for bankers gone wild – they typically report extreme profitability (which makes them appear to be creditworthy to the credulous) and they are willing to promise to pay higher interest rates).
Their promises, of course, have all the reliability of the producers' of “Girls Gone Wild” promises that the girls will be able to launch a film career if they shed their clothes. Where were the German banking regulators? They seem to have believed that “What happens in Vegas (Dublin) stays in Vegas (Dublin).” Instead, their German banks came back from their riotous holidays in the PIIGS with BTDs (bank transmitted diseases).
The German banks' regulators continue to let them hide the embarrassing losses they picked up on holiday, but that cover up will collapse if any of the PIIGS default. The PIIGS will default if the EU does not bail them out, so there will be a bail out even though the German taxpayers hate to fund bailouts.
2. Japan's ageing problem - The Economist has a groovy chart showing Japan's ageing population and mades this conclusion.
FOR about 50 years after the second world war the combination of Japan’s fast-growing labour force and the rising productivity of its famously industrious workers created a growth miracle. Within two generations the number of people of working age increased by 37m and Japan went from ruins to the world’s second-largest economy. In the next 40 years that process will go into reverse.
The working-age population will shrink so quickly that by 2050 it will be smaller than it was in 1950, and four out of ten Japanese will be over 65.
Unless Japan’s productivity rises faster than its workforce declines, which seems unlikely, its economy will shrink.
3. 'Peak Oil? Not a chance' - Clifford Krauss at The New York Times reports a variety of specialists saying there is no Peak in Peak Oil and we should all relax a bit.
Energy experts now predict decades of residential and commercial power at reasonable prices. Simply put, the world of energy has once again been turned upside down.
“Oil and gas will continue to be pillars for global energy supply for decades to come,” said James Burkhard, a managing director of IHS CERA, an energy consulting firm. “The competitiveness of oil and gas and the scale at which they are produced mean that there are no readily available substitutes in either one year or 20 years.”
The outlook, based on long-term trends barely visible five years ago, now appears to promise large supplies of oil and gas from multiple new sources for decades into the future. The same high prices that inspired dire fear in the first place helped to resolve them. High oil and gas prices produced a wave of investment and drilling, and technological innovation has unlocked oceans of new resources.
Oil and gas from ocean bottoms, the Arctic and shale rock fields are quickly replacing tired fields in places like Mexico, Alaska and the North Sea.
4. Banks are good sometimes - The Daily Mail reports a pensioner in Britain who distrusted banks so much he put 80,000 pounds of life savings either under the bed or in his car. One day he left the bag with the cash on top of the car roof and drove off... It's a painful story.
The man from Southend, Essex, was in tears as he told how he'd saved £2,000 a year all his working life to ensure he could support himself in his retirement. For many years he stashed the money under his bed, but when his guard dog died, aged 12, he decided it would be safer to keep the money in his car.
He had bundled £10,000 wads of notes into eight small plastic bags, placed inside another plastic bag and then a blue drawstring bag.
He said: 'My car is never more than 10ft away from me when I am work so I can keep an eye on it. That morning I went to work at about 6.20am and didn't realise I had lost it until noon. 'I went home and checked my bedroom in case I had left it there. 'Then I realised I must have put it on the roof of my car. If not, I may put it down as I got in the car, but either way it was gone.'
He added: 'I'm gutted. I have worked all my life and have never been on benefits or asked anyone else for a penny. I don't have a (company) pension so this was all I had.
5. 'Cramer goes nuts' - I haven't seen this before and it's old, but it's worth watching. It's Jim Cramer commenting/ranting on CNBC at the time that Bear Stearns was melting down in 2008. A tad frightening, if a little old. It takes you right back. HT Rob via email.
6. 'Smell the fear' - UK Independent Party Leader and European Parliament member Nigel Farage delivered this Euro-hostile rant to the faces of Europe's leaders in the European parliament. It has a certain edge to it. HT Gertraud via email.
7. 'Short term thinking' - William White, the former chief economist at the Bank for Institutional Settlements, blames 'short termism' and a focus on 'flows' rather than 'stocks' for the credit crisis. White even mentions New Zealand as one of the savings culprits. HT Ed Harrison at Credit Writedowns.
In essence, White was saying: "it’s the debt, stupid." When aggregate debt levels build up across business cycles, economists focused on managing within business cycles miss the key ingredient that leads to systemic crisis. It should be expected that politicians or private sector participants worried about the day-to-day exhibit short-termism.
But White says it is particularly troubling that economists and their models exhibit the same tendency because it means there is no long-term oriented systemic counterweight guiding the economy.
This short-termism that White refers to is what I call the asset-based economic model. And, quite frankly, it works – especially when interest rates are declining as they have over the past quarter century. The problem, however, is that you reach a critical state when the accumulation of debt and the misallocation of resources is so large that the same old policies just don’t work anymore. And that’s when the next crisis occurs.
8. 'Just like Enron' - Bethany McLean, the reporter who broke the Enron story, writes at Slate that the US government's accounts are just like Enron's...
Start with the most basic problem: accounting. At the heart of Enron's artifice were accounting tricks that served to mask the true amount of debt the company had by keeping it off the company's financial statements. This had the effect of making Enron look far healthier than it was. At the time Enron went bankrupt, it had $38 billion in debt—only about $12 billion of which was reflected on its balance sheet.
The federal government is similarly able to keep its biggest debt liabilities off the books: Social Security and Medicare.
The vast payouts these two programs will need to make in coming years aren't reflected on the government's balance sheet. The government argues that's proper because the terms of the payout can be changed. (Really? See paragraph one.) David Walker, who served as comptroller general from 1998 to 2008, puts the liability at $45 trillion to $50 trillion. "They don't combine them, they don't add them up to show how serious the problem is," he said on The Daily Show.
John Williams of the Web site Shadow Stats said that if you added up the present value of all the government's liabilities, the annual deficit in 2008 was $5.1 trillion, versus the official number of $455 billion.
9. The swagger is returning to Wall St's spending habits - The WSJ's Dealbook reports here.
“Wall Street is back spending as much if not more than before,” said the New York cosmetic surgeon Dr. Francesca J. Fusco, whose business is booming again after a difficult few years.
Christie’s auction house says investors from the financial world who fell out of the bidding market during the 2008 credit crisis are “pouring” back in.
And here's a video of what a 23 year old investment banking analyst does for fun. "Models and bottles." He thinks its important to arrive with some arm candy...
10. Totally irrelevant but uplifiting video - Buskers sing 'Stand by Me'. The sound quality is spectacular.
Stand By Me | Playing For Change | Song Around The World from Concord Music Group on Vimeo.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.