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Monday's Top 10 with NZ Mint: Irish voters want Irish banks to default on their bonds; May Wang's pirate float sets sail; Iceland's advice for Ireland; Dilbert

Monday's Top 10 with NZ Mint: Irish voters want Irish banks to default on their bonds; May Wang's pirate float sets sail; Iceland's advice for Ireland; Dilbert
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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. 'We love New Zealand' - Many thanks to Vanderlei Luxemburgo who took some snaps at the Auckland Christmas Parade on Sunday of the Natural Dairy crew (May Wang and her bunch of merry men) promoting their love for New Zealand ('We love NZ') to the good folk of Auckland on their float. (Pic below)

The float was a pirate ship.

I kid you not.

You've got to admire Natural Dairy's stickability.

May Wang is fighting off bankruptcy through the courts.

She can't get the Crafar deal past the Overseas Investment Office.

The Serious Fraud Office is also investigating the deal.

She really must love New Zealand a lot.

May Wang's Natural Dairy float in the Christmas Parade

2. 'Just default on the debt' - The Irish Independent reports most Irish voters want the (now) government-owned banks to default on their bonds.

Cue European banker/bureaucrat outrage. That's because this bailout is not about rescuing Ireland's economy or its people.

It's about rescuing the European banks who lent like drunken sailors to Irish banks, who were in turn bailed out by Irish taxpayers. HT Gertraud.

The finding that 57 per cent favour and 43 per cent oppose default reflects a growing view among policymakers and opinion formers that the State simply cannot support the debt burden it has taken on.

As Ireland awaited the fine details of the international bailout, which are expected tonight, it was learned last night that the Irish delegation negotiating with the EU-IMF last week raised the issue of default.

"The Europeans went completely mad," a senior government source said. Government sources have also denied an RTE News report on Friday that the average annual interest rate on the €85bn EU-IMF bailout would be 6.7 per cent. Last night the Minister for Finance, Brian Lenihan, told this newspaper that such an interest rate was "not acceptable to me".

But whatever interest rate is eventually agreed -- it is expected to be closer to 6 per cent -- the State will be burdened with a colossal annual interest payment of around €5bn over nine years, if or when the bailout is drawn down. This effective doubling of the interest payments that are already being made has helped to convince the public here that there must now be a default on a portion of the debt -- specifically, the portion lent to Irish banks, including senior bonds.

If that was to happen, it would be likely to cause a severe shock to the financial system worldwide and raise the risk of an international meltdown. However, advocates of a default say it is no longer in Ireland's national interest to prevent senior bondholders taking a hit.  

3. The nub of the question - Daniel McConnell at the Independent writes this excellent analysis: Do we cut our losses and burn unsecured bondholders -- or do we sacrifice ourselves for Europe? "

The Irish Government should serve its people, not bankers. By rewarding bondholders and paying them back for their stupid mistakes, we create a moral hazard. They should be punished for their failure. Bailing them out means they'll continue to take risks with the assumption they'll be bailed out again.

The same goes for people who've been lending money to these banks. As has been pointed out, both Russia (1998) and Argentina (2002) defaulted, restructured their debt, and came out fighting.

4. 'The economy is set to starve' - Independent (and expert) US banking analyst Chris Martenson believes in Peak Oil and is saying Americans need to get ready for it. Here's more detail. HT Cosmic via email.

The global economy will have to make do with less than half the rate of growth in oil that it enjoyed over the prior 25 years. How will the economy grow with less oil available? What will happen to the valuations of financial assets that explicitly assume that prior rates of growth stretch endlessly into the future?

To cut to the chase, the admission by the IEA that we will not be achieving past levels of energy growth should be the most gigantic red flag in history, at least to those who might care that their money or other paper-based forms of wealth be worth something in the future. What if that future growth does not emerge? What happens when the collateral for a loan goes sour? The IEA report indicates an enormous set of risks for an over-leveraged world reliant on constant growth.  

5. Painful and embarrassing  - National Australia Bank's payments processing problem is proving difficult to unwind and fix. It's becoming a very public and painful issue across the Tasman. Why is it always the 'upgrades' that downgrade service?

One for all the bank IT and marketing people to look at and gently thank the almighty that "There by the grace of god go I..."

THE crippling NAB payment processing failure that caused chaos for thousands of customers will continue today, and has been attributed by a bank source to human error rather than the corrupted file the NAB has blamed. The crisis stands to trigger a wave of late fees by third parties.

NAB cannot say when all customers will have access to their money. The bank source said NAB made a failed attempt to upgrade its ageing legacy mainframe on Wednesday night. An attempt was then made to process the payments while the failed upgrade was being reversed, which caused crucial data to be corrupted.

6. 'I'm off to Brazil' - The Telegraph reports Young Portugese people are looking at emigrating to Brazil, where they also speak Portugese, but have a growing economy. They're even fleeing to Mozambique. HT Darryl.

The prospects for young people were bad even before their current economic woes. Their parents enjoy job security which makes them almost unsackable no matter how little work they do, especially in the bloated public sector. Many public servants are paid for a 14 month year – with extra month's pay at Christmas and in summer. Senior public servants get cars and drivers, whether they want them or not.

The young, who entered the workforce when perks and safe jobs had come to an end, must struggle through on short-term contracts and bad pay. So many of the best-educated and brightest depart – and Portugal loses the energetic, skilled people it desperately needs. Ines Grasina, 18, a friend of Miss Silva, said she would also leave when she graduates, probably for London.

"I think a lot people are leaving Portugal to find jobs," said Ines Lamas, 25, a travel agent. "A friend of mine has just left to try to set up a restaurant in Mozambique. The debt problem here is getting worse. Things don't look good at all."  

7. Is it worth defaulting? - WSJ reports many Americans are starting to ask themselves that question when they see the average time that homeowners in foreclosure have managed to live in their property 'rent' free is an average of 492 days. HT Troy via email.

Banks are taking progressively longer to foreclose. The average borrower in the foreclosure process hadn’t made a payment in 492 days as of the end of October, according to LPS.

That compares to 382 days a year ago and a low of 244 days in August 2007. In other words, people who default on their mortgages can reasonably expect, on average, to stay in their homes rent-free more than 16 months. In some states such as New York and Florida, the number is closer to 20 months. That’s a meaningful incentive, and it’s likely to grow unless banks manage to boost their throughput.  

8. 'The finger of blame should turn upon itself' - China's inflation problem is so bad now that Chinese students are rioting over the cost of food in the school canteen, the South China Morning Post reports. Yet, as the Economist points out, China's complaint that the Fed is to blame for its inflation problem is disengenuous.

Despite its best efforts, the Fed has only succeeded in raising America’s broad money supply (as measured by seasonally-adjusted M2) to about $8.8 trillion. China’s central bankers, on the other hand, have increased China’s M2 to almost 70 trillion yuan, or $10.5 trillion.

China has a greater quantity of money circulating in an economy a third of the size. Who is calling whom easy?

9. Ireland should have let its banks fail - Iceland has some advice for Ireland, Bloomberg reports.

You know you're in trouble when Iceland says it is better off than you.

Iceland’s President Olafur R. Grimsson said his country is better off than Ireland thanks to the government’s decision to allow the banks to fail two years ago and because the krona could be devalued.

“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today.

“These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

10. Totally imcomprehensible video about something to sell the government

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32 Comments

Here's one response to a financial crisis: confiscate the private pension system. That's what Hungary did last week. Argentina did it a while back.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a6848KPU9JA0

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”

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Ah and the Ponzi  Pension wars have begun!! France has made its move too:

http://www.efinancialnews.com/story/2010-11-29/france-seizes-euro-36bn-of-pension-assets

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What a great idea. Give all your money to a government that has such a terrible track record that its about to default on its debt.

Do they really think they'll get that government pension even if they agree to this?

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I dont think its uh "give" more like mugged.

regards

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That is absolutely amazing (and scary). Just imagine if they did that with Kiwisaver here?

Cue soundtrack

http://www.bobdylan.com/#/songs/world-gone-wrong

Strange things have happened, like never before.
My baby told me I would have to go.
I can't be good no more, once like I did before.
I can't be good, baby,
Honey, because the world's gone wrong....

Cheers

Alex

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Apparently all the pensioners in Hungary get a big sack of spuds twice a year. it was a bribe by the previous govt that got out of hand not because of the cost of spuds but the administration cost. It's all so hungarian.

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America has been at this game for years.  At the Federal level, Social Security funds have been "loaned" to pay for current expenses.  At the State/County/City level, they do this in the form of underfunding pension funds.

Just watch for the next step when America decides it needs the private funds in people's Individual Retirement Accounts (IRA's).  Kiwisaver is NZ's version of the IRA's.  Every Gov't in the world with debt issues will be drooling over these types of accounts.

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i remember a joke going around in 2008:

 

Q: What's the difference between Iceland and Ireland?

A: 2 letters and 6 months

 

it took a wee while longer to come true but i didn't think Iceland would be bouncing back by the time Ireland went down.....

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Isn't there a saying that any football manager who receives a 'vote of confidence' from their chairman knows they're toast

Further to that -- Spain now says it will never have to be bailed. Which means it probably will have to be.

"I think it is almost impossible now to stop the contagion," said Mark Grant, managing director of corporate syndicate and structured debt products at Southwest Securities in Florida.

"If Ireland is dealt with, it will not be solved and then bond owners will turn their attention to Portugal, Spain, Italy, Belgium et al as the monetary union is full of structural defects. With the possible exception of Germany, it appears to me that no sovereign debt is safe."

Spanish Prime Minister Jose Luis Rodriguez Zapatero said last week there was no chance Madrid would follow Dublin and Athens in requesting aid, a line repeated by his economy minister as she arrived for Sunday's EU talks in Brussels.

http://www.reuters.com/article/idUSTRE6AR33E20101128

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Rod Zapa , PM of Spain is right , he should not follow Athens or Dublin , the Spaniards should refuse to carry the Banks losses. The Buck has to stop somewhere . 

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Yet American corporate profits are their highest ever....

American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or noninflation-adjusted terms.

http://www.nytimes.com/2010/11/24/business/economy/24econ.html?_r=1&src=me&ref=business

cheers

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Wow ! That is GOOD news , isn't it , Bernard . Good news coming out of the US-of-A .............. That place wot some reckon is in a depression or a double dip recession . ............ $US 1.659 trillion in profits .............. Not so morally nor financially bankrupt as some would say  ............ Nor finished , dead & buried as others opine .............. Whew ! Really good news . ........ Truely ! ..

...Excellent .

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I remember a very useful article somewhere once, that broke down the trend in US corporate profits BY SECTOR.

The clear pattern that emerges, is that the financial sector is the one where the profits are being racked up.

"The Corporates" make a convenient target for politicians and the Unions; but the poor old "main street" producers and employers end up copping spite tactics that just hurt everyone.

Someone said, and I agree, that the finance sector SHOULD be "handmaiden to industry".

Henry George had a point, too, about the Unions failing to grasp that by attacking "industry" all the time, they were sawing at the same branch that they sat on WITH "industry"; while land owners accumulated the Ricardian gains that resulted from growth, largely untaxed. This is many times worse under "bubble" scenarios than it is under honest "Ricardian" scenarios. I suggest the last round of bubbles has seen the biggest increase in mass inequality in human history.

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It's not surprised that corporate American profits are high - the banks are not writing of their losses. Germany is still doing ok and they're not writing of their losses either.

Iceland was right and Ireland should follow the example.

Personally I am affronted that investors can recklessly place their money in businesses like SCF and expect the rest of the country to bail them out when it goes pair shaped. Investors need to do due diligence when placing there money.

If a bank doesn't seem sound / then buy property, if property doesn't seem sound / buy gold.

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  "You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver.  It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings." says Professor Wilhelm Hankel of Frankfurt University. 

He may be too close to the truth than we think !!

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re 4 - thank you.

There will be a lot here, who won't read that one.

should be the most gigantic red flag in history, at least to those who might care that their money or other paper-based forms of wealth be worth something in the future.

I should do him for plagarism.......          :)

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I read it.......! Martenson is pretty good.

Nothing I disagree with.

The bit that interests me, is "Part 3", that is only available to subscribers. "What should the investor do with this information"?

That is the free market at work, PDK. Watch and learn. It's all gonna be taken care of. If we let it.

If those pesky urban planners would just get out of the way of people wanting to live in clusters of homes like yours, it would really, really help.

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Actually, what he points to is the main human conundrum - that we can't tap out of the system, until it crashes, and by then, if there's no controlled morph to a replacement, there can only be chaos.

He has to earn because he can't not, even though he knows what is coming. I'm 30 years ahead there, and I still tap in occasionally.

There is no lead-time:

http://www.albartlett.org/

and click on the links.

I don't need to say more.

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LOL.........Markets cant handle "expotential" they are purely short term.....they didnt see it coming....its past tense already...

If I wasnt in this test tube with you and Gummy Bear I'd be all  for sitting back and watching this unfold.....

regards

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Some of these PM's in denial should be given a lesson in how to calculate compound interest as should Kiwi's.

Default or a " restructuring " is inevitable for these highly indebted economies including ours - it's just a question of when.

You can't go on borrowing to pay the interest as we have done for some years for ever.

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I suspect the Irish will tolerate being laughed at for a wee while...maybe into 011 before the bomb makers return to their past ways and set about demolishing the banks across the nation...there will be more than a handful of bankers on the run hand in hand with idiot politicians....just a matter of time.

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'twas a great time to be a glazier, and good planning meant that the undertakers didn't do too well out of it"
 apologies in advance.

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Piece on China refers.......... I never trusted the ''growth" figures coming out of China . I could not see how an economy so big could ever grow by between 8% and 10% per annum compounded .  Its defies all logic .

While the amount of development or re-development you see in the South of China is astonishing ,  the compounding effect of "doubling China " every 7 years is a physical impossibility  

Now we know the truth, they were reporting very low inflation.

Their real growth has probably been around a more reasonable but still huge 3% pa , the other 7% is the effects of inflation ... inflating domestic prices of housing , food , fuel and clothing .

Now with so much money in circulation , they are almost certainly going to tighten money supply with potentially dire consequences for people selling stuff to China 

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"The bankruptcy...was the final chapter of a saga in which Henderson's property and hospitality empire crumbled under the weight of debt."

How many others out there who used to proclaim during 2003-2007 that "Debt is good!" and "There's good debt and there's bad debt!" and "You have to make your debt work for you!" are only now discovering just how wrong they were?

My guess is it's a lot of people, and they'll be following Henderson's path.

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That "totally incomprehensible video" at the end.  Where have I seen that before, the earnest expert carefully explaining the benefits of some invention at such  a level of complexity as to be beyond human understanding, but oddly persuasive nonetheless? 

Oh yes, I've got it.  The whole whizzy obscure money-go-around perfected by finance companies and banks during the noughties. The latest iteration of the Emperor's new clothes.   If you can't dazzle them with brilliance, baffle them with bullshit.

The analogy is perfect.    Quite a brilliant little skit.  And quite depressing also.

Cheers to all. 

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 "President Nicolas Sarkozy's office on Sunday "categorically" denied that France was threatened by the crisis in the eurozone provoked by Ireland's massive debt problems." the age.com

looks like frogs on the BBQ to me....!

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As the bad joke goes whats Green and turns red at the flick of a switch.......

Liquidiser....just need to flick and the Frogs are red sludge.....french banks.....german banks....all screwed...

regards

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That anecdote is arse about , given that the French have been socialists for so very long ...................... It seems to me that the frogs are currently  red , but are quickly turning green ...... with envy ........... that the Yanks can just crank on the currency printing press to get their banks  out of the  sludge .

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Here it goes

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/81661…

 

 

As Keynes once said, blaming economic crises on speculators is “not far removed, intellectually, from ascription of cattle disease to the “evil eye”.

Has Mr Zapatero read the IMF’s devastating Article IV report on his own country? It states that the government’s “gross financing needs” for 2011 will be €226bn, or 21pc of GDP. “Spain’s financing requirements are large and, retaining market confidence will be critical. Spain has exhausted its fiscal space. Targets should be made more credible.”

Madrid must attract €226bn of good money from Spanish savers, German pension funds, French banks, Japanese life insurers, and China’s central bank, so that an incompetent government (this one happens to be socialist, but the Greek conservatives were worse) can continue to run budget deficits of 7pc to 8pc of GDP in 2011. Why should they lend a single pfennig, having already been told by EU leaders that they will face scalping if Spain ever needs a rescue?

 

 and an Entree

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8166440…

 

Mr Hart, who runs Corriente Advisors from Fort Worth Texas, has told potential investors in a presentation that China is in the "late stages of an enormous credit bubble".

When this bursts, the financier said he expects an "economic fall-out" that will be as "extraordinary as China's economic out-performance over the last decade".

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In the land of idiots!

 http://www.marketoracle.co.uk/Article24623.html

 Consumer credit outstanding is $2.41 trillion, the same level reached in early 2007, and up from $1.5 trillion in 2000. This is a 60% increase in ten years. Personal income has risen from $8.4 trillion to $12.6 trillion over this same time frame, a 50% increase. Americans have substituted debt for income in order to keep up with the Joneses. The mass delusion lives. 
The MSM declares that the reduction in overall consumer debt from its peak of $2.56 trillion in 2008 to $2.41 trillion today proves that consumers have been cutting back and paying off debt. This is another media lie. Non-revolving debt, which includes car loans, education loans, mobile home loans and boat loans sits at $1.6 trillion, an all-time high matched in 2008. Credit card debt has “plunged” from $957 billion to $814 billion, not because consumers paid down their balances. The mega Wall Street banks have written off $20 billion per quarter since early 2009, accounting for ALL of the reduction in credit card debt. Clueless consumers continue to charge at the same rate as the peak in 2008.
Average credit card debt per household with credit card debt: $15,788
There are 609.8 million bank credit cards held by U.S. consumers.
The U.S. credit card default rate is 13.01%
In 2006, the United States Census Bureau determined that there were nearly 1.5 billion credit cards in use in the U.S. A stack of all those credit cards would reach more than 70 miles into space -- and be almost as tall as 13 Mount Everests.
Penalty fees from credit cards added up to about $20.5 billion in 2009.
The national average default rate as January 2010 stood at 27.88% and the mean default rate is 28.99%.
Total bankruptcy filings in 2009 reached 1.4 million, up from 1.09 million in 2008. Bankruptcies in 2010 are on pace to exceed 1.6 million.
26% of Americans, or more than 58 million adults, admit to not paying all of their bills on time. Among African-Americans, this number is at 51%.

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I think the US consumers are maxed out, retail sales dont suggest consumers are ignoring the msgs, it would be interesting to see what its spent on....food? or whiteware/toys?....look at the default rates...13%!

Yet US corps are recording tidy profits or at least the banks are.....

regards

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