Friday's Top 10 at 10 with NZ Mint: America's rolling bankruptcy; Can China start consuming?; 'Restructure the Euro debt'; UK peasants start revolting; Angry fecking Irish; Dilbert

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 Monday's Top 10 at 10 via email to

I'll pop any surplus suggestions I get into the comment stream

1. It's getting ugly over there - The political battles over the budget in America are getting ugly. James Pethokoukis at Reuters reports that Republicans want to drive US states and cities into bankruptcy so public worker unions can be crushed. It all underlines the awful mess than American state and city finances are in.

Let's face it.

The world's largest economy is basically bankrupt.

No matter which way it's painted, America needs to restructure its debt or inflate it away.

The Fed seems to be choosing the latter option.

The problem is it's inflating away the value of the world's reserve currency.

Meanwhile it's political warfare down at the grassroots and in the legislatures.

The numbers are astonishing. The unfunded state liabilities are worth up to US$3 trillion. And that's before anyone starts on the unfunded Federal liabilities.

The most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds.

The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.” In short, the lack of a BAB program would make it harder for states to borrow to cover a $140 billion budgetary shortfall next year, as estimated by the Center for Budget and Policy Priorities. The long-term numbers are even scarier.

Estimates of states’ unfunded liabilities to pay for retiree benefits range from $750 billion to more than $3 trillion.

2. The Chinese consumption story - The developed world needs China to start consuming more and exporting relatively less. New Zealand's future rests on this trend actually happening. There's a long way for China to go, Reuters' Alan Wheatley (and old squash partner of mine from my Singapore days) explains in this excellent long feature about Chinese consumption.

Spending might be sturdy in China, but investment has been off the charts. As a result, consumption was just 35.6 percent of Gross Domestic Product in 2009, from 46.1 percent a decade earlier - and that was helped by a massive government stimulus to counter the global financial crisis.

The task for China's policymakers is to lift that proportion by boosting wages, speeding up urbanization and building a social safety net so people do not need to save so much for a rainy day.

"Consumption will be the story of the next five to 10 years, and because we're talking about a fifth of humanity, it will have a huge impact on global business," said David Gosset, director of the Euro-China Center for International and Business Relations at the China Europe International Business School in Shanghai.

Still, he doubted China's consumption share would reach the roughly 60 percent rate of the European Union, let alone the 70 percent rate of the United States.

"The Chinese will never consume as we do in the West, especially in the U.S."

Some juicy factoids are spread through the article.

German sports goods company Adidas AG plans to open more than 2,500 stores in smaller Chinese cities by 2015.

One statistic dramatizes this imbalance at the heart of China's economy: the share of national wealth going to workers as wage income plummeted to 39.7 percent in 2007 from 53.1 percent in 1998. Seen in that light, it is no wonder consumption has contracted as a share of GDP. But could China be on the cusp of change? The National Bureau of Statistics (NBS) yearbook shows wages have surged and accounted for 46.6 percent of GDP in 2009.

Consultants McKinsey & Co expects China by 2025 to have 221 cities with more than one million inhabitants, compared with 35 in Europe today. Zhengzhou, the capital of Henan, China's most populous province, will have a bigger economy than Sweden, Hong Kong or Israel by 2020, according to the Economist Intelligence Unit.  

3. European debt restructuring is inevitable - Berkeley Economics Professor Barry Eichengreen writes at Project Syndicate that a restructuring of European debt is inevitable.

The crisis countries have, in fact, shown remarkable resolve in implementing painful cuts. But one economic variable has not adjusted with the others: public and private debt. The value of inherited government debts remains intact, and, aside from a handful of obligations to so-called junior creditors, bank debts also remain untouched.

This simple fact creates a fundamental contradiction for the internal devaluation strategy: the more that countries reduce wages and costs, the heavier their inherited debt loads become. And, as debt burdens become heavier, public spending must be cut further and taxes increased to service the government’s debt and that of its wards, like the banks.

This, in turn, creates the need for more internal devaluation, further heightening the debt burden, and so on, in a vicious spiral downward into depression. So, if internal devaluation is to work, the value of debts, where they already represent a heavy burden, must be reduced. Government debt must be restructured. Bank debts have to be converted into equity and, where banks are insolvent, written off. Mortgage debts, too, must be written down.  

4. The Great Property Debt Death Spiral - Bloomberg reports US home values are poised to drop by US$1.7 trillion this year, according to property valuer Zillow.

U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.

This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement. Zillow’s report is similar to other forecasts for prolonged weakness in the U.S. housing market.

U.S. home prices will decline as much as 11 percent by 2012 as weak demand and rising inventory extend the housing slump, Morgan Stanley said in a report yesterday. Prices will be as much as 36 percent below their 2006 peak before finding a bottom, Morgan Stanley analysts led by Oliver Chang wrote. Sales will stay “depressed” through next year amid tightened lending standards, they said. 

5. Should we have one too ? - Britain released the details of its bank levy overnight. The BBC's Robert Peston has a nice summary.

6. The peasants are revolting - The economic crisis in Europe will eventually morph into political crises as very grumpy voters protest at being sacrificed to protect the bonuses and profits of bankers and their shareholders.

Here's an early taste in Britain. The Telegraph reports Charles and Camilla were attacked as they tried to drive through a protest in London against a tripling of student fees. There's an extra intergenerational wealth transfer twist to the anger of the protestors too.

Here's an eyewitness.

“We couldn’t believe it. The car had really big windows so Charles was very much on display. People were trying to talk to him about tuition fees at first but when more people realised what was happening, the crowds swelled and people were throwing glass bottles and picking up litter bins and throwing them at the car. You could hear all this smashing.

“There was one protection officer in the Jaguar behind, dressed in a tuxedo, and he was opening the car doors and using them to bash people away. His car took a real pummelling. “It must have been frightening for them but, throughout it all, Charles was really calm and smiling at everyone. Camilla was beaming too.

He was holding his hands out towards them in a gesture that said, 'I’m innocent’.”  

7. The ECB is the only buyer - Morgan Stanley's bond desk reports (via Zerohedge) that the only buyer of Greek, Portugese and Irish bonds in the market at the moment is the European Central Bank. Buyers are on strike. This European crisis is far from over.

For what its worth, in conversation w/ one of my bond guys, it seems as though people are still fearing the EUR debacle. ECB is the only buyer out there right now.

8. Is Italy next? - Credit Writedowns notes there are rumours that Italy's credit rating may be downgraded. Here's more detail and a useful table showing New Zealand's ranking in the sovereign risk table. Ours has worsened most of the lot since June.

9. Triple notch downgrade - Here come the tail end Charlies. Fitch has downgraded Ireland's rating by three notches to BBB+.

10. Totally Feckin frank video on the Irish situation - A warning. Turn down the sound if you have sensitive bosses and co-workers.

My favourite question: "So I'm sensing a little bit of discontent then..."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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re #6

I didnt think the Royals had much sway in the political circles? Or perhaps the peasants want the monarchy reinstated ;P

#10  I love it!

swearing used for its best purpose.... great.

Note also the absence of doubt.... can we offer him an interview spot with an appropriate banker?

The accent (and sentiment) of the workin' man the world over!

More about the plight of the working man/woman


Don Blankenship: The Dark Lord of Coal Country

Blankenship grew up poor in the hollows of West Virginia. But as the richest and most powerful coal baron in Appalachia, he has destroyed the region's mountains, polluted its waters and overseen the worst mining disaster in 40 years


"One balmy night this fall, a black BMW 750LI — a German luxury sedan that costs more than a typical coal miner makes in a year — pulls into the parking lot of the shaggy country club in Bluefield, West Virginia. Bluefield is a fading coal town in a state that is full of fading coal towns. Seventy-five years ago, when the Pocahontas coal seam was one of the richest veins in America, and tooling up for the 20th century required massive tonnage of coal, there was money here, and hope. But now the coal is mined out, the buildings downtown are vacant, and shiny new Beemers are about as common as flying saucers.

The driver — a young, tan, L.A.-surfer-boy type — jumps out and opens the rear door. A tall man, 60, with a thin mustache and a double chin emerges: Don Blankenship, the CEO of Massey Energy, the largest and most powerful coal company in central Appalachia. He grabs his dark-blue suit jacket, which is folded on the tan leather seat beside him, and slips it on. He wears a red-and-yellow silk tie and tasseled leather loafers. His hands are chubby and white — no calluses, not a speck of coal dust. Accountant's hands. His eyes are black and inexpressive."

It's Friday Yay......and you know what that means....huh....yup....................(<:)~

in honour of the Australian Cricket Teams relaxed approach to game of late. 

                                A koala was sitting in a gum tree smoking a joint 


                                When a little lizard walked past, looked up and said,

                                'Hey Koala! What are you doing?'                           


                               The koala said, 'Smoking a joint, come up 

                                and have some.'                              



                               So the little lizard climbed up and sat next to the koala

                                where they enjoyed a few hits. After a while the little 

                                lizard said that his mouth was 'dry' and that he was 

                                going to get a drink from the river.                            



                                The little lizard was so stoned that he leaned over 

                                too far and fell into the river. A crocodile saw this 

                                and swam over to the little lizard and helped him 

                                to the side. Then he asked the little lizard, 'What's 

                                the matter with you?'                                 


                                The little lizard explained to the crocodile that he 

                                had been sitting with the koala in the tree, smoking 

                                a joint, but got too stoned and fell into the river 

                                while taking a drink.



                                The crocodile said that he had to check this out 

                                and walked into the rain forest, found the tree 

                                where the koala was sitting finishing a joint. 

                                The crocodile looked up and said, 



                               'Hey you!'                                 



                                So the koala looked down at him and said, 




                                'Shiiiiiiiiiiit dude... 


                                How much water did you drink?



Ha!. Go the Poms in the Ashes in Perth



And the China vs US thing is far from over

China’s trade surplus may have exceeded $21 billion in November, set to match the biggest quarterly gap since 2008 and adding to pressure for yuan gains to appease U.S. lawmakers and cool inflation.

Now that's going to get down-right nasty in the new year...whooooowee...

Something bad is brewing in the Queensland property market.

Here's a Bank of Queensland profit warning



The US housing market (and economy) will get worse after this...

U.S. mortgage rates surged to a five- month high, tracking a jump in bond yields after President Barack Obama agreed to extend tax cuts for two years.

The average rate for a 30-year fixed loan increased to 4.61 percent in the week ended today from 4.46 percent, the fourth week of gains, Freddie Mac said in a statement.

Wonder what John Key will lose on his pad in Hawaii!

" The average rate for a 30-year loan fell to 4.17 percent last month".......we have 30 year mortgages in NZ... right?

'...there is a backup in government bonds... everywhere....We could be witnessing an historic turning point. "

It will be more than just historic when it slams into the 180 billion in household debt down here!

"Lockwood.....LOCKWOOD....get the broom out "


"A global survey has revealed an "alarming" level of corruption in New Zealand with 4% of respondents admitting to paying a bribe in the last year.

Other results of the survey include that respondents thought political parties, followed by parliament, were the most corrupt institutions." tvnz

Probably one of the most accurate assessments of the Irish problem that I've seen:

A must watch 2min vid on YouTube.

Can china start consuming?

Consuming what FFS?  we cant get oil out of the ground any faster, we are past, at or near peak on many raw materials like copper, gold, iron as well.  If the developed world needs China to consume like them then that simply cant happen, best case for every unit they consume, we dont......

"The Chinese will never consume as we do in the West, especially in the U.S."

Yes exactly.....bang goes the global economy long before that.....add in the US will never again consume like it will be too broke....


Item 8,The Developed country risk table shows NZ 4th best after Switzerland, Sweden and Australia.

That seems pretty good, another  positive that contradicts the negative focus about so-called 'Noddyland'  NZ is doing ok, knockers need to realise we are punching above our weight ! May be we are not so bad afterall?

I'd say a more telling part of that table is the cost of insurance against default (the CDS Column), not the 'score' We are at 65 basis point to cover our risk. That's far more than all the other AAA's, bar Austria.

The economic climate is reversed from the real one. It seems here we are having winter - hardly anyone on the road, empty shops and most of us have more time to enjoy – winter conditions.

Over in Europe things are rather warm blooded – running towards the government - no siesta - rather hot - summer.

..and we call it the Middle East - always hot, Africa/ Pacifica becomes China and North/ South Korea- who knows ? 

..and food becomes rare for some, because it is hot and cold again !! The climate changes under hot money - getting cold - gold autumn in....doesn't matter.

...and luckily small NZ is so far away- who want to know ?

Oh well - the world is a little bit more crazy today !

The problem with punching beyond our weight is, we cant take the damage....look up first Jutland and world war I battleships v battlecruisers for that result.

Our weakness is private debt its huge and its not productive debt....sure we are being dragged along by OZ which is being dragged along by China....sure we have not suffered hugely....Im hoping we wont even with the double dip next year I expect....

Look at the change v June...2.6 bigger than most....look at the 5yr spreads....equal to the pigs mostly....

The conventional economists like the IMF, rating agencies and other cretins etc have said its public ie Govn debt thats the one and only issue....they are ignoring our private debt.....this is political blinkers, which means they get blindsided......did a great job seeing and avoiding the GFC didnt they?.......uh no.



Well, I would think being 4th least risky of the Developed world means exactly  that.

Let me repeat myself.......A chart put out by the same neo-classical / moniterist economics who got us into this mess and didnt see it coming and now cant get us out except by money they said everything was great and it blew up, they now say we are doing great....

Their other tool dropping the interest rate they have already abused until its no should have been going up like ours in the boom times to remove stupid borrowing, but it didnt....



On the Gold Coast at the moment and one certainly gets the feel of a two speed Aussie economy.  The AFR reported last week that Linfox are paying truck drivers starting wages of $118,000 AUD in Perth rising to $150,000 to $180,000 a year incl allowances and overtime. Over here on the Gold Coast the property market is in a mire.  It was being reported today that the developer of the futeristic  twin tower block the Oracle ,has only settled approx 25% of the apartments and that is nearly 8 weeks into the settlement process. Robina shopping mall last night while busy had shop after shop running 30% sales.  If it wasn't for 2 companies -  Rio and BHP - my view is that AUZ would be a very different place.

Cactus Kate defends Hanover

Steven, tying to get your drift. Are you suggesting NZ isn't 4th least riskiest, or are you saying the risk table is not worth the paper it is written on.  If the latter ,what are your credentials that would make you  so right??

Muzza - Darwin wasn't a priest - but what he (and others contemporaneously) worked out, rendered much of their patter obsolete.

Same with what Steven says.

Think it out from first principles.

Whether we are publicly or privately indebted, it;'s idebted we are. One of the most per-capita around.

We hope to come out of that selling to others (there's no other way) but Steven and I know that the days of others being able to afford/find big dosh, are numbered.

Due to the peaking of energy supply resulting in the peaking of work done. Which the priests (all economists, 99% of 'pollies, Bollard etc etc,) don't want to know about.

Because it spells the end of their beliefs.

Whether they're qualified or not is of noconsequence - fact rules.

Not so much the former in that I think NZ is fundimentally (under the PI borrowing stupidity) economically sound in that we produce more food than we need, when things get rough there will be food. We also have a very high % of renewable energy, in dire straights those two things will do more to help us adjust than any piece of paper written by a well paid cretin.  For the latter I question just how good the piece of paper is given it was compiled by the "professional" morons who didnt see the GFC coming and ignored the private debt due to idelogical blinkers and its effects. If you read the likes of Steve Keen he points out that the private debt is very significant and his models and logic do not ignore it, (and he's very concerned) as a result he has been pretty accurate in forecasting events.....his other big asset is he isnt wearing idelogical/political Im going on his success, and his open mind so someone like that I listen to....

In terms of my credentials, Im following SK who has a lot, Im saying examine the facts and make your own mind up....these charts / tables I think should not be relied upon, Ive bailed out of shares and Im staying out, Im paying down debt (mortgage) just as fast I can, because that's a risk but fortunately for me a small one.  I think and its seem so do others that a big dip is coming.  These are a lot of good financial minds out there who are not blindly acting, they see the risk so are quietly dis-engaging and going to cash. Cash is great its highly flexible and beats anything in closing a buying deal when there are bargins, and big bargins are expected within 2 years probably 1 it seems.

Ignoring my other fav subject to go on about....

Why am I so right? I may not be but it isnt me. I think looking at the weight of logic and evidence on one side that I am right to follow it.....what credentials do I need? none to make my own mind up and act accordingly........




Great, sarcastic video on why "Australia is Different" (in terms of its property prices):

Dont you just love the Irish.

I reckon we'll have none of that : Sister Marie Thornton , the vice-president of finance at Iona College ( New Rochelle , New York )  faces charges of embezzling $US 850 000 from the college's coffers from 1999-2009 . Apparently the Catholic nun was a frequent visitor to casinos in Atlantic City ( New Jersey ) .

The casinos show great decorum in not querying why a lady of the church was gracing  their premises  , and where all her dosh had come from . But from now on , a stint in a correctional facility will cleanse the good lady of her dirty habits .

Is THIS for real? Why the hell would we want to have ANYTHING to do with FEMA here in NZ?

They are an incredibly dodgy and quite incompetent agency so what could we possibly learn from these idiots other than 'how to use national disasters against liberty and human rights'

They were involved in some very suspect events around 9/11 (WTC7 for one) and they made a complete mess of Hurricane Katrina in terms of rescue and events afterwards

Why the hell is our government making ANY connection to this criminal organization?

Read here people:

No8: triple A for the US? what a f***king joke! Just goes to show these ratings agencies a not worth a damn!

Steven, thankyou for your thoughtful reply. But that's all it is, your thoughts. Reading it, you have identify no particular credentials or qualifications. Not sure whether you consider that a good thing or not. But if someone thinks their opinion has equal weight about anything or everything  with those who have qualifications and job experience, then there is little point for anyone to spend years of studying and training, and that would bring us back into a primitive society- then there would be plenty to gripe about!

Muzza - read my post above.

"studying and training" you say - but in what?

Like I said, for priests, read economists.

What you have to do - and clearly Steven does it - is evaluate everything, and try to be as knowlegeable about everything as you can.

Sooner, or later, though, you have to eliminate some possibilities, as a result of that thinking.

Evolution (while still being learned about, don't mistake learning for not knowing) outweighs pie-in-the-sky-when-you-die, unless you choose to reneg on the personal fact-finding, and choose to leave it to others.

I've gotten to the point where I'm sure that nothing happens without energy, and therefore that without exponentially-increasing supplies of it, you can't grow activity exponentially.

30 years study says we have hit the energy quality/quantity straps now, therefore glogal average growth has too - efficiencies excepted.

Show me an economists who 'believes' (purposely chosen) that?

So GE Money won the legal battle over the loans...didn't they do well...what a wonderful crowd they are...just the sort of people you will want to be associated with...isn't that right!

  I totaly agree.In May i noticed that thirty shops had given up at Pacific Fair..because of low turnover and high rents.Even the chatty bus drivers were trying to get tickets to go to the Mines in WA.It seems public perception is always way behind the reality.Their B...... machine is well far as property sales went you could see the gloss coming off the asking prices.

  The twenty grand help with asking prices distorted the market and gave them a reprieve,but sadly it caused people to get into debt,where they shouldn't have..China is cutting back to cool off their over heating economy.But you have to remember compared with the rest of the World Australia and New Zealand keep attracting well healed immigrants,this has to somewhat distort the overall picture.

  In NZ. Their were three main centres where the immigrants would wind up Christchurch Wellington and their are two.Which likely to be the case for some time.The Baby Boomer downsizers will sell to these Immigrants and move to the hinterland and purchase,and have the change jangling in their pockets.....I've noticed Sold signs lately,especially North of Auckland where their hasn't been much action for a couple of years....something is happening.

"But you have to remember compared with the rest of the World Australia and New Zealand keep attracting well healed immigrants,this has to somewhat distort the overall picture."

PIs and RE people have made this claim for years, yet it isn't borne out in reality, and never has been, certainly not as far as NZ is concerned.

"The Baby Boomer downsizers will sell to these Immigrants and move to the hinterland and purchase,and have the change jangling in their pockets.....I've noticed Sold signs lately,especially North of Auckland where their hasn't been much action for a couple of years....something is happening."

It's debatable whether "North of Auckland" can be considered the "hinterland".

What most certainly isn't debatable is the utterly pathetic state of rural RE.

If BB downsizers are buying anywhere, it's not in rural areas.

When urban prices went stupid during the bubble, those in the country decided that their shack too was worth Remmers pricetags, and unfortunately a lot of urbanites looking for the skite trophy holiday home agreed.

So they borrowed yet more money to buy these insanely overpriced implement sheds, only to lose more money on the deal than they did with their city "investments".

And yet...all those many people desperate to sell their country junk are still clinging to 2006 asking prices, guaranteeing that the bank is going to attempt to sell it out from under them, and for a lot less than the current asking prices.

A rush to the country? Dream on. The BB downsizers you say will buy rural property are also the people trying to sell rural property, and rural property isn't selling.