Monday's Top 10 with NZ Mint: Chinese property 50% overvalued; China 'biggest bubble of all time'; US to invade Mexico?; Cactus Kate vs Rob Alloway; Dilberts

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 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. The problem with the TPP - Matt McCarten has a good old go at the Trans Pacific Partnership trade treaty in this Herald on Sunday column.

Fair enough.

The TPP is just an opportunity for big US corporate interests to beat us up on issues such as intellectual property, Pharmac, Fonterra's access to America and anything else they see an opportunity for.

The latest one is big Tobacco trying to change New Zealand's anti-smoking laws, the Greens point out.

We shouldn't go anywhere near a TPP. Fonterra won't get in, anyway.

Just ask the Australia sugar and beef farmers what they think of their FTA with America.

Auckland law professor Jane Kelsey, who is heading up the TPP opposition, says multi-nationals are determined to get the TPP to allow unrestricted investments of any sort in addition to an unfettered right to move money in or out of a country, including profits.

The corporate lobbyists insist on the inclusion that governments must consult corporates on any new policies that might affect their investment and afterwards explain what notice they took of that advice.

More brazenly, they want any government to forfeit the right to introduce laws or policies that reduce the value of their investment without full compensation.

They also want the right to sue for compensation before secret international tribunals.  

2. Loading up the SFO - Cactus Kate has a long look at the Serious Fraud Office's investigation into Hanover Finance and argues the Serious Fraud Office is effectively doing the due diligence on Hanover's book that Allied Farmers should have done before the deal.

She takes a swipe at financial advisors, but questions whether Hotchin and Watson should face investigation. She's not a fan of Rob Alloway.

New Zealand however doesn't seem to be a country for responsible informed and educated investing, people want upside reward without accepting and manning-up to downside risk.

It doesn't want to be a country where loses are taken as part of business. It doesn't want to be a country where questions can be asked really if some people are just too stupid to have money to be allowed to choose their own investments.

It's easier to put your complaint on the grand pile at the SFO and have those you hate subjected to a criminal investigation. The New Zealand Way.......... All at the taxpayers expense.  

3. 'We'll make you pay in future' - The BBC reports the European Union is planning to make private lenders cover the losses of any future European debt crisis from 2013 onwards.

This is the problem at the heart of Europe. Who takes the haircut? The public as taxpayers or bond holders/shareholders (which means pension savers). It would be nice if some bankers took haircuts too....somehow.

It will also mean higher interest rates for everyone, pretty much everywhere. Although that will be dampened somewhat down in Australasia now that our banks can offered covered bonds into Europe. No such ugly rules down here....  

The decision may significantly raise the future cost of borrowing for over-indebted eurozone governments. It is part of a new permanent scheme - to be funded by eurozone governments, but not the UK - to replace existing bail-out funds that expire in 2013.

The new mechanism will need a treaty change, which may lead to ratification problems in the Irish Republic. In future, Brussels may require a crisis-stricken eurozone government to force losses on its existing private lenders - including investors in government bonds - before it would provide a bail-out package.

The creation of the European Stability Mechanism in 2013 will formally collapse one of the founding principles of the single currency, ie the "no bail-out" clause. Rescuing ailing economies will now be enshrined in law through what the draft communique describes as "limited treaty change".

And if a government got into trouble later down the line, it would be required to default on its other debts, while continuing to make payments on its rescue loans.

"That won't please the markets, who thought that holding government bonds was as safe as cash deposits," says BBC business correspondent Joe Lynam. 

4. New York, Illinois and California the new Greece and Ireland - The New York Times points to problems that these big three state governments are having refinancing their debts and how the Federal government is in no mood to help them. HT Cosmic via email.

“It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.

Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk. Municipal bankruptcies or defaults have been extremely rare — no state has defaulted since the Great Depression, and only a handful of cities have declared bankruptcy or are considering doing so.

But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.

5. Should America invade Mexico ? - Redstate.com reports the narco-violence tearing apart Mexico is causing some people north of the border to ask whether it's time for America to invade...

HT Troy via email who said this. "Instead of America admitting the prohibition isn’t working and the Drug War is an epic failure of biblical proportions, they are talking about invading Mexico which is the natural End Game to the policy of fail."

And here's what Red State had to say:

With the exception of, perhaps, Texas governor Rick Perry, no public official wants to publicly admit an obvious fact: The United States of America will likely be forced to invade Mexico. It’s not a matter of if, it’s a matter of when.

The question then becomes: What to do with Mexico after we invade it and wipe out the drug cartels (as much as can be).

Does the United States merely return Mexico to a nation state of corrupt politicians, failed economic policies, and lawlessness, or do we annex Mexico and turn it into the 51st state?  

This map shows how much of Mexico is controlled or being fought over by the drug lords.

6. 'Forgive me father I have sinned...and now I have some money to ...er...invest...can you help me?' -  AP reports the Vatican's bank, The Institute for Relgious Works, is being investigated for money laundering. Apparently the labels on its ATMs are in Latin. HT Andrew via email.

Court documents show that prosecutors say the Vatican Bank deliberately flouted anti-laundering laws "with the aim of hiding the ownership, destination and origin of the capital."

The documents also reveal investigators' suspicions that clergy may have acted as fronts for corrupt businessmen and Mafia. The documents pinpoint two transactions that have not been reported: one in 2009 involving the use of a false name, and another in 2010 in which the Vatican Bank withdrew euro650,000 ($860 million) from an Italian bank account but ignored bank requests to disclose where the money was headed.  

7. The red flag in China - This is a much watch video clip from hedge fundie Jim Chanos at CNBC on the problems in China. HT Hugh via email.

According to Chanos, China's over dependence on real estate construction is worrying. China has built entire cities that are now sitting empty. Yet, despite this over building, construction is continuing, with 12 million to 15 million residential units this year.

These units, which are priced similar to those for US residents, are intended for Chinese workers who earn about $3,500 annually and are in the bottom 20 percent of wage earners. To make matters worse, many of the Chinese who have moved to cities from the country are construction workers.

So when the construction slows, many will likely move back to the country-side, leaving a construction ghost town and one massive financial black hole.  

8. So bubbly it hurts - The Telegraph reports the Chinese property market is so bubblelicious that Chinese people can't afford it. The official report reckons Chinese prices are 50% over valued. HT Hugh via email.

China's property bubble has grown so huge that 85pc of Chinese living in cities can no longer afford to buy a home, according to an influential Chinese government think tank. The Chinese Academy of Social Sciences (CASS) said in its annual Economic Blue Paper that a typical Chinese property now costs 8.8 years of average earnings.

In addition, CASS said that house prices are still rising far in excess of wages, putting property more and more beyond the reach of average Chinese. CASS estimated that Chinese property prices had risen by 15pc this year, although the rises in some cities have been far steeper.

Attempting to quantify the size of the property bubble, CASS calculated what it believed was a "real" house price in 35 large and medium-sized cities in September, using an index of eleven statistics, including per capita disposable income, saving deposits, number of doctors and university students, retail sales volumes and local capital investment levels.

According to its figures, new homes in seven out of the 35 cities were more than 50pc over their fair value. Property prices in Fuzhou are 70pc too expensive, while those in Hangzhou are 66pc overpriced. New homes in Shanghai are 37pc overpriced and those in Beijing are almost 50pc overpriced.  

9. And Chanos is not the only one - Bloomberg reports Blackhorse Asset Management's Richard Duncan saying China may be the biggest bubble in history. He makes the point that the Chinese have printed more than the Fed and are hypocrites of the highest order.

A more than 50 percent surge in China’s money supply since 2008 helped fuel economic growth in excess of 9 percent per year, even as trading partners sank into recession. The expansion also saddled the country with factories that produce three times more goods than can be bought by China’s workers, 80 percent of whom make less than $5 a day, said Duncan.

“China has the greatest economic bubble in history,” said Duncan, author of “The Dollar Crisis” first published in 2003.

“There’s a real risk it’s going to collapse in a Great Depression-style scenario.” The pin that may prick China’s bubble, Duncan said, is a backlash against free trade among voters in the U.S., where unemployment last month rose to the highest since April.

The U.S. House of Representatives in September enacted legislation that would let U.S. companies petition for duties on Chinese imports to compensate for the effect of an undervalued yuan. Protectionist sentiment could gather steam in the next two to three congressional election cycles, Duncan said.  

10. 'To catch a pasty predator' - Jon Stewart does his thing on Julian Assange....the 'Whitemare'