Wednesday's Top 10 at 10 with NZ Mint: Libyan delusion; China's pretend banks; Dung tightens after Dong devaluation; Saudi's Shia timebomb

Here's today's Top 10 at 10 past 7 pm.

My apologies that I'm not applying all my efforts to these at the moment.

Looking overseas at the global economic landscape all seems pointless today.

Our thoughts are with the people of Christchurch.

This will be short. No cartoons and videos I'm afraid.

Again, I welcome any help with links from those who want to take their minds off events at home.

1. Qaddafi's delusion - Muammar Qaddafi gave a speech last night where he accused protestors of being rats and cockroaches that he was prepared to exterminate to protect Libya, the BBC reported.

2. Revolution hours away - Libya's former Interior Minister has resigned and thinks an overthrow of Qaddafi is only hours away, CNN reported.

Ex-Interior Minister Abdul Fattah Younis al Abidi told CNN that he resigned Monday after hearing that some 300 unarmed civilians had been killed in Benghazi during the prior two to three days. He accused Libyan leader Moammar Gadhafi of planning to attack civilians on a wide scale.

"Gadhafi told me he was planning on using airplanes against the people in Benghazi, and I told him that he will have thousands of people killed if he does that," Abidi said in an Arabic-language telephone interview conducted Wednesday. Abidi said he now supports the people and the revolution.

He called Gadhafi "a stubborn man" who will not give up. "He will either commit suicide or he will get killed," said Abidi, who said he has known him since 1964.

3. Rural lending - Country99 TV has put a couple of its longer pieces on rural lending onto YouTube. They're worth watching.

And here's Part II  

4. Falling house prices - The S&P Case/Shiller index showed US house prices fell a further 4.1% in the last quarter of 2010, further complicating any hopes of a US recovery, CNN reports.

"Despite improvements in the overall economy, housing continues to drift lower and weaker," said David Blitzer, spokesman for S&P. And things may get a lot worse, said Robert Shiller, a Yale economist and half of the Case-Shiller team, in a web conference after the report's release.

"There's a substantial risk of home prices falling another 15%, 20% or 25% more," he said. Shiller cited a few reasons for his bearish stance.

The government is expected to reduce the presence of Fannie Mae and Freddie Mac in the housing market. These agencies currently provide loan guarantees for about two-thirds of mortgages. If they fade away, private mortgage money will have to fill the gap and the cost of mortgage borrowing will surely rise. That will hurt home prices.  

5. Keep an eye on this - US Treasury markets will have to cope with another US$64 billion worth of issuance in the next 24 hours. That's causing prices to fall and yields to rise. As oil prices hit 28 month highs on the Libyan crisis, bond investors are worrying about inflation, Bloomberg reported.

There will be “higher inflation and lower growth because of higher oil prices,” said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., which runs the world’s biggest bond fund.

Ten-year yields will advance to 3.93 percent by year-end, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings.  

6. Vietnamese desperation - Vietnam has tightened monetary policy for the second time in a week, Bloomberg reported.

Prime Minister Dung is having to tighten interest rate policy to compensate for devaluations in the dong currency.

Vietnam is under pressure to curb inflation that is poised to accelerate from a 23-month high as electricity prices rise and four currency devaluations in 15 months spur import costs. The nation raised its refinancing rate by 2 percentage points to 11 percent last week, joining neighbors from Thailand to China in tightening policy.  

7. Keep an eye on Saudi Arabia's Eastern Province - Steve LeVine at Foreign Policy points out the Shia-dominated Eastern Province of Saudi Arabia may be the next bomb to blow up under the oil price.

We keep hearing that al-Saud rule is safe (and the al-Sabahs of Kuwait, along with the al-Thanis in Qatar). But retaining power is only one metric for oil price stability. The chink in the Saudi armor is its oil-saturated, Shia-dominated Eastern Province. Here is Dharan, the headquarters of Saudi Aramco; the humongous 5-million-barrel-a-day Ghawar oilfield; the 800,000-barrel-a-day Qatif and Abu Safa oilfields; the gigantic Ras Tanura oil port; and the Abqiaq processing center.

Because of all this, the king has nailed down every movable part in the province with overlapping protection -- private Aramco security, Interior Ministry forces, the National Guard, and the military, all of them manned largely by Sunni personnel and loyal to the royal family.

Even so, if the Shia population does start protesting, we will see the oil market's version of pandemonium.

Greg Priddy, a global oil analyst at the Eurasia Group, a New York-based political risk firm, tells me that there is "a definite threat of a spillover" of trouble. "I won't be surprised if there is unrest in the Eastern Province," Priddy told me over the weekend.

Why does Priddy say that? Quite apart from Shia unhappiness, the Eastern Province is linked to Bahrain by a 16-mile-long causeway. Today, there's relative calm in Bahrain as the opposition puts together a united front for negotiation with the ruling al-Khalifa family. But there has been on-again, off-again Shia unrest both in Bahrain and the Eastern Province, and Bahrain's upheaval could reignite and be contagious.

8. Inequality in America - Mother Jones has 7 startling charts here, starting with this one below.

9. Another way to do it - Renowned China watcher Michael Pettis reckons Chinese companies are now lending surplus cash to each other, circumventing an increasingly tight banking system and keeping the cash surging around. This also happened in the final days of the Japanese boom in the late 1980s. FTAlphaville has the shortened version.

In the late 1980s Japanese companies, faced with the combination of highly repressed borrowing costs and the prospects of ever-rising asset prices (sound familiar?), discovered that it was far easier and more exciting to make money by speculating than by normal operations, and it became the great fashion among Japanese corporations.

But it came with a huge cost. Japanese companies began relying increasingly on zaiteku for profits and imbedded increasingly risky structures into their balance sheets. When the seemingly impossible happened, and asset prices stopped rising inexorably, the impact on Japan’s subsequent contraction was made much worse.  

10. Libyan saboutage? - Reuters reports suggestions Qaddafi may order the saboutage of Libyan oil fields rather than let them fall into the hands of protestors.

"Among other things, Gaddafi has ordered security services to start sabotaging oil facilities," Baer wrote. "The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos."

The growing violence in Libya has forced a number of oil companies to shut in production in Africa's third-largest oil producer and disrupted flows from the country's export terminals.