Thursday's Top 10 with NZ Mint: Osama an Arsenal fan; Mortgage holidays extend and pretend; China's Mercantilist Confucianism; NZ's misery index at 20 year highs; Dilbert

Here's my Top 10 links from around the Internet at 2.30 pm  in association with NZ Mint.

I'll pop the extras into the comment stream. See all previous Top 10s here.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

The cartoons are back. Yay!

1. Not a joiner - FT.com's Robert Shrimsley reports exclusively on what Osama bin Laden's neighbours in Abbotabad thought of him.

Apparently the bearded one wasn't much of a joiner. It seems he wasn't keen on the local neigbourhood watch committee.

And he was an Arsenal fan.

No wonder he was grumpy.

He apparently also had a duvet cover with a picture of Arsenal's Dennis Bergkamp on it...

I wonder if Mr Shrimsley is having us on...

A known Arsenal fan, he would sometimes go to the village hall to watch live matches. One fellow fan said: “I remember once saying he looked like Osama bin Laden. He just laughed and said people were always telling him that.” Inside his bedroom the Seals also found a 30-minute DVD of all the team’s classic matches. The room itself was plain apart from a prayer mat and a Dennis Bergkamp duvet cover.

Children were rarely allowed in to the compound. If they hit a cricket ball over the 18ft high wall they could not collect it, but were reimbursed by one of the other adults living there. Javed, 14, admits: “It was always an easy way to make money if you were a bit short. You’d knock on the door and tell them you had hit a couple of balls over. They’d give you 200 rupees. I suppose we’ll have to go back to washing cars now. It’s a shame.”

2. Just so miserable - Remember the misery index? It was a creature of the stagflation of the 1970s and was referred to quite regularly then. It's a combination of the inflation rate and the unemployment rate. It's back into double figures.

Here's New Zealand's misery rate chart below after today's jobless numbers, courtesy of The Dim Post.

Our Misery Index is now higher than at any point since the Rogernomics Recession in the early 1990s (Q3 of 1993, to be precise).

Rather frighteningly, the latest unemployment statistics don’t even factor in the impact of the second Canterbury earthquake.

3. 'Just let us borrow another US$2 trillion...' - Reuters reports US Treasury Secretary Tim Geithner has asked Congress to lift the US debt ceiling by another US$2 trillion to US$16.3 trillion.

A Reuters analysis of Treasury's borrowing needs forecast Congress would have to raise the debt ceiling by more than $2 trillion to get through next year's election without having to revisit the issue. According to the Treasury, the government borrows on average about $125 billion per month.

4. Extend and pretend - Banks have put an awful lot of mortgages in Christchurch on holiday, but the interest bills are still mounting up and compounding in a quietly dangerous way for customers and shareholders (and depositors?).

Rebecca Stevenson at Stuff has some useful detail on how much big this lump of compounding debt has become.

ANZ/National Bank alone has deferred payments on residential property worth $240m in Christchurch since February, while Westpac has approved mortgage payment holidays for 1500 customers on mortgages with an average value of $200,000.

Last year turned into a record year for mortgage holidays for BNZ. The bank approved 4055 holidays, including its Christchurch-affected customers, well up on the previous year where 3727 were approved. And already in the first three months of the year, 955 BNZ customers have gone on "holiday".

In 2010, ANZ/ National approved 10,000 loan repayment holidays on a whopping $2.4 billion of lending, but despite this rather large statistic Thompson says the bank is careful to make sure customers understand the implications. She also says the number of repayment holidays has stayed consistent, even since the recession began in 2008.

ASB have taken a slightly different tack from the other banks in that they have promoted reduced interest rates for their ASB, Sovereign and Bank Direct mortgage holders. In three weeks, ASB converted $100m of Christchurch home loans to discounted interest rates of 1 per cent off variable rates or 0.5 cent off fixed for a year.

5. No favours really - Our own Amanda Morrall covered this story last October when she was working for the Press. Here's why such mortgage holidays can be dangerous things.

Take an average loan of $250,000. On a two-year fixed rate of 6.69 per cent, amortised over 30 years, the monthly mortgage repayment would be $1611.54.

According to Mortgage Solutions' Geoff Hill's calculations, a three-month mortgage holiday would have the compounded effect of adding an extra $6389 onto the loan. It also ends up increasing the monthly repayments to $1642.70, assuming that the borrower repays the mortgage within the same 30-year time frame.

"The banks aren't doing you any favours in reality," concludes Hill.

6. Jaws of the Dragon - Ian Fletcher writes at HuffPo about a new book by Tokyo-based Irish journalist Eammon Fingleton about the rise and rise of China. Fletcher makes some interesting points (citing Fingleton) about China's Confucianism and Mercantilism.

It's something we naive New Zealanders should think a lot more about before we sell off our farms and everything else to the Chinese.

America's defense against Chinese mercantilism is further sabotaged by the fact that, despite our using similar policies earlier in our own history, mainstream American economists are largely blind to the fact that mercantilism even works. Trapped in the same "free" market thinking that led to the 2008 financial crisis, they don't believe that China's policies can possibly be a winning move for that country. An economy that has gone from peasant agriculture to superpower in 30 years doesn't seem to persuade them.

Why are China's economic policies so effective? The aggressive pursuit of exports is a game other nations, like Germany and Japan, also play well. But these are both medium-sized high-wage nations that are already developed, not gigantic low-wage nations still on the early stage of their development path.

China is unique because it combines standard-issue (if exceptionally cynical) mercantilism with other policies, like forced savings and systematic technology acquisition, made possible by its despotic ex-Marxist political system. For example, it has, by deliberate state fiat, a savings rateclose to 50%, while America's is close to zero. This gives China a tidal wave of investment capital to put into everything from factories to freeways. (It is also enabling China to accumulate ownership of American government securities and private-sector assets.)

Japan never took over the world, so some people dismiss the Chinese threat as yet another big wolf-cry. But China has ten times Japan's population, nuclear weapons, and a hard-authoritarian rather than soft-authoritarian political system. This time, it's different.

7. Fed murmurs suggest QE III possible - Bloomberg reports one Federal Reserve President (there's a gaggle of them) saying that rates are nowhere near rising.

Federal Reserve Bank of Boston President Eric Rosengren said the economy isn’t growing fast enough to achieve the central bank’s goals of full employment and stable prices, and that “nothing’s off the table” if the outlook deteriorates.

“I’d like to see growth that’s strong enough to generate jobs at a faster rate than 200,000” a month, Rosengren said in an interview with Bloomberg Television to air tomorrow. For interest rates to rise, “we’d have to see much more job growth than we’ve seen to date.”

Asked whether a third round of quantitative easing policy was still under consideration, Rosengren said that “nothing’s off the table, it depends on economic conditions, so we have to do whatever makes sense given our outlook for the economy.”

“If we were to see inflation rates going down dramatically and the unemployment rate going up dramatically, we’d have to reexamine what our monetary policy is,” he said. “That’s not something I expect, that’s not something that’s in most people’s forecasts.”

8. The problem with ageing - Leith van Onselen at Macrobusiness.com pulls together the data and charts on the problems of ageing workforces in Australia and New Zealand.

I wonder if property investors have really thought about this.

Both nations will face similar demographic headwinds as their populations age and the proportion of working age people declines, bringing with it lower consumption expenditure and growth, as well as higher taxes.

And the impact of ageing on asset prices are expected to be substantial. For example, according to a recent Bank for International Settlements (BIS) working paper, the ageing of the Baby Boomers is projected to reduce Australia’s (New Zealand’s) real house price growth by around 30% (40%) over the next 40 years compared to neutral demographics. This is because the Baby Boomers will reduce their housing stock as they enter retirement by liquidating their investment property holdings and downsizing, thereby depressing house prices.

9. The world's reserve currency - The economist has charted the US dollar over a long period. Should we put our faith in this reserve currency? Perhaps not.

A weak currency should be good news for a country’s exporters, but that hasn’t stopped America from running a persistent trade deficit. And America’s creditors are having to cope with the unappealing combination of holding low-yielding Treasury bonds in a depreciating currency.

10. Totally Jon Stewart on Pakistani Intelligence.