Monday's Top 10 with NZ Mint: Why global growth is not enough to escape the debt; Achtung Schulden; How stuffed Ireland really is; That bastard Bernard; Tony Alexander's house price forecast; Dilbert

Here's my Top 10 links from around the Internet at 2 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 Irish Times link at number 3 is today's must read.

1. The growth failure - Bloomberg reports PIMCO's Bill Gross argues America's anemic economic growth isn't enough for the world's largest economy to grow out of its debt problem.

This is New Zealand's problem too.

Next week John Key is going to magick up a juicy growth forecast that will solve all of New Zealand's problems.

Yet the government's growth forecasts have not been achieved in the last three years. Why should some Hail Mary growth forecast on May 19 be any different.

Do people realise it's different this time. Recoveries for heavily indebted economies after a financial crisis are slower and lower than normal.

This 'abnormal' period of slow growth can last 7-10 years according to the studies by Reinhart and Rogoff.

This time it's different.

Does John Key realise this?

Here's Gross.

“Year- over-year real gross domestic product is holding at 2 percent, while nominal GDP is only 3.9 percent. That’s hardly sufficient to support both asset and labor markets in combination, nor is it sufficient to grow our way out of a steadily increasing debt to GDP ratio. It’s not enough.”

While employment growth will be probably be strong the next few months, investors will need to see whether that is sustainable once the Federal Reserve’s policy of quantitative easing ends in June, according to Gross.

2. Achtung Schulden - Germany's Der Spiegel set the cat amongst the pigeons over the weekend with this article warning the Greeks are about to throw their euro toy out of the cot.

Sources told SPIEGEL ONLINE that Schäuble intends to seek to prevent Greece from leaving the euro zone if at all possible. He will take with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro.

"It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro," the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt.

The charts are cracking.

3. 'We must break free' - The debate in Ireland is shifting quickly to how Ireland can default and get out from under its debts. Here Economist Morgan Kelly writes at the Irish Times about how to default.

Seriously.

No wonder the NZDMO is borrowing as much as it can get its hands on as quickly as possible.

Because it's quite possible some time in the next 18 months we will have another Lehman style shutdown of international credit markets.

Best to stock up now, the NZDMO is thinking.

Here's what Kelly is saying:

WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.

Ireland is facing economic ruin.

I'd recommend reading all of Kelly's piece. It is compelling. HT Andrew via email.

4. ANZ's CEO is worried too - BusinessDay reports ANZ Group CEO Mike Smith is particularly wary of another European meltdown.

Smith said Europe's debt crisis would have serious implications for Australia. ''Europe has no way out of this mess at the moment and we're not seeing the requisite leadership because we're in minority government land,'' he told AAP.

The end game in Europe will be decided by the bond markets forcing debt-stressed countries to restructure, and the impact will play through the credit markets to Australian banks and probably borrowers.

"The wholesale credit markets are going to get affected and it's going to create massive volatility, so again [the] cost of borrowing may well increase and that will affect the banking system here," Mr Smith said.

5. Three big questions - Harvard economics professor Greg Mankiw asks three questions in this New York Times Op-Ed that are crucial in the global outlook. He admits he doesn't know the answer to any of them.

They are: 

How long will it take for the economy’s wounds to heal?

How long will inflation expectations remain anchored?

How long will the bond market trust the United States?

My answers would be: A decade, less than a decade and less than a decade.

It's another must read today.

6. Keep an eye on this - BBC reports American and Chinese officials are meeting over the next three days to discuss the exchange rate and the weather.

US Treasury Secretary Timothy Geithner will be co-chairing the economic talks with China's Vice Premier Wang Qishan, while Secretary of State Hillary Clinton and State Councillor Dai Bingguo will head the strategic dialogue.

Mr Geithner has said he will press China again on its currency policy, an issue of persistent friction between the world's two biggest economies.

The Chinese have retorted they are adamant that pleas to raise the value of the yuan will be of little use.

6. What the debt ceiling is all about - Ed Harrison of CreditWritedowns talks about the US debt ceiling debate and the 'murder-suicide' pact between China and America over the currency and US borrowing.

On the debt issue, the concept that the Chinese are going to dump dollars is ridiculous. They have pegged their currency to the U.S. dollar. Revalue the currency and the accumulation of dollar reserves goes away. It's as simple as that. The reason the Chinese are not revaluing more aggressively is because they know doing so would cause a massive disruption which would imperil their economy, already wracked by a massive capital investment bubble.

Moreover, a massive revaluation is the path to mutual economic annihilation as surely as the old Soviet-US mutually assured destruction on the nuclear front was. Call it murder-suicide. It won't happen.

7. That bastard Bernard - Bernard Whimp lured 1,100 investors into 'high-ball' offers for shares worth NZ$7.2 million, Hamish Rutherford from Stuff reports from the courts today.

The catch?

The Financial Markets Authority revealed in the Wellington High Court this morning that 1157 shareholders accepted a series of offers from Whimp, which appeared to offer a premium to the market value, with the fine print revealing that payments would be made over a decade.

8. Business confidence at an 18 month high - Tony Alexander's email survey of readers finds a net 42% are optimistic about the economy in May vs 14% in April and minus 21% in March.

Time to increase the OCR then?

The results by industry show good sentiment in farming, agricultural servicing, forestry and manufacturing for export, with improvements in sentiment evident for accountants, construction, residential and non-residential real estate, and even tourism. However retailing remains extremely weak and lawyers are not seeing much activity improvement as yet.

The results reveal that conditions in the NZ economy at the moment remain very challenging with tight margins, businesses struggling to pass on cost increases, disruption following the Christchurch earthquake, and some evidence of shortages of skilled staff such as engineers, and some listings shortages also for residential and non-residential property. The results leave us happy with our expectation of strong growth in NZ economic activity over 2012 but challenging conditions for most firms in the short term.  

And here's Tony's view on what it means, including for house prices

Our forecast for near 4% economic growth over 2012 implies rapid labour market tightening, rising interest rates from perhaps late this year, a generally strong NZ dollar, and as we noted above, rising house prices due to a shortage of accommodation in some parts of the country. Over 2013 we expect growth to slow down because of the combined effects of resource shortages and higher interest rates.

The main implications of our outlook are that businesses should not be tardy in hiring extra people, and having core debt at floating interest rates over 2012 – 13 would be a dangerous move.

Home buyers should prepare for rising prices from later this year, tourism and export education operators lower inflow numbers, and retailers would probably be best advised not to build inventories until customer inflows have been strong for at least 2-3 months.  

9.'Why I won't support more bailouts' - Here's the leader of the True Finns party saying via the WSJ that he won't support any more bailouts.

In a true market economy, bad choices get penalized. Not here. When the inevitable failure of overindebted euro-zone countries came to light, a secret pact was made. Instead of accepting losses on unsound investments—which would have led to the probable collapse and national bailout of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund, Ireland's NAMA and a lineup of special-purpose vehicles that make Enron look simple.

Some politicians understood this; others just panicked and did as they were told. The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds. Further contrary to the official wisdom, the recipient states did not want such "help," not this way. The natural option for them was to admit insolvency and let failed private lenders, wherever they were based, eat their losses.  

10. Totally fun video of Barack Obama hammering Donald Trump to his face. Hopefully this kills off the hair and the political campaign underneath it.