Here's my Top 10 links from around the Internet at 10 past 12 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.
Keeping any eye on China again today. This is where the landmines are.
1. Chinese pork prices - Chinese inflation is one of the hot spots of the global economy.
It is no doubt one of the variables being watched closely by the Communist leadership in China as it tries to slow down the economy and prevent inflation getting so out of hand that it causes civil unrest.
Pork prices hit a three year high this week and are up 43.5% in the last year, Caijin reported.
Food is a much bigger share of spending for most in China.
Pork prices in China have been surging for four straight weeks to the highest level since 2008, adding to inflation woes that have afflicted the world’s second-largest economy for years.
Chinese pork market has been witnessed a string of upsurges since May 2010, and will continue rising, deputy secretary general of China’s meat institute Gao Guan was quoted by a local newspaper as saying.
Pork prices have nearly doubled from its lows, and surpassed the historical high in 2008, Gao said. A publicly available data shows that ending May, the country’s pork prices surged 43.5 percent from the same period of last year.
2. A tale of two cities - Jeff Stibel writes at the Harvard Business Review that the US economy has become schizophrenic with a dying middle class, an abandoned under class and an increasingly wealthy super rich.
At first glance, the combination of record corporate profits alongside anemic job growth seems contrary, but the two are directly connected. The primary reason corporate profits are at record highs is that large companies learned to be lean and highly productive during the worst years of the recession. The profits generated through a reduced but more productive headcount has induced many large companies to continue this lean approach even as we emerge from recession. The result: record profits despite weak revenue growth, which leads to a lack of hiring.
The job growth problem is even more nuanced than that. It turns out that the hiring we are seeing is at the extreme ends of the spectrum. To ensure strong profits, corporations are cutting out the middle layers of management — the middle-class. In their place, they are hiring at the very low end and promoting at the high end. Senior management compensation is up nearly 25% this year ($9M for the average S&P 500 CEO), to levels higher than in pre-recession days, according to executive compensation research firm Equilar.
On the other side, we have job growth coming in at the bottom of the pyramid, mostly minimum wage and temporary positions. Take last month's job creation, for example. Out of the 260,000 jobs created in April, a whopping 60,000 jobs came from one company: McDonald's. There is nothing wrong with flipping burgers for a living, but it will not pull us out of a recession.
3. Increasingly unhappy - ScienceDaily reports a new US study has found that increasing wealth inequality has made 60% of the population unhappier. The richest 20% are still happy.
The conclusions: That grim mood cannot be attributed to thinner pocketbooks during periods of greater inequality -- though those pocketbooks were thinner. Rather, the gap between people's own fortunes and those of people who are better off is correlated with feelings that other people are less fair and less trustworthy, and this results in a diminished sense of well-being in general.
Interestingly, the psychologists found, the inequality blues did not afflict Americans at the top.. For instance, for the richest 20 percent, income disparity or its absence did not affect their feelings about fairness and trust -- or their happiness -- one way or the other.
4. And here's one reason why - That increased inquality of wealth and incomes is at least partly because improvements in productivity have not translated into real wage growth in recent years. Where did that money go? Here's the chart for the US. An eye-opener.
5. Milking the (cash) cows - Korda Mentha has claimed fees worth more than NZ$4 million from the receivership of Crafar Farms and legal fees of NZ$5 million, Stuff's Andrea Fox reports.
6. Credit card fees attempt - There have been various attempts in the last year to pass on the credit card processing fees as an additional cost to credit card holders. Some service stations tried and failed. Air New Zealand has successfully started passing the fees on. See Emma Geraghty's story from last year on this subject.
Now an Auckland startup company wants to start an EFTPOS system that automatically surcharges people for credit card transactions. This looks sneaky. Essentially it is using card users to pay the EFTPOS charges for the retailer. Inflation anybody?
Claire Rogers at BusinessDay has the story.
John Hodgson, iPayments general manager, said its terminals added the surcharge at the point of sale and broke down the bill so customers could see the added fee.
Retailers could set their surcharge at 2 per cent of the transaction, or $2 if that was greater, or 3 per cent of the transaction or $2. Terminals cost $46 a month to rent but retailers averaging two credit transactions a day – or three a day for wireless terminals – would not have to pay the rental fee. IPayments would take a cut of each surcharge.
Retailers were paying as much as 5 per cent in fees on credit card transactions, he said. "Some credit-card holders will be disapproving but others will understand it's a fairness issue."
7. Nickel prices plunge - Bloomberg reports on a slump in nickel prices. It's worth watching these metal prices for an early sniff on what is happening in China.
While raw-material producers are failing to extract enough copper and oil and droughts threaten crops, nickel supply is expanding faster than demand. Prices reached a record $51,800 in 2007 and moved at least 63 percent a year since then, leading consumers to use more substitutes than in any other major commodity, Macquarie says. Ikea Group, the world’s largest home- furnishings retailer, is removing the metal from kitchen and bathroom products.
8. Dude where's my recovery - Aussie economist Steve Keen is in fine form again here on the problem with bankers and debt... HT Troy.
As Schumpeter argued decades ago, in a well-functioning capitalist system, the main recipients of credit are entrepreneurs who have an idea, but not the money needed to put it into action.
It becomes a bad thing when this additional credit goes, not to entrepreneurs, but to Ponzi merchants in the finance sector, who use it not to innovate or add to productive capacity, but to gamble on asset prices. This adds to debt levels without adding to the economy’s capacity to service them, leading to a blowout in the ratio of private debt to GDP.
Ultimately, this process leads to a crisis like the one we are now in, where so much debt has been taken on that the growth of debt comes to an end. The economy then enters not a recession, but a Depression.
9. US in worse position than Greece - So says PIMCO's Bill Gross via CNBC. Yet the bond vigilantes are still asleep...
Much of the public focus is on the nation's public debt, which is $14.3 trillion. But that doesn't include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.
The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.
Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.
"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That's much more than Greece, that's much more than almost any other developed country. We've got a problem and we have to get after it quickly."
10. Debt ceiling doubts - Gross refers above to an FT report that US banks are preparing to pull back from buying US Treasuries because they're starting to worry about the US Congress lifting its debt ceiling before the August 2 deadline for a US default.
"We’re planning to lower our reliance on the use of Treasurys in early August and have more cash on hand as a contingency measure," said a U.S. bank chief.
Investors worldwide own large amounts of the $9.7 trillion of debt that has been sold by the U.S. government as part of their portfolios. But nearly 40 per cent of the existing U.S. Treasury debt — about $4 trillion — is used to back deals in the repurchase, futures and swaps markets, say JPMorgan Chase estimates.
It is this key role that Treasurys play as collateral for the wider financial system where turmoil could follow any missed payment resulting from the debt ceiling fight. The top quality and liquidity of Treasury debt means it can be used to back transactions relatively cheaply, with banks or clearing houses only requiring a small "haircut" or discount on the value of the debt to reflect credit risks.
In a letter to Treasury Secretary Tim Geithner, Matthew Zames, a JPMorgan Chase executive and chairman of the Treasury Borrowing Advisory Committee, wrote in April that "a default could trigger a wave of margin calls and widening of haircuts on collateral, which in turn could lead to deleveraging and a sharp drop in lending."
11. Totally all Greek to me - This Greek language video is a first and last for us. Apparently it shows an escape tunnel under the Greek parliament being cleared in case the MPs have to be make an ...er... urgent exit...on Wednesday during a key vote.
Covering Delta has the story/translation. The Google translation is hilarious. The video is fun. The presenter looks like Greece's answer to Paul Henry. He's not happy.
Apparently, a tunnel that leads from Lykavitos to the Greek parliament, and from there to the sea port of Piraeus, is being cleaned out by foreign workers in preparation for the possible evacuation of Greek MP’s in the event of a storming of parliament ahead of wednesday’s vote on the new memorandum.
The situation here is getting completely out of control. I really don’t know how much longer the people will be willing to wait this thing out. The mood here in Athens is one of intense disillusionment with a government that seems increasingly detached from its own people
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