Here's my Top 10 links from around the Internet at 10 am in association with NZ Mint.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
A Europe special today
1. ECB is Europe's last hope - Ambrose Evans Pritchard is always worth reading at The Telegraph.
Here's his summary of the issues facing French President Nikolas Sarkozy and German Chancellor Angela Merkel as they meet over the next few days to decide the fate of the Euro.
Ambrose reckons the European Central Bank is a crucial factor in the equation.
It is currently doing all the heavy lifting that the European politicians (and voters) won't.
Ambrose thinks the ECB should print like there's no tomorrow.
The Germans are sensitive about this.
But they also don't want to bail out the Greeks et al.
It leaves the ECB as the only entity with the firepower.
And the power.
Which creates some interesting tensions of its own.
Here's Ambrose:
Northern League leader Umberto Bossi accused the ECB of "trying to blow up the Italian government." Mr Trichet is moving into dangerous waters dictating budgets to sovereign parliaments. It matters enormously whether citizens have political "ownership" over austerity, or whether it is imposed by outside forces.
His former colleague Otmar Issing fears that Europe is becoming a deformed union where officials run roughshod over nations and fiscal power lies beyond democratic control. Such encroachments have "brought war" in the past, he said.
HSBC's chief economist Stephen King said the ECB must print money a l'outrance in "exactly the same" way as the Fed. "At the heart of the problem is the ECB's unwillingness to be seen 'monetizing' government debt. Yet if the alternative to QE is the collapse of the euro or a descent into depression, then massive expansion of the ECB's balance sheet seems a small price to pay."
Such views are rarer in Germany but at last making themselves heard. Kantoos Economics said the ECB has been "extremely tight" and lost sight of its essential purpose. "It is therefore an important cause of the current mess."
"European policy makers and central bankers are wrecking one of the most fascinating projects in human history, the unity and friendship among the countries of Europe. This is beyond depressing," he said.
2. Good on him - Warren Buffett tells his rich mates to pay their tax
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
3. Common European fiscal policy - James Neuger writes well at Bloomberg about the debate brewing over Europe having a common fiscal policy, which means European bond issuance, to go with its common monetary policy.
The question of “eurobonds” or “fiscal union” -- toxic language in northern countries like Germany -- will force itself onto the agenda once the retooled rescue fund is in place as soon as next month.
The trigger will be a European Commission feasibility study of jointly sold eurobonds, seen by a growing number of economists as the only way of guaranteeing to the markets that countries such as Italy won’t go bust. Unprecedented bailouts by governments and the European Central Bank have so far failed to stamp out the crisis that is menacing the region’s core members.
“No single currency has ever survived without some form of debt mutualization,” said Simon Tilford, chief economist at the London-based Centre for European Reform, a research institute focused on European integration. “There’s an increasing recognition that that is the only way of stabilizing the euro zone.”
4. The hunt for loopholes - Bloomberg reports that Chinese property buyers are 'fake' divorcing their wives to get around rules on third mortgages. Bubble anyone?
Frank He said he faked a divorce from his wife of 10 years to skirt China’s ban on third mortgages and obtain a bank loan for a third property, a 12 million yuan ($1.9 million) suburban villa.
“My wife and I love each other, but as long as we can get the mortgage from the bank for the deal, we’ll take it,” said He, a 40-year-old manager at a chemical company. The forged document, which cost the Shanghai couple 20,000 yuan, helped them get a loan amounting to 60 percent of the purchase price, he said.
Chinese homebuyers and developers are finding loopholes as they come under pressure from government policies to curb gains in residential prices, such as limits on the number of properties owned. Builders are refraining from cutting prices, offering free parking lots and attics instead, as they face higher borrowing costs after Standard & Poor’s downgraded their outlook in June.
“These are actually price cuts in disguise,” Sun Mingchun, Hong Kong-based economist at Daiwa Securities Capital Markets, said in an interview. “Developers are reluctant to offer discounts and are playing games with the government.”
5. Finally she has had enough - The Daily Mail reports Ruth Madoff has dumped Bernie Madoff after 52 years of marriage.
According to Madoff's biographer, Mrs Madoff has not visited her 73-year-old husband since their son Mark committed suicide in December.
'Ruth has not seen Bernie since Mark's suicide and I think the remnants of the family will now pull together,' said Diana Henriques, author of 'Bernie Madoff: The Wizard of Lies'.
It's today's must read I reckon. He recommends a complete cleanout and an end of the Too Big To Fail culture on Wall St.
He also wants the return of the 1933 Glass Steagall Act.
Can it be true that the trillions of dollars we spent bailing out Wall Street only restored the deeply flawed status quo, instead of bringing about the fundamental system overhaul we needed?
One of the unintended consequences of the rescue of the banks in 2008 was to restore many of the most heinous aspects of Wall Street’s culture, thus exponentially increasing the inherent risks in the system. Indeed, while Main Street continues to suffer from high unemployment and plunging home prices, the financial industry is dancing a jig after paying itself about $150 billion in compensation in 2010.
7. How the rich are hoarding - The WSJ reports on how many rich investors in America are not investing in the stock market and instead are virtual hoarders.
After taking big risks and big losses in 2008, wealthy investors have become the Cassandras of the financial world, hunkering down with cash, gold, farmland and other haven investments. Their "fear portfolios" largely protected them from last week's market gyrations, when the Standard & Poor's 500-stock index spiked up and down more than four percent a day for four days straight.
Yet they are also imposing a national price. Recoveries are often led by the investing and risk-taking of the wealthy, and the rich have traditionally been more optimistic about the economy than everyday investors. Yet current surveys show the rich are among the most pessimistic about the economy. Rather than investing in stocks or companies that can create jobs, they are betting on continued volatility and slow growth by hoarding cash, gold and other safety assets.
"If the wealthy run into the proverbial bunker, then the economy will falter," said Mark Zandi, chief economist at Moody's Analytics, a division of Moody's Corp. "A loss of faith in our economy can quickly become self-reinforcing and self-fulfilling."
8. Capitalism is destroying itself - So says Nouriel Roubini here in a WSJ video interview in a resoundingly Marxian fashon. Good on him.
Here's Roubini:
Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process.
9. What's wrong with Europe - Satyajit Das is also a good read on the European crisis over here at Naked Capitalism.
Stephen Jen, a currency strategist and former economist for the IMF, captured the essence of the problem: “The creditors are becoming the debtors ….The burden of support in the euro zone will become even more concentrated on Germany and France.” This will ultimately affect the credit ratings of these countries, causing financial problems if the contingent liabilities were triggered.
If the new plan fails to arrest the problems, Europe’s peripheral economies will be affected first, with problems spreading to Spain and Italy and perhaps Belgium. Increasingly, it would affect the stronger countries like Germany, France and the Netherlands. Rather then containing contagion, the EU plan risks spreading the crisis to the stronger members of the Euro-zone.
10. Totally Stephen Colbert on the Mitt Romney comment about corporations being people.
(Updated with cartoons)
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