Wednesday's Top 10 with NZ Mint: The return of European nationalism; China tells West to fix its own debt problems; How about a new Bretton Woods or Marshall Plan to forgive debt?; Dilbert

Here's my Top 10 links from around the Internet at 7 pm 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.

Good crop of cartoons today.

1. The rise of nationalism in Europe - George Friedman writes well at Stratfor about the history behind the birth of the euro and the national grievances that are now threatening to tear it apart.

I think it's still way to early to worry about conflict between states in Europe.

But the resentments are building and the nationalist forces that tore Europe apart twice in the last 100 years are beginning to simmer.

There is an enormous well of peace and good will to suppress it and redirect it.

It's quite possible this could all blow over if the Germans just swallow the rat and bail out everyone in Southern Europe.

It could even end peacefully if the Greeks are bankrupted and ejected from the euro without it sparking a horrible financial meltdown. (See numbers 3 and 9 for more on that)

But there are now serious questions about the unity of Europe.

Here's Friedman:

Germany and Greece each have explanations for why the other is responsible for what has happened. For the Germans, it was the irresponsibility of the Greek government in buying political power with money it didn’t have to the point of falsifying economic data to obtain eurozone membership. For the Greeks, the problem is the hijacking of Europe by the Germans. Germany controls the eurozone’s monetary policy and has built a regulatory system that provides unfair privileges, so the Greeks believe, for Germany’s exports, economic structure and financial system. Each nation believes the other is taking advantage of the situation.

Political leaders are seeking accommodation, but their ability to accommodate each other is increasingly limited by public opinion growing more hostile not only to the particulars of the deal but to the principle of accommodation. The most important issue is not that Germany and Greece disagree (although they do, strongly) but that their publics are increasingly viewing each other as nationals of a foreign power who are pursuing their own selfish interests. Both sides say they want “more Europe,” but only if “more Europe” means more of what they want from the other.

Does Greece or Portugal really want to give Germany a blank check to export what it wants with it, or would they prefer managed trade under their control? Play this forward past the euro crisis and the foundations of a unified Europe become questionable.

This is the stuff that banks and politicians need to worry about. The deeper worry is nationalism. European nationalism has always had a deeper engine than simply love of one’s own. It is also rooted in resentment of others. Europe is not necessarily unique in this, but it has experienced some of the greatest catastrophes in history because of it. Historically, the Europeans have hated well. We are very early in the process of accumulating grievances and remembering how to hate, but we have entered the process. How this is played out, how the politicians, financiers and media interpret these grievances, will have great implications for Europe. Out of it may come a broader sense of national betrayal, which was just what the European Union was supposed to prevent.

2. A Dying economy - UPI Editor Martin Walker writes there are structural problems in the global economy, in particular the increasing use of technology instead of people. HT Stan via email.

Whereas automation began by eroding the need for a large blue-collar workforce, we are starting to see the way computerization is eroding the demand for a white-collar workforce, whether in newspapers, paralegal services or accounting. The education industry is likely to follow, as cheap distant learning starts to erode the demand for traditional college education.

The next victim will be healthcare services, hitherto one of the fastest-growing employment areas. The coming of constant and automated diagnosis through smart phones, followed by the eventual success of electronic health records, is going to reduce the need for human staff.

Then will come the reduced need for cashiers and retail staff (6 percent of U.S employment) as we move to electronic payment by phones. Vodaphone is building hardware on the assumption that by 2020 half of all retail transactions will be conducted by smartphones.

The core of the problem is that governments have been trying to tackle this economic crisis by using the tools of the 1930s, as if it were another version of the Great Depression that could be resolved through traditional Keynesian methods. But it is starting to become clear that many of the roots of this crisis stem from the reality that we are already entering a completely different technological era in which the traditional tools of job creation and demand stimulus no longer work in the same old ways.

Where this takes us as an economy dependent on mass employment to pay for consumption, taxes and pensions that still unclear. And what it does to us as a society in which most people measure much of their self-worth by their jobs and their incomes and their ability to take care of their families is more uncertain still. But the essence of this crisis is becoming clear; it is less an event than a transition. We won't be getting back to "normal," not ever.

3. Beware a Greek exit - Buttonwood writes at The Economist about comments from Citigroup's Willem Buiter explaining why any Greek exit from the euro is not a simple or contained thing.

Bank runs within Europe are possible...

Greece's exit would create a powerful and highly visible precedent. As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area. Any non-captive/financially sophisticated owner of a deposit account.... will withdraw his deposits from countries deemed at risk - even a small risk - of exit. Any non-captive depositor who fears a non-zero risk of the future introduction of a New Escudo, a New Punt, a New Peseta or a New Lira would withdraw his deposits at the drop of a hat and deposit them in the handful of countries likely to remain in the euro area no matter what - Germany, Luxembourg, the Netherlands, Austria and Finland.

The funding strike and deposit run out of the periphery euro area member states (defined very broadly) would create financial havoc and most likely cause a financial crisis followed by a deep recession in the euro area broad periphery.

4. The Real Median income problem - Ezra Klein's Wonkblog at Washington Post has 5 charts that explain the endless US recession, including this one below that Klein explains here:

How brutal has the recession been to U.S. households? Americans are earning even less than they did 13 years ago. That’s according to new Census data released Tuesday, which found that real median income fell to $49,445 in 2010, the lowest number since 1997, and the largest decline in income in a single year of any recession since at least 1967. Poverty rates also rose to a record level: 15.1 percent of Americans are now in poverty, the highest level since 1993.

5. In search of a New Bretton Woods or Brady bonds - MSNBC's Dylan Ratigan talks with PIMCO's Mohamed El Irian about how to get the world out of this debt mess.

Ironically, for the biggest bond fund manager in the world, El Irian talks a lot about debt forgiveness.

In 1944, America had probably its finest moment, when it convened the Bretton Woods summit to organize the finances of the post-war world. The post-WW I reparations deal looked much like what we are pursuing now, a “blood from the stone” philosophy of stripping as much from German as possible, while America got as much back from England and France as possible. We know where that led, to depression, then global tensions, then a trade war, then a real war. The post-WW II deal was organized around turning Western Europe into a productive society, to pursue the goal of peace. And it worked! The Marshall Plan, Bretton Woods, the IMF, and the World Bank turned Western Europe into a rich trading partner, and the idea of war between Germany and France is now laughable. This was clearly worth debt forgiveness!

We need a new global restructuring of our obligations, a new Bretton Woods or Brady Bonds solution. Greece should not be descending into poverty, it has an educated workforce and wonderful traditions. American homeowners shouldn’t be under siege by creditor predator banks, and millions of us shouldn’t be unemployed as debt-holders forced into a Survivor-like fight with each other over scraps. We cannot allow giant creditors to turn fights over debt into currency wars, and then into real wars.

We need leadership to say that this world will not be a lowest common denominator fight over satisfying old debts that cannot be satisfied, with no environmental, labor, or consumer protections. We need leadership to move us towards a high-trust, global productive society that can solve our collective problems. This is doable. We’ve done it before. We can do it again.

6. 'Don't rely on us' - Ever helpful, Chinese Premier Wen Jiabao has warned in this Bloomberg piece that western nations should cut their deficits and create jobs (that's going to be difficult to do at the same time) rather than rely on China to be the last buyer of debt in the planetary Ponzi scheme.

To be fair to our dear leader, Wen did not use the Ponzi word. But he may as well have.

Here's the comments:

“Countries must first put their own houses in order,” Wen said today at the World Economic Forum in the Chinese city of Dalian. “Developed countries must take responsible fiscal and monetary policies. What is most important now is to prevent the further spread of the sovereign debt crisis in Europe.”

“What he is basically saying is China wants to help, they want to invest, but we can’t help you take the proper measures to control the debt crisis, you’ve got to do that on your own,” said William Rhodes, a senior adviser to Citigroup Inc. who was at Wen’s speech.

7. A special price for the French - Bloomberg reports Societe Generale and BNP Paribas are having to pay more to borrow than their European counterparts as the fear spreads about what might follow a Greek default.

Societe Generale SA, BNP Paribas SA and Credit Agricole SA (ACA)are being quoted higher rates than their competitors in the commercial paper market as the crisis in the euro zone spreads beyond Greece,Portugal and Italy.

Investors charged the French companies an average 6.7 basis points more to borrow three-month commercial paper on Sept. 8 than the rate the lenders said they could pay in the London interbank offered rate market, according to two buyers who asked not to be identified because the talks are private. As recently as July, the banks received CP rates that were lower than Libor.

8. And here's why - Moody's downgraded Societe Generale and Credit Agricole banks tonight....

9. Lehman (not) lite - Zerohedge reports market strategist David Zervos saying what he thinks a Greek default might look like.

 "The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe WITHOUT an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly - wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs - one for each country. That is going to require a US style socialization of each banking system - with many WAMUs, Wachovias, AIGs and IndyMacs along the way. 

"The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks - even though it is probably a more cost effective solution for both the German banks and taxpayers....Expect a massive policy response in Europe and a move towards financial market nationlaization that will make the US experience look like a walk in the park. "

10. Totally Jon Stewart on the Tea Party madness