Here's my Top 10 links from around the Internet at 11.40 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.
Apologies for the no-show yesterday. I caught a lurgy from the wife and kids. Even my good friend Panadol wasn't good enough. And I'm still not drinking coffee, which isn't helping much...but I really want to win NZ$20 off Amanda.
1. Why so confident? - The markets rallied overnight on hopes that Europe can solve its problems.
But look just a few millimetres below the surface of the political landscape in Germany, in particular, and you see plenty of potholes and hurdles for any expansion of the EFSF (European Financial Stability Fund) and the European Central Bank's role.
Chancellor Angela Merkel has to get approval from her Parliament on Thursday for an old expansion of the fund.
Reuters reports she will struggle to get the support of her own coalition partners and will instead have to get support from the centre-left opposition, which will weaken her politically.
Germany's Finance Minister has even outright denied that the fund will be expanded. And the German Constitutional court has been very vocal in its opposition.
Why are markets so sure Germany will roll over?
A revolt by Euro skeptical backbenchers hostile to further bailouts in Merkel's conservatives and their liberal Free Democratic coalition partners may leave her without a majority in her own camp.
In an internal vote on Tuesday, 11 deputies from Merkel's CDU/CSU group voted against the motion and two abstained. Coalition sources said they expected between 2 and 5 FDP lawmakers to vote against and up to 6 to abstain.
If more than 19 coalition lawmakers vote against or abstain, Merkel will be dependent on opposition votes in a political humiliation that could weaken her ability to push through future rescues.
2. And here's some more cold water for the market bulls - Ambrose Evans Pritchard reports at The Telegraph that the German Finance Minister has called the revamped EFSF a "stupid American idea".
German finance minister Wolfgang Schauble said it would be a folly to boost the EU's bail-out machinery (EFSF) beyond its €440bn lending limit by deploying leverage to up to €2 trillion, perhaps by raising funds from the European Central Bank.
"I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense," he said. Mr Schauble told Washington to mind its own businesss after President Barack Obama rebuked EU leaders for failing to recapitalise banks and allowing the debt crisis to escalate to the point where it is "scaring the world".
"It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government," he said.
3. Auckland embraces unaffordable housing - Leith van Onselen has done us all a service at Macrobusiness.com.au with his analysis of the Auckland Council's new draft plan, which he describes as one of the dumber proposals he's read for some time.
It is hard to understand why the Auckland Council would even consider implementing tighter planning controls than those that exist currently. Auckland’s existing MUL has already driven urban land prices to obscene levels – according to research by respected economist Arthur Grimes, now the chairman of the Reserve Bank, this limit has made land immediately inside the MUL between eight and 13 times more expensive than land immediately outside.
In the process, the MUL has helped make Auckland’s housing amongst the most expensive in the English-speaking world (see below chart) and made Auckland more densely populated than Vancouver, Melbourne, Portland, Adelaide, Perth or Brisbane.
4. Britain's Green belts - This debate over sprawl vs intensification and how to encourage more house building is certainly a live one in Britain, where the government is looking to ease restrictions on building on green belts.
Ian Cowie from The Telegraph writes about the inevitable fallout for property owners.
Thousands of house prices could fall by a third or more if Coalition Government proposals to change planning rules in favour of developers become law, knocking hundreds of thousands of pounds off some of the most desirable homes in the green belt.
Many estate agents are reluctant to discuss this potential domestic disaster because they are linked to building and development companies who stand to gain if given a free hand to brick over the fields and meadows that make England such a green and pleasant land.
But David Pardoe, a director of Chesterton Humberts’ rural division in Salisbury, was among those willing to speak out. He told me: “It is the larger and higher value country houses that will suffer the most if developers are given the go ahead to build in green belt and other protected areas, as it could jeopardize three of the factors by which a country house is valued; its privacy levels, the views it has, and its proximity to other properties.
5. Why lower rates are no use - The Fed's Twist programme was designed to lower longer term interest rates and spark borrowing and spending by households.
But the WSJ reports here that even mortgage rates as low as 3.86% aren't working.
"At this point, the only people being helped are those who need it the least," he said. For the home-sales market, low rates will help make homes more affordable, but may not boost home buying if consumers are worried about the economy.
"Today, the buyers' concern is the falling value of homes," said Mr. Barnes. "I've had potential buyers say: 'I don't care if rates are zero if prices are going to fall again.' "
6. Lower bank profits - The FT's Martin Wolf writes an excellent blog post on how bank returns on equity have been way too high since the 1970s because they took on too much risk, which eventually meant they had to be bailed out by taxpayers. HT Dan via email.
What would you say if someone offered you an investment with a promised real return of close to 15 per cent? You might say: “How much can I buy?” Alternatively, you might say: “What is the catch?” Sensible people must take the latter view. If you thought that you were being offered a reliable real return at such an exalted level, you would buy as much as you could. This must be particularly true now when real returns on the bonds of relatively safe governments are close to zero.
So what is the catch? The obvious answer has to be that the real return in question is extremely risky, because it is volatile and offers a significant chance of total wipe-out.
Indeed, it is perfectly obvious that these cannot be sustainable safe returns in economies growing at 2 per cent a year, for such a large and well-established industry. At a 15 per cent real return, the value of cumulative retained earnings would double in five years and increase 16-fold in 20 years. Pretty soon, bank equity would be the only real asset in the world!
If a bank says it needs a real return on equity of 15 per cent, to obtain funds from investors, it is telling you that it is running an enormously risky business. The question you need to ask yourself is this: can we afford to have financial institutions that are both so large and so essential and yet run such huge risks? I suggest the answer is: no. Make them safer. It really is not going to hurt.
7. An extraordinary interview, that turned out to be too good/bad to be true - Independent trader Alessio Rastani says some hilarious stuff in this BBC interview below.
"The governments don't rule the world. Goldman Sachs does."
It turns out he's a independent trader living in a mortgaged house in a dodgy part of London. Here's The Telegraph, which found out he was an 'attention seeker, not a trader'
"They approached me," he told The Telegraph. "I'm an attention seeker. That is the main reason I speak. That is the reason I agreed to go on the BBC. Trading is a like a hobby. It is not a business. I am a talker. I talk a lot. I love the whole idea of public speaking."
So he's more of a talker than a trader. A man who doesn't own the house he lives in, but can sum up the financial crisis in just three minutes – a knack that escapes many financial commentators. "I agreed to go on because I'm attention seeker," he said on Tuesday. "But I meant every word I said."
8. Greece's Debt Crisis Odyssey - The BBC has produced an excellent flowchart explaining the various what-if scenarios in the Greek crisis.
Click on the chart for a bigger version. All the scenarios end badly.
9. Trade tensions growing - Senate Majority Leader Harry Reid plans to propose a bill next week that would allow American companies to ask for counterveiling duties against Chinese exports to America because of the overvaluation of the yuan.
A key provision of the Senate bill would instruct the Commerce Department to treat undervalued currencies as a subsidy under trade law, allowing companies to ask for countervailing duties against imports on a case-by-case basis.
Policymakers are already worried Europe's debt crisis could undermine global growth. A trade war between the United States and China would be more trouble.
The lawmakers argued China's currency is undervalued by as much as 25 percent to 40 percent against the dollar, giving Chinese companies an unfair price advantage and destroying millions of American jobs.
China rejects the criticism and last week a Chinese foreign ministry official urged the United States to "not politicize the renminbi's exchange rate because of U.S. domestic economic problems."
10. Totally Back in Black on Jon Stewart's Daily Show. "They want to take the Arsenic out of Apple Juice!"
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