Friday's Top 10 with NZ Mint: Europe's intractable banking capital problems; US drums beating for China trade war; Futuristic campervan; Clarke and Dawe; 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.

Anyone who thinks the European thing is fixed should read Robert Peston at number 1. The cartoon under number 5 is the funniest thing I've seen in a while.

1. New stress tests - BBC's Robert Peston reports the penny has finally dropped for European banking regulators about how they need to do credible stress tests that actually assumes someone is going to take some losses on all this dodgy sovereign debt floating around.

But then what?

Peston talks to a few people on the inside and finds there are enormous hurdles still to jump.

This European crisis is so far from over it's not funny.

It's generally not funny.

But it matters an awful lot.

Here's the hurdles:

Will credible stress tests actually be run and will European governments make sure that sufficient additional capital is injected into European banks?

Well, those close to the EBA (European Banking Authority) caution me that the important decisions have not yet been taken.

They say three things.

First, that the most serious impediment to sanitizing the European financial system is the intransigence of the French government.

France's banks are perceived to be weak by investors and creditors. But France's big banks and French ministers say the market is wrong. Which is why the French government is proving most resistant to the idea of credible stress tests and an ambitious plan to inject perhaps €200bn of additional capital into eurozone banks.

Second, my sources are convinced that Europe's banks will be adequately recapitalised. But what they cannot say is whether this will happen in a sensible orderly way, or whether it will only happen five seconds before midnight, when markets are melting down.

Third, officials and regulators tell me that of the €200bn that may have to be injected into banks, some will come from commercial investors, some from national governments and some from Europe's bailout found, the European Financial Stability Facility.

Or to put it another way, there won't be an American-style TARP rescue.

2. The beating drums of trade war - The New York Times reports on the latest moves in America to crack down on Chinese imports.

Under pressure from Congress to do more to confront China on economic issues, the Obama administration has notified the World Trade Organization of nearly 200 Chinese subsidy programs, saying many of them may violate free trade rules.

Ron Kirk, the United States trade representative, said in a statementon Thursday that many of the subsidies had been identified as part of a yearlong American investigation of how the Chinese government helped bankroll the rapid growth of its clean energy industries. In solar and wind power, in particular, American companies have had trouble keeping up with Chinese competitors.

The action by Mr. Kirk’s office comes as the Senate is considering a bill challenging China’s manipulation of its currency as a trade tool.The Chinese government strongly condemned that bill, and House Republicans and the White House have also expressed reservations.

But with the trade representative’s long list of ways that China subsidizes its domestic industries, the Obama administration was now taking a more head-on approach to Chinese trade. Whether or not any of those subsidies violate international trade rules, the American trade office says China is already out of bounds by not having reported them to the W.T.O.

3. The problem with technology - Greg Ip muses at The Economist about the decline of America in tandem with the wonderful innovation of companies such as Apple, Facebook, Google and Amazon.

He makes some excellent points about how America's middle class has been hollowed out and the benefits claimed by the elite while still being encouraged to consume all the wondrous new gadgets designed by these companies in America but made elsewhere.

Even if Apple remains as successful as it has been under Mr Jobs, that success long ago decoupled from that of the broader economy. Written on the back of my iPod are the words, “Designed by Apple in California, Assembled in China.” It was classic Jobs: reframing an issue, the outsourcing of American manufacturing jobs, as something inspirational rather than discouraging. The low-skill assembly jobs and the middle-class lives they provided may be leaving for Asian shores, but the brainy, wealth-creating parts of the process—the design, the engineering, the marketing—were firmly rooted in Silicon Valley. Free traders (including me) loved to cite the research that finds far more of the value in an iPod is added in America than in China.

But behind this glowing story of synergy between American brains and Chinese brawn lay a more disturbing reality. American global economic leadership has, in the last decade, benefited an ever narrower slice of its people. They have become fabulously wealthy, while the vast majority of job growth has been in areas like education and health care, where productivity and wages are stagnant, a trend well documented by Michael Spence.

Yet even if American innovation is fundamentally sound, there remains the more unsettling problem of how narrowly its fruits are shared. If you want to know why the Senate is on the verge of passing a bill punishing China for its trade practices, look no further than this fact: Apple, Google, Facebook and Amazon collectively employ just 113,000 people, a third of GM’s payroll in 1980.

4. UBS knew about Kweku - ComputerworldUK reports it turns out Kweku Adoboli was not such a rogue trader after all,  HT Troy

Interim chief executive Sergio Ermotti, who is running the company following Oswald Grubel’s resignation last month, sent a memo to employees saying the bank is aware that its systems did detect the rogue activity.

In the memo, seen by the Wall Street Journal, Ermotti wrote: “Our internal investigation indicates that risk and operational systems did detect unauthorised or unexplained activity but this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced.”

5. The other side - Standard and Poor's and ABN Amro have defended themselves in the closely watched legal action being taken against them in Australia's Federal Court by local councils who bought structured bonds that blew up spectacularly.

Here's what ABN Amro's lawyer said via SMH.com.au:

''Standard & Poor's had the established framework and analytical tools to rate a product such as this,'' Mr Jackman said. ''We were dealing with people of very high competence and integrity.''

He rejected a claim by the councils' barrister, Noel Hutley SC, ''that we were taking advantage of an inability of Standard & Poor's to rate the product''. Mr Jackman continued: ''He goes so far as to say that we controlled Standard & Poor's in this ratings process. The suggestions are utterly fanciful.''

6. Quite a dropout - Steve Jobs famously dropped out of a community college and went on to do amazing things.

He returned to Stanford University in 2005 to give its commencement address (video below), which is now justifiably famous.

It's a succinct explanation of who he was and how he lived.

Here's a bit of the speech as repeated by WSJ:

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

Here's the video:

7. A new type of campervan - The Daily Mail reports on this 15 ft campervan design that comes from Switzerland. I put it in only because I'm a secret campervan fan.

8. What a bunch of hypocrites - Paul La Monica writes at CNN Money that America's accusations that China is manipulating its currency is a joke because America is doing the same.

How can anyone with a straight face declare that China needs to be punished for keeping the yuan artificially low when the United States is also aggressively trying to devalue the dollar with its monetary and fiscal policies?

The righteous indignation and holier-than-thou attitude is comical at best. The Federal Reserve, through two rounds of quantitative easing and now Operation Twist, has helped push the dollar lower.

Simply put, buying up U.S. Treasuries as if they were Missoni apparel at Target leads to lower interest rates and a weaker currency.

The do-nothing Congress hasn't made matters any better. The debt ceiling debacle this summer didn't help the dollar either.

9. Totally irrelevant video of a bunch of Russian kids playing as a rock band while riding on a motorcycle.

It's outrageous. They're not even wearing helmets...

10. Totally Clarke and Dawe because I always try to put Clarke and Dawe on on a Friday. The Australian government held a tax summit this week.

There was a talk about Lake Burleigh Griffin...

Not much else happened.

"Keep Wayne away from the jelly beans."