Monday's Top 10 with NZ Mint: Europe's bank funding still frozen; China's toxic 'gutter oil'; A 1 tonne golden Kangaroo; America's US$1 bln railway fraud; Dilbert

Here's my Top 10 links from around the Internet at 2 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.

I like the look of the gold coin. But maybe not the weight.

1. The freeze is still on - Bloomberg reports that the europhoria in stock markets last week after the apparent 'mega-deal' to save the Eurozone has not transferred into the credit markets where European banks are still frozen out.

And they will need to refinance US$1 trillion of bonds over the next year...

Many are now on life support for funding from the European Central Bank.

The deal done last week to recapitalise the banks after a 50% haircut on Greek debt was only half that demanded by the IMF.

Stress tests results for European banks are still widely distrusted, particularly after Dexia scored so highly earlier this year and collapsed just weeks later.

Here's Bloomberg on the background:

“The biggest problem at the moment is that banks haven’t been able to fund themselves,” said David Moss, who helps manage about 8.5 billion euros ($12 billion) at F&C Asset Management Plc in London. “If banks can’t fund themselves, they’ll struggle to exist.”

In 2008, the U.S. Federal Deposit Insurance Corp. gave a guarantee on bank bonds, allowing financial institutions to access markets with the backing of the government. For European policy makers to replicate the success of that program any warranty would have to be given at the EU level because the deteriorating public finances of southern states means they would struggle to back their banks, analysts said.

“It’s a valiant attempt to get term funding kick-started again,” said Andrew Stimpson, an analyst at Keefe Bruyette & Woods Inc. in London. “But investors’ concerns are with the sovereigns not the banks, so putting the onus on the sovereigns to guarantee bank issuance does not sound convincing.”

2. One tonne of pure gold - Got a spare US$55 million? Perth's Mint has minted a 1 tonne coin with a carving of a Kangaroo on one side and the queen's head on the other side.

Makes you wonder about the definition of money I was taught in school. Portable. Divisable. Store of value. Exchangeable.

Maybe not so much with this one. But fun never the less. You'd have to have a big pocket.

And a forklift nearby. HT Suhaimi.

Here's the video.

3. Here's a good lark - Reuters reports hundreds of railway workers in America are alleged to have committed US$1 billion of fraud by claiming disability payments for fake disabilities at the same time as claiming their pensions.

The number is enormous.

Former Long Island Railroad workers, doctors and a federal railroad agency employee are accused of participating in the scheme in which employees filed disability claims shortly before they retired. The move allowed them to get disability pay on top of their retirement pension, prosecutors said.

In filing the claims, the railway workers allegedly paid between $800 and $1,200 to hire one of several disability doctors.

4. It's all in the land - Leith van Onselen at Macrobusiness does a great job of working out that land price inflation is the major driver behind the explosion in dwelling values in Australia in the last couple of decades.

Sounds familiar.

Here's his thinking and a great chart below showing land values relative to GDP.

While residential land prices have been increasing in real terms for much of the past 50 years, they accelerated in the late-1980s, commensurate with the widespread adoption by Australia’s state and local governments of urban consolidation policies, such as more restrictive planning processes (including the implementation of urban growth boundaries) and the imposition of up-front impact fees and charges on new developments. These policies helped to force-up the cost of fringe land, causing the price of pre-existing residential land to increase in the process.

5. No wonder they're grumpy - Kevin Drum writes at Mother Jones about where America's income went from 1979 to 2005. He has a great chart to show who won and who lost.

One of the points this drives home is just how much the story of growing income inequality really is a story of the top 1%. Inequality has increased within the bottom 99%, but not all that dramatically. It's really the top 1% and the top 0.1% where all the action is. So if the Occupy Wall Street folks are ever looking for an alternate slogan, they might consider "Give us back our $700 billion."

You can, of course, try to concoct some story in which growing income inequality has boosted economic growth, so that the gains of the rich have been solely from income that nobody would have gotten otherwise. But it's a pretty tough story to tell, because there's simply no evidence for it. The American economy hasn't been growing any faster over the past 30 years than it did in the 30 years before, it's just distributed the gains of its growth disproportionately to the rich.

To bring this home a little more vividly, take a look at the row labeled "41-60." That's the dead middle of the income distribution. If all income groups had grown at the same rate over the past 30 years, that median household would today be making about $10,000 more than they are. That's the price we pay for our growing plutocracy.

6. Chinese food safety - New Zealand has its own experience with Chinese food safety via Fonterra's now defunct joint venture with SanLu that poisoned baby formula with melamine.

Fonterra's decision to blow the whistle via Helen Clark and the Chinese Premier ultimately won New Zealand huge kudos from consumers in China, who now see New Zealand as a source of honest and clean food. So much so that we have to put limits on the number of cans of baby formula being sold at supermarkets near Auckland airport to Chinese tourists wanting to take home the good stuff.

Ironically, we would not have had the Chinese bids for CraFarms without that incident.

Here's The Economist writing about the depths of the food safety problems in China in the wake of problems with pork labelling at Wal-Mart's stores in China.

The Walmart case followed close on the heels of another food scandal that seems to shock the public far more: the production and extensive use of “gutter oil”, mainly in restaurants. The term refers to recycled cooking oil, which is often retrieved from drains where it is dumped by restaurants after use. Floating to the top, it is scooped up and recycled, using chemicals to disguise the smell. Such oil can contain carcinogens and toxic mould. Even Xinhua, the government’s news agency, called gutter oil “the most nerve-jittery problem of late” concerning food safety, and one that showed “a really nasty reality of Chinese food today”.

Last month the police said they had arrested 32 people for producing the oil and had seized 90 tonnes of it in 14 provinces. Cynicism is widespread, even in the state-controlled media which reported that an estimated 2m tonnes of the slop are consumed annually in the country by unwitting diners. This is said to be equivalent to about one-tenth of the total used by restaurants. The mysterious death last month of Li Xiang, a reporter investigating the phenomenon, fuelled suspicions among Chinese internet users of an attempt by criminals to silence him.

7. 'Show us the money' - Bloomberg reports Standard and Poor's and Moody's routinely give better credit ratings to those companies and governments that pay them the most, a university study has found.

The research shows that profit may influence credit rankings after a government panel described the rating companies as “key enablers of the financial meltdown” in 2008. New York- based Moody’s, Standard & Poor’s and Fitch Ratings still dominate scoring for the $43 trillion globaldebt market, pressing borrowers from Spain to California to address fiscal imbalances to avert downgrades that may raise taxpayers’ financing costs.

“There’s a problem here of conflicts, credibility and competence,” said Phil Angelides, a former California State Treasurer and chairman of the Financial Crisis Inquiry Commission, which Congress asked to examine causes of the crisis. “The current model is tragically broken, it needs to be abandoned,” he said Oct. 14 in a telephone interview.

8. America's other deficit - Morgan Stanley Asia Chairman Stephen Roach points out at Project Syndicate that America is running chronic trade deficits with 87 countries other than China, and that China's currency has appreciated 30% vs the US dollar since 2005.

America’s massive trade deficit is a direct consequence of an unprecedented shortfall of domestic saving. The broadest and most meaningful measure of a country’s saving capacity is what economists call the “net national saving rate” – the combined saving of individuals, businesses, and the government. It is measured in “net” terms to strip out the depreciation associated with aging or obsolescent capacity. It provides a measure of the saving that is available to fund expansion of a country’s capital stock, and thus to sustain its economic growth.

In the US, there simply is no net saving any more. Since the fourth quarter of 2008, America’s net national saving rate has been negative – in sharp contrast to the 6.4%-of-GDP averaged over the last three decades of the twentieth century. Never before in modern history has the world’s leading economic power experienced a saving shortfall of such epic proportions.

Yet the US found a way to finesse this problem. Exploiting what Valéry Giscard d’Estaing called the “exorbitant privilege” of the world’s reserve currency, the US borrowed surplus savings from abroad on very attractive terms, running massive balance-of-payments, or current-account, deficits to attract foreign capital.

9. Totally irrelevant, but still something special - Here is the eulogy that novelist Mona Simpson gave at the funeral of her brother, Steve Jobs.

10. Totally relevant Jon Stewart video on the European financial crisis.