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 tobernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Apologies for no Top 10 yesterday. I was traveling to Invercargill. Some great charts today on 'Eurogeddon'.
1. Europe faces systemic crisis - BBC reports European Commission President Jose Manuel Barroso saying the Eurozone faces a systemic crisis unless it integrates its budgets more deeply.
Every day I ask myself how this is all going to end.
The consensus I'm reading is that the only thing that can save the Eurozone now is massive intervention by the European Central Bank (ECB) to buy all these toxic Southern European bonds with printed money and a cutting of European short term rates to zero %.
This explains why the gold price in euro terms is at record highs.
The things to watch now are whatever the ECB says about cutting rates and printing money.
And then whatever the Germans say. They hate this idea and worry about both inflation and further enabling over-spending in Southern Europe (although Germany is the immediate beneficiary because the funds the Germans lend are often used to buy German exports.)
At some point the Germans will have to capitulate and allow their Euro to be devalued. Or they will lose it altogether.
Ironically, this will make their exporters even more competitive and prosperous. But it does mean they'll have to keep lending money to the Southern Europeans forever and ever, until they ultimately default, given their reluctance to wean their economies off the cheap German sugar money.
The other thing to watch is European politics.
When will the voters rebel?
Here's Barroso:
He told the European Parliament in Strasbourg that further measures might be needed to tackle the debt crisis.
"Without this increased integration, convergence and discipline, we will not be able to sustain a common currency," he added.
2. NAB beating the drums - The Australian reports National Australia Bank, which owns BNZ, seems to be warning more about rising funding costs than others. The implication is that NAB may raise floating mortgage rates without a rise in the Official Cash Rate in Australia.
Here's NAB CEO Cameron Clyne:
THE head of National Australia Bank warned yesterday that the threat of a new credit squeeze was "increasingly real" and would impact on future interest rate cuts. NAB chief executive Cameron Clyne told a business lunch in Brisbane that funding markets were "very constrained" as Europe grappled with a ballooning debt crisis.
"Money is very tight out there at the moment," Mr Clyne told the QUT Business Leaders' Forum. "It is increasingly concerning what is going to happen."
Mr Clyne said banks faced the twin challenges of not only sourcing money but deciding how much they were willing to pay for it. As a result, the interest rates charged by all banks would be influenced by more than just the fluctuations of the Reserve Bank cash rate, he said.
3. The Positive Money campaign - Ben Dyson writes in the Guardian about his Positive Money campaign to take the power to create money out of the hands of private banks and put it back in the hands of the Bank of England.
Incredibly, the law that makes it illegal to print your own tenners at home has never been updated to apply to the electronic money that is now created by banks. As we began to use electronic money to make the vast majority of payments, cash became less important and the power to create money shifted to the banks that caused the crisis. Without anyone noticing, the power to create money was privatised by stealth.
So while criminal gangs manage to create about £2.5bn of fake cash each year, the banks collectively create more than £100bn a year without breaking a single law. Their reward for doing so is the interest that is currently being collected on nearly every pound in existence. The cost to the rest of us is a lifetime in debt.
4. 'You know how screwed Europe is when it has a German pope and Italian central banker' - Hedge fund manager Kyle Bass, who picked the US sub prime crisis and the European debt crisis, tells BBC in this interview that a massive European debt restructure is required.
Well worth a watch.
5. Eurogeddon - Paul Krugman calls it with this chart showing the spread between French and German bonds overnight as the evidence.
6. More eurogeddon - And here's a longer term chart of the French vs German spread for their 30 year government bonds to rub it in via FTAlphaville.
7. 'Cashed up bogans' - This WSJ piece on the Australian mining boom is fun. It profiles a 25 year old high school dropout (pictured below with his 'enhanced' A$71,000 Holden V8 ute) earning more than A$200,000 a year working underground in a Western Australian mine.
The WSJ called the Holden a Chevy.
Sacrilege.
He has earned A$1 million but has no savings...
Mr. Dinnison, who has mined copper, tin, nickel and gold, drills holes that are then packed with explosives to extract ore. He wears a $5,000 gold chain crucifix. "I'm not religious, but I am conscious that what I do is serious," he said. "But then you come home and you have all that cash."
Despite having earned roughly US$1 million since he started, he has no savings and doesn't apologize. "The mines are so dull, that when you get back here, everything is stimulation and excitement," he said. "The money I spend supports other businesses because of the [stuff] I blow it on."
8. Here we go - FTAlphaville reports the cost of leveraged loans to private equity investors by European banks is exploding.
I wonder how Graeme Hart feels about this...
In its report, LCD points to this Dealbook story about US private equity shops, distressed debt and sovereign wealth funds “licking their chops” at the prospect of scooping up some of these assets at such attractive yields. (PricewaterhouseCoopers estimates that the total value of asset sales by European banks could reach $1,800bn, though as we’ve mentioned a few times, many of these sales will involve cross-border assets.)
But we suspect there’s a limit to how much of a saviour these outside buyers might turn out to be.
These investments will come with big risks, both because the European sovereign debt crisis has no visible end and because of how close Europe is to another recession. And the deleveraging itself could well be the cause of a downturn, leading to a further climb in default rates on these loans, higher yields, and so forth — the start of a frightening feedback loop.
9. (Pink) diamonds are a Chinese girl's (and boy's) best friend - WSJ reports on how Chinese and Hong Kong women are opting for pink diamonds as an alternative to gold as a store of value...
Worried that traditional investments like stocks and bonds are losing their sparkle, wealthy Chinese are buying the gemstones to showcase alongside fine wines and contemporary art.
Their interest is driving up prices of Australian pink diamonds—the world's rarest—and supporting returns that have outstripped the Dow Jones Industrial Average and Hong Kong's Hang Seng over the past decade. An index of pink-diamond prices more than doubled between 2000 and 2010, according to Gemdax consultants. That compares with the 63% return on the Hang Seng and 6.2% for the DJIA.
"I see it as an investment, but unlike shares, I can wear it," said Doris Kwan, a Hong Kong-based consultant, who bought a pink-diamond necklace in April at a private sale in Shanghai. "I'm not going to put a gold bar on my body."
10. Totally Jon Stewart unable to contain himself over Herman Cain's latest gaffe. Much more fun than the shenanigans around teapotgate.
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