Monday's Top 10 with NZ Mint: Latvian bank run; European bailout laundering plan; Charter school hedge funds; Survival of the fattest (banks); A US$21 trln debt overhang; Dilbert

Here's my Top 10 links from around the Internet at 7.30 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.

#1 is sobering in a deep way. Be sure not to buy any Christmas presents after reading it. ;)

1. A Mesopotamian solution - Boston Consulting Group writes in this research paper about the ultimate need for debt restructuring in the developed world.

It says central banks and governments are trying to create inflation to make the problem go away, but aren't having much luck as governments are forced into austerity programmes that slam economies into recession.

It points to the lessons of history.

In ancient Mesopotamia debts recorded on clay tablets were wiped clean whenever a new monarch was appointed.

BCG reckons the debt 'overhang' in the Western World is about €16 trillion.

Here's enterprising investor on the BCG report.

 Today total global debt stands at approximately $150 trillion, or 194% of global gross domestic product. And according to a new study by Boston Consulting Group, the developed economies of the world would need to reduce total debt by approximately $21 trillion in order to return to a maximum total debt-to-GDP ratio of 180%, a level considered to be a manageable burden.

This sum, US$21 trillion, is almost incomprehensible. It amounts to more than US$3,000 for every man, woman, and child on the planet — all 7 billion of us.

2. Laundering rescue funds through the IMF - The Economist writes about the deal over the weekend in Europe to push national central banks in the Eurozone to lend money to the IMF, who would then use it to help bail out Southern European countries.

It's a clever wheeze that may cause more harm than good, according to The Economist.

In many ways this money-laundering would be a clever wheeze. It gets around the central bankers’ hang-ups. It provides discipline, since the fund’s conditionality would help to keep Europe’s peripheral economies on track. And it could elicit funds from others. America won’t contribute anything more to the IMF, but big emerging markets seem willing to top up the fund’s resources, provided the Europeans do so too. With Europe’s own rescue fund—the European Financial Stability Facility—floundering, the IMF may be the best route to raising real money.

Unfortunately, like many clever wheezes, this one is full of pitfalls, both for the Europeans and for the IMF. The fund, which already has over half of its outstanding loans in the euro zone, would become even more heavily exposed to one region. For Italy or Spain, borrowing from the IMF is not the same as the ECB buying their bonds. The IMF is a preferred creditor, which means it always gets paid back first. Thus the more the fund lends to a country, the bigger the write-down for private creditors if there were ever a default.

3. 'Not comprehensive or quick' - PIMCO CEO Mohamed El Irian gives his verdict on the European rescue plan:

A week ago, markets were hoping that the combination of an ECB  policy meeting and yet another Summit of European leaders would allow them to leave behind — not for a day or a week, but for months and quarters — the unsettling European cloud. Unfortunately, neither was decisive enough; and yet another golden opportunity was insufficiently exploited by European policymakers.

European leaders still need to do a lot more, and quickly, if they are to catch up and get ahead of the crisis. Accordingly, and regrettably, the specter of volatility caused by European headlines will not recede for long.

4. Charter School hedge funds - The National-ACT coalition agreement included trials of publicly-funded but privately-run charter schools. They are a feature in America.

Radio Live's Andrew Patterson interviewed US hedge fund manager John Petry on Sunday Business about investing in these US charter shcools.

5. Survival of the Fattest - The New York Times' Gretchen Morgenson writes about how the mood is shifting in America towards breaking up the Too Big To Fail banks.

About time.

Richard W. Fisher, the president of the Federal Reserve Bank of Dallas, is one. In a speech last month he described, quite colorfully, the problems of these unwieldy institutions and the regulatory ethic "that coddles survival of the fattest rather than promoting survival of the fittest." Bank regulators should follow the lead of the health authorities battling obesity rates among our population, he said, adding that he favored "an international accord that would break up these institutions into more manageable size."

This is a banker talking, not a member of the Occupy Wall Street drum circle. And yet, some have criticized Mr. Fisher for voicing these sensible views - a sign to him that the issue is gaining traction. In an interview last week, he said: "Judging from the anguished calls I received from lobbyists for the megabanks, the 'attaboy' calls I am getting from regional and community bankers and the requests for copies of the speech from senators on both sides of the aisle, it appears this is a hot topic."

6. Just too much austerity - Harry Ergas writes at The Australian that Europe's 'fiscal compact' will be broken unless voters buy into it. Europe has proven before it will break its rules.

The smart money is on a repeat of last decade's performance, when France and Germany, faced with domestic political pressures to incur substantial deficits, led the charge in dramatically weakening the fiscal constraints imposed by the Stability and Growth Pact. The consequences of those changes, implemented in 2005, were predictable: they encouraged unchecked debt accumulation.

If those consequences are undeniable, there is no sign European leaders have learned the lesson: that fiscal constraints are unlikely to be effective unless electorates endorse them and can be counted on to punish violations. Securing that endorsement requires a willingness to engage with electorates that Europe's leaders largely lack. So in its absence, rules will be made to be broken.

7. Trapped inside an economic prison that is called the euro - Nigel Farage tells it straight.

8. A Chinese hard landing - Zero Hedge points to some research showing a sharp slowdown in China's steel making sector as the housing market there cools. This would be bad for iron ore and coal prices charged by Australian exporters.

Steel capacity cuts – through idling or accelerated maintenance outages – are now commonplace and the speed of these cuts has certainly surprised the market. Construction is the principal end-market blamed for this weakness; given the very large inventory overhang and the continued lack of liquidity, this is not surprising. Within the context of declining housing starts, plummeting transaction volumes and the beginning of a meaningful move down in housing prices, these shifts in the steel market have been an interesting harbinger of more substantial problems in the Chinese economy.

Our principal concern is the extension of housing weakness into the banking system through the mechanism of both failing developers as well as the opaque and informal lending. In our view, any suggestion that the Chinese market is undergoing a substantial restock is misplaced." Today, we get a confirmation of just this warning courtesy of Citigroup which has charted weekly Iron Ore China port inventories and of broad steel inventories. Needless to say, domestic steelmakers, who better than anyone know the state of domestic end product demand, have seen the writing on the wall, and have one message for the world: short Brazil and Australia.

9. Latvian bank run - Nervous depositers cleaned out ATMs of Swedbank in Latvia over the weekend after rumours of problems spread, Zero Hedge points out.

10. Totally John Oliver on Californian tax law and the poor, poor state of Amazon. A must watch on American politics.