Here's my Top 10 links from around the Internet at 2.30 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.
My must read today is #3 from Steve Keen.
1. Smelly money - The Telegraph reports Italians are smuggling cash into San Marino in their underwear and shoes to beat the tax man.
Sounds to me like Italians are also a tad worried about what might happen if the euro was ever to collapse.
The Greeks have been ferretting cash out for a couple of years now.
Ultimately, cash is king and a devaluation will not be small, neat or painless.
We will see much more of this sort of thing in Europe before it is all over.
Border guards may make themselves an awful lot before it's finished.
Border guards of the miniature republic, including the city of San Marino which lies six miles from the Adriatic Sea in north-east Italy, have reported a sharp increase in the number of Italian men trying to smuggle in money in their shoes, while women have been caught with wads of notes stashed in their underwear.
Others are even bicycling across the border with money hidden in their water bottles. Last month a cyclist was caught with €10,000 stuffed into a plastic drinks flask.
2. Very good (and pungent) advice - Here's Hong Kong resident corporate lawyer Cactus Kate (Cathy Odgers) with 10 useful tips via a post at NBR for New Zealanders wanting to do business in China.
Well worth a click. Here's a sample:
1. Any Westerner or even Chinese person who claims to be an expert in doing business in China, is not. The experts are already rich and they don't like sharing. Every part of China is different, every industry and every person has different morals, ethics and way of doing things. Just like back home.
2. Cash is not only King it is Queen and the Prince. Limit allowing Chinese to run up credit. Cash upfront, especially on volume deals where they've offered to buy 100x of a product. Tomorrow usually never comes.
3. The age of leverage - Australian economist Steve Keen is an excellent and sceptical observer of the global economics and banking professions.
Here's his analysis via Business Spectator:
The 'Global Financial Crisis', which began in late 2007, marked a turning point in the nature of market economies. Their performance from at least the mid-1960s had been underwritten by a faster growth of private debt than of GDP: this was the 'Age of Leverage'. In late 2007, the growth rate of private debt fell, and since then we have been in the Age of Deleveraging.
As we enter this Age of Deleveraging, the worst thing we can do is apply policies that appeared to work during the preceding Age of Leverage – but were in fact predicated on ever-rising private sector indebtedness. Politicians should be sceptical of conventional economic advice at this time; it would be much wiser to study the history of the 1930s instead.
Capitalism became a world-beater in the 1800’s, when it developed capabilities for endemic innovation. Societies that adopted the capitalist system gained unrivaled prosperity, enjoyed widespread job satisfaction, obtained productivity growth that was the marvel of the world and ended mass privation.
Now the capitalist system has been corrupted. The managerial state has assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. This system, however, is not capitalism, but rather an economic order that harks back to Bismarck in the late nineteenth century and Mussolini in the twentieth: corporatism.
In various ways, corporatism chokes off the dynamism that makes for engaging work, faster economic growth, and greater opportunity and inclusiveness. It maintains lethargic, wasteful, unproductive, and well-connected firms at the expense of dynamic newcomers and outsiders, and favors declared goals such as industrialization, economic development, and national greatness over individuals’ economic freedom and responsibility. Today, airlines, auto manufacturers, agricultural companies, media, investment banks, hedge funds, and much more has at some point been deemed too important to weather the free market on its own, receiving a helping hand from government in the name of the “public good.”
6. Insatiable consumers and investors - Robert Reich captures quite nicely the Catch 22 now at the heart of our modern form of globalised capitalism where everything gets cheaper to make, profits get bigger, fewer workers receive ever-lower pay and the system grinds to a halt under the weight of too much stuff, not enough jobs, too much debt and too much cash hoarded by too few people in government bonds.
Who or what is the economy for? Surely not just for a few at the top, and not just big corporations and their CEOs. Nor can the success of the economy be measured by how fast the GDP is growing, or how high the Dow Jones Industrial Average is rising, or whether average incomes are turning upward.
The crisis of American capitalism marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles – even though the lion’s share of consuming and investing is done by the wealthy – the real crisis centers on the increasing efficiency by which all of us as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.
7. How Norway and Sweden did it - George Lakey writes at BusinessInsider about how Sweden and Norway overthrew a dominant 1% in the 1930s. A good history lesson I hadn't heard before.
Sweden and Norway, for example, both experienced a major power shift in the 1930s after prolonged nonviolent struggle. They “fired” the top 1 percent of people who set the direction for society and created the basis for something different.
Both countries had a history of horrendous poverty. When the 1 percent was in charge, hundreds of thousands of people emigrated to avoid starvation. Under the leadership of the working class, however, both countries built robust and successful economies that nearly eliminated poverty, expanded free university education, abolished slums, provided excellent health care available to all as a matter of right and created a system of full employment. Unlike the Norwegians, the Swedes didn’t find oil, but that didn’t stop them from building what the latest CIA World Factbook calls “an enviable standard of living.”
8. This excellent graphic showing the amount of cash lent by banks and others to European governments is worth a click - There's a lot of trucks. HT SirWB via Twitter.
9. Trapped in a mattress - PIMCO's Bill Gross does a great job here explaining why 0% interest rates aren't always a good thing...
They create liquidity traps where lots of money is stuck in government bonds and bills.
Zero-bound interest rates do not always and necessarily force investors to take more risk by purchasing stocks or real estate, to cite the classic central bank thesis. First of all, when rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill.
10. Totally Jon Stewart on Mitt Romney's Private Equity investing skills (ie gearing up with lots of debt, sacking a bunch of people and making out like bandits).
Stewart does a great job of explaining private equity tactics.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.