Here's my Top 10 links from around the Internet at Midday 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 #9. It's wonky about Europe's payment system, but convinced me Europe's debt problems are far from solved. They are deeply structural and even the Germans know this.
1. My personal rates bombshell - There's a great new tool on the Auckland City Council website that allows you to caculate your likely rates bill for next year (2012/13) compared with this year.
It shows how that amalgamation of the various councils into the Super City is now being reflected in rates.
Some areas are seeing big rates increases, while others may see falls or flat rates..
Everyone's rates are different and the number quoted is before 'transitional' arrangements, which could include a 10% cap on rates increases.
But I just got my own personal bill for our house in Epsom.
My rates bill is up 18% from last year to around NZ$3,400.
Yikes.
Let's do a bit of crowdsourcing. Could readers who are Auckland property owners please go to the link and check out your rates change. Then put your change in the comments. So far my twitter followers are reporting 30% and 18% respectively.
2. China is not relaxing yet - Despite falling house prices in China, the authorities there are determined to put a lid on prices with new property taxes. Wish our central government would do the same... Some Wag might say they already are via the Super City changes...
Bloomberg reports China is saying it will expand its current trial of property taxes beyond Shanghai and Chongqing.
Chinese Finance Minister Xie Xuren said the nation may expand property-tax trials, as the government prolongs efforts to cool the real-estate market, make housing affordable and limit asset bubbles.
Taxes can guide housing demand, Xie said at a press briefing in Beijing today during the annual meeting of the National People’s Congress, without saying where more tests could take place. So far, the government has pilot projects in Shanghai and Chongqing.
3. The crackdown goes on - Switzerland is now helping the likes of America to hunt down tax exiles.
Tax crackdowns by cash-strapped governments will be one of the themes of our age. Can't say I'm too sad.
Expatica reports the Swiss Upper House of Parliament has voted for a higher income tax rate on Switzerland's 5,000 wealthiest residents.
The text will now be put to the lower chamber, where Socialists are however expected to try to block the adoption of the bill, as they want preferential tax treatment for foreigners scrapped completely.
Switzerland has come under pressure from its neighbours -- many of which have depleted state coffers -- as well as from some of its own citizens over its flat rate tax system that has attracted the wealthiest to claim residency here.
4. How the 0.1% live - The Daily Mail has a bunch of photos of luxury tree houses that cost around 250,000 pounds a pop. There's something wrong when this stuff is happening.
At £250,000 each, these fairytale treetop palaces are the latest in a global trend for bespoke garden living, claims their English designer.
They include a James Bond style safe-house with CCTV and biometric security systems, fairytale castles and forest-getaways for home county executives.
5. Grow for it - The NZIER has issued a working paper detailing how population growth could promote economic growth in New Zealand. HT Eric Crampton. Here's the thinking. (Corrected to 15 mln in 50 years in headline from 50 mln. My apols and thanks Gummy for spotting. Yikes)
It is feasible to adopt a population policy with the aim of the population reaching 15 million in the next 50 years – an annual growth rate of 2.5% per annum. This would bring the size and density of the population to levels closer to more prosperous European countries. Fifteen million – two and a half times current projections – is a good target, too, as it allows for several large cities, fostering competition within New Zealand.
The benefits of such a policy come from increasing scale, where high fixed costs including infrastructure are spread across a larger population. Network effects provide other benefits. With the right selection parameters, more liberal immigration policies could also assist New Zealand with its looming fiscal challenges of an ageing population.
6. The problem with bank dividends - Jesse Eisinger from ProPublica reports on how the US Federal Reserve ignored calls from other regulators in late 2010 to stop the Too Big To Fail Banks from resuming dividend payments.
“We remain concerned over their ability to withstand stress in an uncertain economic environment,” wrote Sheila Bair, the head of the Federal Deposit Insurance Corp., in a previously unreported letter obtained by ProPublica.
The letter came as the Fed was launching a “stress test” to decide whether the biggest U.S. financial firms could pay out dividends and buy back their shares instead of putting aside that money as capital. It was one of the central bank’s most critical oversight decisions in the wake of the financial crisis.
“We strongly encourage” that the Fed “delay any dividends or compensation increases until they can show” that their earnings are strong and their assets sound, she wrote. Given the continued uncertainty in the markets, “we do not believe it is the right time to allow transactions that will weaken their capital and liquidity positions.”
Four months later, the Federal Reserve rejected Bair’s appeal.
In March 2011, the Federal Reserve green-lighted most of the top 19 financial institutions to deliver tens of billions of dollars to shareholders, including many of their own top executives. The 19 paid out $33 billion in the first nine months of 2011 in dividends and stock buy-backs.
7. Super Mario vs Grumpy Jens - Der Spiegel reports on the growing rifts within the European Central Bank (ECB) between the free-lending (Italian) President 'Super' Mario Draghi and the (German) Bundesbank's increasingly grumpy representative Jens Weidmann.
'Super' Mario may have calmed things down and bought some time for now with his €1.3 trillion money dump in less than three months, but none of the real problems with too much debt have been fixed.
Essentially the Europeans, the Americans, the Japanese and the Chinese have printed a bunch of money to try and make the problem of too much debt go away with a bit (but not too much) inflation. They are essentially punishing savers to avoid a catastrophic meltdown that forces a mass nationalisation of banks and massive housing debt restructuring.
Everyone is tip-toeing around the essential need for some sort of debt jubilee, partly because that will force someone to choose who will pay the price. Will it be bank shareholders, taxpayers, bank bond holders, future savers, borrowers or all of the above? The powers-that-be are all betting that growth will fix the problem.
Trouble is, growth may not come in an era where technological innovation simply shuffles income from the masses in the developed world to the 0.1% and accelerates a contraction in the consumer economy. Also, the huge debt load is also weighing on growth.
Here's Der Spiegel (luckily for us in English):
There is a rift among top-ranking officials at the ECB, and it also extends between the majority of the ECB's Governing Council and the Bundesbank. First, two leading German ECB officials -- chief economist Jürgen Stark and Bundesbank President Axel Weber -- resigned because the monetary authority was buying up sovereign bonds from Greece and Portugal. Then Weber's successor Weidmann objected to the ECB's purchase of government bonds from heavily indebted Italy.
Now, Weidmann is rebelling against the manner in which Draghi is giving European banks one new cash injection after another. Although Weidmann admits that the measures are basically correct, their conditions are "very generous," he complains -- and expresses his total opposition to this policy in the jargon of the central bankers: "This can particularly become a problem if banks are discouraged from taking action to restructure their balance sheets and strengthen their capital base."
8. Wall St's deepest fear - An Upper East Side 'ahem' Madam has been arrested and may have a black book full of big names from the investment banking world, the New York Post reports.
Here's John Carney with the best excuse I've heard in a while:
When alleged Manhattan madam Anna Gristina was arrested in late February, she was meeting with a banker from Morgan Stanley, according to a source familiar with the matter.
The Morgan Stanley banker hasn't been charged. The two were meeting to discuss ways she could expand her business online, according to the source.
9. The TARGET2 problem - The Der Spiegel article above looked in detail at a particular problem inside the European monetary system whereby central banks lend each other money in 'TARGET2' balances.
Part of the reason for all this intra-Europe lending is the huge current account balances within Europe, as shown in this chart below. The TARGET2 blowouts are in the charts below. HT Zerohedge.
Here's Der Spiegel pointing out the Bundesbank has crossed the Rubicon of European thinking and is wondering what might happen if the euro breaks up (shudder):
Weidmann complained in a letter to ECB President Draghi that the central bank was accepting increasingly lower-grade collateral in exchange for its cash injections. This poses a danger, he warned, as the central banks in the north of the euro zone are owed ever growing amounts of money by their counterparts in the south. If the euro zone broke apart, the Bundesbank would be left holding a good deal of its bad debt from so-called TARGET2 loans, which currently amount to some €500 billion ($660 billion), he warned.
This may sound somewhat technical to most laypeople, but among leading ECB officials the letter was seen as violating a taboo. TARGET2 refers to the central banks' internal payment system, which has accumulated massive imbalances during the course of the euro crisis. These inequalities aren't problematic as long as the monetary union remains intact. So far, the Bundesbank has always played down this risk. But Weidmann's about-face is a "disastrous signal," say ECB executives because, for the first time ever, the Bundesbank "is no longer ruling out a break-up of the euro zone."
And here's Zerohedge's interpretation:
The problem, as we noted last year, is that the system may have crossed a threshold where Germany's explicit funding of the CA deficit transgressors is now far too large for it to be sustainable (as Jens Weidmann has now confirmed).
Alternatively, should the status quo continue, and it very well may with just bailout after bailout in store - in other words the same defection-encouraging game theory stance - the only way it can work is if Germany continues to recycle the CA surplus right back into the European periphery. There is, however, no ceiling to this activity, and in several years, the German TARGET2 "receivable" will be in the trillions, or well greater than its entire GDP.
And that, in a nutshell, is what is happening in Europe.
Everything else is merely noise masking the expansion of the relationship whereby Germany pretends its increasing losses, in the form of recycled sunk Current Account "costs" as a victory.
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