Wednesday's Top 10 with NZ Mint: A fatal Ferarri accident in Beijing; 'Why we'll never see another gold standard'; Japan's pension time bomb; Wall trampolining

Here's my Top 10 links from around the Internet at 12.30 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.

My must read today is #7. This is what happens to pensions in an ageing society with 0% interest rates for 15 years. The industry goes bust. Sorry no Dilbert today til later. Dilbert's site is down. Maybe his IT people have rebelled against the HR people. ;)

1. China raises fuel prices - China is now the epicentre of the global economy for Australia and New Zealand.

The big concerns are around a hard landing (5% growth) vs a soft landing (8% growth).

Now China has put up fuel prices for the second time in six weeks and by the biggest amount in almost three years.

This won't help small businesses and consumers, although they aren't the major drivers of the Chinese economy.

Investment in infrastructure and exports still drive the economy.

Here's the latest from CNBC:

The owners of China's expanding fleet of private cars will still barely blink at the record pump prices, now roughly 20 percent higher than in the United States and more than 50 percent higher than Chinese rates of three years ago.

But it may mean greater pain for some industrial users and logistics firms that have already been feeling the pinch of high diesel prices.

"That is why Premier Wen said that growth would have to be slowed down in China," said Mirae's Kwan. "One reason is because of high energy prices. Those who cannot afford the extra prices would have to shut down."

2. 'We'll never see another gold standard' - US Federal Reserve Chairman Ben Bernanke gave a speech overnight where he gave a history lesson on the Fed and monetary policy, including an explanation of why we'll never see another gold standard.

He's doing his best with his print, extend and pretend strategy...

Here's Business Insider reporting the speech:

Bernanke pointed out various reasons that there's simply "not enough gold" to sustain today's global economy. First, extracting gold from the ground is a costly and uncertain endeavor. There is a limited amount of gold in the world, and it just doesn't make sense in the modern world for central or commercial banks store large amounts of gold in vaults. The size of the gold supply and inconvenience of the metal renders it too impractical to keep up with the pace of global commerce.

Second, while advocates of the gold standard are right that prices remain stable in the long-term, "on a year to year basis, that's not true." Limited supplies of gold—or changes to the supply of gold—cause prices of goods to be volatile in the short-term, regardless of long-term price stability.

In a rebuttal to the second part of that argument, Bernanke explained, "the commitment to the gold standard is that no matter how bad [the economy gets] we're going to stick to the gold standard."

He pointed to a substantial tome of economic research finding that the gold standard aggravated the Great Depression, saying "the gold standard was one of the main reasons the Great Depression was so bad and so long." The inability of the Federal Reserve to control monetary policy—open up credit, address unemployment, and drive business demand—left it with much less power to avert or mitigate the decade-long crisis. Bernanke added that countries not tied to the gold standard also had a much easier time getting out of the Depression. In the modern world, he said, "we've seen that problem with various kinds of fixed exchange rates."

3. A fatal Ferrari accident in Bejing - The atmosphere in Beijing is febrile at the moment. Overnight there were vague and unsubstantiated coup rumours and unconfirmed reports of troop movements via microblogging and Chinese Twitter sites. Now there's a Ferrari accident that has been hushed up.

Here's the Globe and Mail on the incident, which says a lot now about how the real people feel about the elite, or the princelings as they have become known.

As I’ve written before, anyone seen driving a Ferrari in the streets of Beijing is immediately presumed to be a member of China’s “princeling” class, the sons and daughters of the Communist Party elite. (Bo Guagua, the playboy son of fallen Chongqing boss Bo Xilai, has famously been spotted in the streets of Beijing behind the wheel of a red Ferrari, though his family claims he doesn’t own the car.) The fact that the Public Security Bureau refused to release the name of the dead driver, or any other details about their investigation into the crash, only heightened suspicions.

To the surprise of many, it was the Global Times, a newspaper affiliated with the Communist Party that gave voice to what many were whispering, albeit only in its English-language edition.

In an article titled “Ferrari crash information hushed up,” the paper laid out the hypothesis of an unnamed Beijing resident: “They make such great efforts to wipe out the information, and it just proves that this young man must have a special background, maybe he’s a high-ranking official’s son.”

4. The leaks start on Bo Xilai - The sacking of Bo Xilai last week is a sensation in China. Now the rumours are circulating about why he was sacked.

Here's the latest via the BBC, which seems to have got hold of an audio recording of a conversation where Bo reacted to news his right hand henchman was investigating Bo's family. Bo sacked the henchman, who then promptly tried to defect. It all went very pear-shaped after that.

It's all beginning to sound like an episode of 'The Young and Restless Princelings'.

It suggests there is a fierce battle taking place ahead of the leadership change, expected to happen at the Chinese Communist Party's 18th congress later this year.

The audio recording, which was posted on the internet, seems to have involved senior officials in the western city of Chongqing.

They heard how the city's police chief, Wang Lijun, told Mr Bo in January that his family was being investigated. The politician apparently reacted angrily and demoted Mr Wang, disregarding established practices.

There have been rumours about Bo Xilai's family for some time, many centred on his son, Bo Guagua. He studied at one of Britain's most expensive private schools, Harrow, before going on to Oxford University. Photographs that appear to show him enjoying himself at parties have whizzed around internet sites.

5. Here's the BHP chart that scared the markets overnight and drove BHP's shares price down 4%. HT BusinessInsider.

The Grey and green bits are where iron ore demand is growing less than 10%. Quite a bit of China, including the key Southern and Eastern bits.

6. Does inequality cause financial crisis? - The Economist has a typically nuanced look.

Inequality occasionally rises with credit creation, as in America in the late 1920s and during the years before the 2008 crisis. This need not mean that the one causes the other, they note. In other cases, such as in Australia and Sweden in the 1980s, credit booms seem to drive inequality rather than the other way around. Elsewhere, as in 1990s Japan, rapid growth in the share of income going to the highest earners coincided with a slump in credit. Rising real incomes and low interest rates reliably lead to credit booms, they reckon, but inequality does not. Mr Rajan’s story may work for America’s 2008 crisis. It is not an iron law.

7. Japan's pension time bomb - Reuters has the story of a scandal with a Japanese pension fund that cooked its books. How many others might there be? This is what happens when interest rates are nearly 0% for 15 years.

In one of Japan's worst financial scandals, AIJ is under investigation for falsifying performance records on roughly 200 billion yen ($2.4 billion) in pension money. Nearly all of that is believed to have disappeared, dealing a blow to the 84 pension co-operatives representing 880,000 employees that entrusted it with funds.

The financial regulator, under fire for failing to prevent the scandal, has launched an investigation into all 265 discretionary asset managers in Japan. Politicians are considering regulations such as limiting risky investments and safety-net measures to support ailing pension funds.

But new rules and inspections will do little to help the legions of pension funds already nursing big shortfalls and failing to meet annual return targets of up to 5.5 percent, realistic decades ago when they were set but no longer probable in an era of zero interest rates and deflation.

Around a sixth of the 595 co-operatives that manage the bulk of the 27 trillion yen ($324 billion) in pension assets for small and medium-sized firms are designated by the health ministry to be in a state of critical financial health. As of March 2011, the collective shortfall was 630 billion yen.

8. When a rock meets a hard place - Professor Minmin Pei writes at Project Syndicate about what China needs to do and why its politicians may not want to do it.

The latest attempt is the World Bank’s just-released and much-applauded report China 2030: Building a Modern, Harmonious, and Creative High-Income Society. As far as technical economic advice goes, the report is hard to top. It provides a detailed, thoughtful, and honest diagnosis of the Chinese economy’s structural and institutional flaws, and calls for coherent and bold reforms to remove these fundamental obstacles to sustainable growth.

Unfortunately, while the Bank’s report has laid out a clear economic course that Chinese leaders should pursue for the sake of China, the Bank has shied away from the most critical question: Will the Chinese government actually heed its advice and swallow the bitter medicine, given the country’s one-party political system?

For example, among the most urgent reforms that China 2030 recommends is reduction of the state’s role in the economy. This can be achieved by eliminating privileges for state-owned enterprises (SOEs), such as subsidized capital and monopolies, and by allowing the private sector more freedom. But, curiously, the report’s authors seem to forget that this would entail prohibitive, if not disastrous, costs for the ruling Chinese Communist Party (CCP).

9. Totally Wall Trampolining - No further comment required.

10. Totally Stephen Colbert on St Patricks Day and a crisis in the Danish sperm export industry. I laughed.