Tuesday's Top 10 with NZ Mint: France asserts; Spain shudders; Britain declines; the tax wedge; concrete sinks; Dilbert

Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.

Bernard Hickey is still on vacation, but he will be back on Thursday.

I welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

I am still keen to get your suggestions for suitable cartoons. If you notice a really good one, please email me.

See all previous Top 10s here.

1. 'We’re not just any country: we can change the situation'
The French-led counter-attack and rumblings of revolt through every branch of the EU institutions last week have brought the Merkozy phase of the eurozone crisis to an abrupt end. "It’s not for Germany to decide for the rest of Europe," said François Hollande, soon to be French leader, unless he trips horribly next week. Strong words even for the hustings. "If I am elected president, there will be a change in Europe's construction. We’re not just any country: we can change the situation," he said.

European allies are flocking to his cause from left and right, he claims. Not even Austria supports Germany’s austerity drive any longer. Ambrose Evans-Pritchard reviews the fast-changing landscape in the eurozone:

This then is the birth of a Euroland growth bloc with well over 200m people and a commanding majority vote in the European Council, a defining moment in this saga. Mario Draghi at the European Central Bank is quickly bending to the new political dispensation with calls for a "Growth Compact". The Commission - liberated at last - is finding ways to "extend deadlines" on fiscal targets.

2. Euro's fate hinges on austerity in Madrid
Spain in recent days has taken center stage in the euro crisis. The country's banks are threatened with collapse and the government in Madrid has not been successful in efforts to get the national budget under control. Will the country be forced to request aid from the euro bailout fund? Germany's Spiegel has a handy review, but it is scary reading:

Spain's banks are widely regarded as time bombs, with portfolios of volatile loans on their balance sheets that could explode at any time. The country is sliding deeper into recession and international financial investors are slowly but surely withdrawing. Last week, the government in Madrid succeeded in selling new bonds on the markets. But the yields for these 10-year sovereign bonds are currently running at a crisis level of roughly 6 percent.

The fate of the monetary union currently depends on Spain's austerity policies. The experts in Brussels are convinced that if the country seeks aid from the rescue package, the crisis will reach the next escalation stage.

3. 'We need tax cuts'
Britain is back in recession. The wisdom of austerity is being debated as vigorously there as elsewhere in Europe. There is an election imminent in London for their "Lord Mayor". The incumbent, an engaging Conservative toff named Boris Johnson is widely expected to win handsomely, beating off for a second time a left-wing rival, Ken Livingstone. What makes it interesting from this far-away is that Johnson is calling loudly for tax cuts and spending cuts - so loudly in fact, he is aiming some of his barbs at the UK government. It looks like a winning campaign. More from the UK Telegraph:

The mayor sends a clear signal that he believes in a low-tax economy for all groups of voters, with the emphasis on lower council tax and pro-growth policies to help business.

“I certainly think London needs to be tax competitive,” Mr Johnson says. “I’ve got to look what I can do to bear down on people’s expenses … We have frozen council tax over four years, we’ll have cut it by 10 per cent in the next four years.”

4. Tailing off in Auckland
An obvious measure of how well the construction sector is doing is building consents - and these were at two year highs in March. But another measure is readymix concrete production, and that was not looking good at all for the Auckland region, the first of this regional data released. Consented projects don't all get built and you have up to two years to start. The concrete stats are a better current barometer. They don't look good:

5. NAB can't sell its struggling UK business, so its retrenching there
It’s a AU$700 million-plus retreat to Scotland and the north of England for National Australia Bank as chief executive Cameron Clyne turns his back on his predecessors’ grand UK expansion. That’s the outcome of a two-month review of NAB’s British adventure, which has been hurting the Australian bank with a decade of poor returns. The Sydney Morning Herald has a useful summary:

The move will lead to the closure of dozens of branches in the south of England, shut down commercial lending and cut as many as 1400 staff there.

 It will also see NAB focus on its so-called heartland markets in Scotland under the Clydesdale banner and in the Yorkshire region as Yorkshire Bank.

NAB has tried to make the best of a bad situation with the UK and had been keen to engineer a sale. And with the bank battling the worst economy since the Second World War, including slipping back into recession, there is little prospect for a near-to-medium term turnaround.

6. "It was not until after the crash that everyone saw it coming"
An Icelandic court has ruled that former Prime Minister Geir Haarde was guilty of one charge related to negligence in connection with the country's financial meltdown in 2008 but gave him no punishment. Haarde was found guilty of failing to hold dedicated cabinet meetings ahead of the crisis. But he was cleared of the three major charges, including neglecting to deal with an overblown banking sector.

7. Saving $250 mln per employee
This is from the "It's not news, but it should be" department: large international tech companies use tax laws to minimise the tax they pay.

Hardly anyone will be surprised. Outrage leaked away a decade or so ago. But the New York Times has managed to piece together a story about how Apple works its tax arrangements. Perhaps its only relevant because of the sums involved: Apple pays a paltry US$3.3 billion in income taxes. If it paid the same rate as most other US companies (24.5%) it would pay $8.3 bln - so a small office in Reno, NV is highly effective; 20 people save them US$5 bln.

8. We have negative effective income taxes for some low-paid people
New Zealand is one of the OECD countries with the lowest tax burden on labour income and one of the two OECD countries, together with Australia, that do not levy compulsory social security contributions. Between 2000 and 2011, the average tax wedge (income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) was considerably below the OECD average for all households analysed an OECD Taxing Wages report.

In 2011, the tax wedge was 27 percentage points below the OECD average for average one-earner couples with 2 children; the lowest tax wedge rate among OECD countries.

If you are single and on the average wage, Chile is where you will pay the least tax on your income - 7% (NZ = 15.9%). Spare a thought for for single workers in Belgium, Germany and France where basically half their wages are taken in income taxes. (Sounds like 19th century indentured workers to me, where everyone had to shop at the "company store". No wonder they get grumpy.)

New Zealand single parents earning 67% of the average wage faced a tax wedge that was 35 percentage points below the OECD average. The tax wedges for these households are actually negative, which means that the cash transfers they receive exceed the taxes they pay.

9. Dealing with inequality
I lived in the US for many years - 15 in fact. An old TV debate program I loved was CNN's Crossfire. Curmudgeon Pat Buchanan "on the right" and Michael Kinsley "on the left". Now Kinsely is a columnist for Bloomberg and he has been thinking about how to deal with wealth disparities. In his latest column, he uses the two bridges crossing Lake Washington in Seattle. Now Seattle was a city I lived in for a few years and I know it well.

One bridge attracts tolls (the 520), the other doesn't (the I-90). One is jammed, the other flows freely. He not only ponders the economics of this, but the social implications too:

But the big problem with the new toll is that it is another small chipping way of our shared life as citizens, and another area where money makes the difference. It used to be that no matter how rich you were, there were some things you could not buy your way out of. Rush-hour congestion was one of them. The law, in its majesty, allowed rich and poor alike to get stuck in traffic. I once heard Steve Ballmer, chief executive of Microsoft and worth many billions of dollars, talking about his strategy for outfoxing the dread 520. (I tried it. It didn’t work.)

As explained by philosopher Michael Walzer, and somewhat more entertainingly by my friend Mickey Kaus, there are two ways to deal with wealth and income inequality (if it bothers you, that is). One is to reduce it, through the tax system. The other is to make money less important. Create national parks, open to everybody. Restore universal military service. And so on.

By this way of thinking, the two bridges side-by-side, one costly to use and one free, constitute a small step backward, toward making money more important. You might say: Wait a minute. What if there already was a toll on both bridges, and it was lifted on one so that people willing to put up with crowds could go across free? That wouldn’t seem iniquitous, would it? But it’s the same thing, really.

And I would say, Great point! Let’s continue this discussion over a drink downtown. And you would look at your watch and say, It’s too late. We’ll never make it across the bridge before dinnertime.

10. The last laugh
Thought I would try an animated cartoon from The New Yorker.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Christopher Whalen: U.S. Debt Culture and the Dollar's Fate
IF AMERICA can restrain its libertine impulses and get its fiscal house in order, the reality of an open, free-market, democratic system will continue to make the dollar among the most desirable asset classes in the world. But perhaps the real question is whether America will remain a free, open and democratic society in an environment of lower economic growth and expectations. After seven decades of using debt and inflation to pull future jobs and growth into the present, the prospect of less opportunity raises the specter of domestic political turmoil in the United States and other nations. Internationally, the result could be turmoil and war. This is not merely a short-run political challenge for Washington but ultimately threatens to challenge the self-image of American society. How will Americans react to seeing their children facing declining prospects for employment and home ownership?
And just for our Keynes-enthusiast PM:
Jobs created via productive economic activity increase the overall pool of wealth, but artificially augmenting consumer activity via government spending or monetary expansion merely slices the existing economic pie into ever-smaller pieces. Governments can use fiscal and monetary policy to encourage growth on the margins, but substituting debt-fueled public-sector spending or easy-money policies for basic economic activity is dishonest politically and madness in economic terms.

Re. #3 - We need more mayors like Boris Johnson in NZ.

He's a buffoon. Unless he can point to an increasing energy-source with an EROEI of better than say 8:1, with a calorific bang-per litre as good as oil, he won't have 'growth'. What he'll have is more 'money' chasing a limited item, so he'll get inflation. He'll also be encouraging folk to 'borrow', which means that they will default their assets to those who 'loaned' to them.

Ok, I'll bite.  Can you please explain how taxing the living daylights out of people actually helps the problem (lack of affordable energy) that you describe? 

Its actually out of context....Boris is attempting to can kick / do something that makes no sense within the terms of "affordable" energy.  He's saying this will cause growth when in fact expensive energy would stop it even if the claimed effect were to happen....and its voodoo economics....so it wont anyway.
We are not taxing the living daylights out of ppl, tax rates are quite low. Boris is saying is reduce taxes to start growth again.....Yet that didnt happen with the Bush tax cuts to the rich for instance....plus other instances where reducing the tax simply didnt accelerate the economy that was promised.
The possibly good point of tax cuts is maybe where you give tax cuts at the bottom, then the poor spend it into the economy. At the top the rich dont spend it as such they invest it in  more "vampire squid" schemes ie its parasitic, these schemes damage the economy. So there is an argument that taxing the rich at up to about 70% may actually be quite positive.
Also the trouble is with tax cuts is they give an expectation of inflation so we get inflation strangely self-fullfilling maybe but that is how it goes apparantly. On the other hand, if you want to boost the economy with no/little inflation effect you do one off infrastructure projects, these give us something of use and while they put money into ppls pockets there is little expectation of future extra work/money,  hence such work isnt very inflationary......

Lets remove the emotion for a start. Living daylights is what I'm referring to.
Tax is just a re-distribution. There is a weak argument that says 'the private sector is more efficient', but all things being equal, it must cost more by the profit charged.
Where you fall over is in seeing tax as a personal loss. It's a collective spend.
Now, your other wee problem, the mindset of 'affordable'. We are on about 'available', your 'affordable' an assumption based on another assumption. No good/service was ever proffered without energy being expended, and therefore no income was gotten without energy being expended. Yet you take 'income' for granted, or what else is your 'affordable' related to?
No, if energy becomes scarce - and fossil energy must - then it'll be 'less affordable', as related to average incomes. Can't help you there - less people on the planet would help, though.
I repeat, we're not talking of 'lack of affordable', we're talking of 'lack'. Which will be addressed by efficiencies, technology (which only gives you efficiencies, and you can't be more than 100% efficient), and doing without.

Far to logical PDK, so it can't be right.

His 'Boris bikes' in London are a hit with family working in the City PDK. ;-)

CO - did you note the oxymoron in your comment?
Think about it - for how long, at what? And they are the folkyou hope to pay off those dairy conversions?
Good luck with that.
To be honest, most environmentally-aware folk fall at that hurdle too - thinking in terms of Business as Usual, work-wise. Wo't happen, 'tis not underwriteable.

Not sure what your reference to dairy conversions is all about PDK - never been involved with conversions. The family member in the UK who works in the City is UK born and bred and have nothing to do with our business here. They find they get less colds/flu etc when using the Boris bikes for the last part of their commute to work than if they had stayed on the underground.
Interesting day coming up at Lincoln soon, I think you would approve pdk:
Forward-looking farmers and growers are actively exploring ways to use changes in climate, scarcity of chemical fertilisers, changes in consumer attitudes and food shortages to position themselves to take advantage of these changes. Threat or opportunity?  Follow-my-leader or creative entrepreneur? 

Those folk who 'work' are the ones the dairy farming industry as a whole expects to pay off their mortgages.
Most CBD 'work' is non-productive in real terms; it will dwindle in a cascading manner.
Have you a link for that 'day'?  I might be interested. The caveat is 'take advantage'. I'd say you will be more likely 'adapting and surviving'.

pdk sorry don't have a link as such as I read about it. It's been led by Dr Charles Merfield, director of The Future Farming Centre (part of the BHU at Lincoln University) www.bhu.org.nz.

The program is not a sit-down-and-listen-all-day affair. Certainly Merf is planning some topical input, but it really is about each participant responding to some provocative questions about expected changes around his/her situation. In other words, what changes are the scientists expecting, what are some useful general strategies to cope with changes, and what particular techniques can I/we use on my/our farm in the short/medium term? We hope it will be practical, useful and scientifically defensible.
Cost: $95.00 (pay on the day) includes morning and afternoon tea and a hearty lunch. Register:  phone or e-mail Nona Verwoerd on 324 3886 or nonav@orcon.net.nz  or phone Merf on 02102318901.
Live, like you’ll die tomorrow.
Farm, like you’ll live forever.

CO - cheers. (Good Quote!)

..... marvellous fellow , Mayor Boris ..... and absolutely spot on , that austerity is no way out of the mess that European countries find themselves in .... it failed miserably in the 1930's , not sure why Merkozy thinks it will work this time around ......
Thankfully for  the Brits they do have the advantage of their own currency ......
London-to-a-Brick that the UK emerges from recession , and embarks upon new growth , well before the Eurozone corpses ( Germany excepted , of course )  do ........

I think the Germans have a significant role in pushing the Eurozone into austerity as well, Gummy. I think it appeals to that national trait they seem to have where everyone marches in precise goose stepping unison together. And if you do not, they have vays of making you goose step.
Of course one of the things I can't get over is the self-serving silence of the Left about the causes behind the need for much of this austerity in Europe. If it hadn't of being for the toxic socialist burden  of high tax and more tax, and then a bit more tax on the productive in society to fund the spend spend spend welfare and social policies there then they may have found their govts. had a bit more fat on their balance sheets to weather the lean times they currently face. But profligate socialist spending seems to know neither bounds nor reason. The productive sector outside of Germany has simply not had sufficient attention and support paid to it to generate the growth and wealth it now so desperately needs to produce.
No wonder there has being a sharp turn to the right across the Continent. Did you know Gummy, that in Spain, if you want to let a worker go you have to get a judge to agree to it first?  That’s socialism for you! 

...... the Germans have learnt that the way to gain control over Europe is through the common currency ...... beats the hell out of their previous strategy , of beating the hell out of the Poles & the Froggies ...
But lest we forget , under the socialist Clark & Cullen government it was damn near impossible to sack an employee in Godzone too ...... short of them actually murdering someone ........
........ but this is what addles my Gummy brain-cell , that the IMF are seeking funds from developing countries of Asia , to shore up the finances of developed economies in Europe ......
If that isn't a damning indictment upon socialsim and the unified currency then I don't know what is ........

Angela Merkel recently went to Paris to see Sarkozy, on checking in at her hotel the receptionist asks:
Res. Name?
AM. Angela Merkle!
Res. Country?
AM. Germany!
Res. Occupation?
AM. No.. just here for a couple of days!!

Practically every Western State of any eminence is currently suffering from politics that are divisive – rather than just showing where the division lines are. All of them are run by a political Establishment that hasn’t renewed itself for decades. And most of them are being run by Coalitions.

#8. Really David, I do despair. Re-writing history again. Wish you'd do your homework.
Quote: New Zealand is one of the two OECD countries, together with Australia, that do not levy compulsory social security contributions.
NZ and Australia always had a "Social Security Tax". It was calculated and charged and accounted for seperately until about 1970 when it was considered redundant to detail the charges seperately on individuals tax returns/assessments. They were consolidated with the general income tax rates. Taxes never went down. The Social Security" Taxes were never removed. Just lumped together.

Really iconoclast I do despair. Rewriting history again.  Wish you would do your home work.  "Taxes never went down"!!!   I don't know where you were in the 1970/80s but the top tax rate was 66% with a huge number of import tariffs. The dreadful, in my view, Labour Govt. of the 1980s lowered the top rate to, if I remember rightly, 33% and replaced the tariff system with a GST rate of 10%..

I worked for the IRD. The "social security tax" was embedded into the general tax rate about 1968. It was never removed. Social Security Tax revenue was tipped into Consolidated Revenue. The 1985 re-arrangement of taxes by Lange and Douglas maintained the transfer from "consolidated revenue" to Health and Welfare. As far as I'm concerned the current tax system still has a "social security tax" component. It has to. Up until 1968 the Health and Welfare allocation was tied to, and limited to the "social security tax" revenue. 

Re-writing, no IMHO.  I dont know what you are trying to argue here but its seems to be different things, in effect iconocast is correct I believe, it just become one fund. Pity as in the UK its still seperately accounted for I think? and ppl can see what is allocated for health....which is good, then when pollies say we need to increase NI by 50% for health, ppl can see the effect and know what it is for.....
I would have said replacing the tariff system (and all that went with it) with GST was a good thing.  From what (little i admit) ive read it removed the effective monopilies perviously handed to some private entities so they could state sanctioned price gouge.

US Secretary of Homeland Security Janet Napolitano is visiting New Zealand this week.
Woops, maybe she is coming after us for speaking our minds on interest.co.nz 
Has anyone said anying destabilising lately, like ...

WTF ! who the hell invited that facist b****? Get your eggs ready folks and make em hard boiled

Regarding #8 and the claim that we pay very low taxes here in NZ compared to elsewhere such as Germany.
I believe Germany has a zero percent tax rate for the very lowest earners.  If you start a business and don't make such money, in Germany you will not pay any income tax.  Compare that with NZ, you will pay income tax on the first dollar you earn.

Not surprised our tax rates are one of the lowest in the OECD - one could say they are a bit too low considering we are in deficit. 
I don't think anyone really prospers from low taxes - all that happens is that people get more money in their pocket, they spend more, prices go up, and you end up with a lower standard of living than a high tax country. We have had a huge amount of tax cuts in the last 5 years - does anyone really feel any richer?  

I don't believe tax cuts cause price increases.
We are in deficit because govt. mismanages the spending of our taxes.

Of course it does. The reserve bank plays around with the OCR to take money out of peoples pockets to curb inflation. The more money people have, the more money they can spend, the more that retailers can charge.

Not surprised our tax rates are one of the lowest in the OECD - one could say they are a bit too low considering we are in deficit.
Taxes are a bit too low or, is there a bit too much spending on middle class welfare gievn the deficit?
I thought the idea of the tax cuts was for New Zealanders to save it and/ or pay down debt. If they are not doing that but spending their tax cuts instead, whose fault is that?

They are spending it because it is the rich that got the tax cuts. They don't have to worry about debt. And that new mansion in Remuera ain't cheap

JJ - like the Labour Party at this point, you don't make much sense.
The rich are just as indebted in proportion, as the lesser-incomed. Probably more.
Don't let your socialism or envy cloud your view, that way you can't see the big picture. I too, don't like a certain kind of selfish person, but that's not the main game in town, now. That was about who go which share of the cake, the story now is that the cake is dwindling.

"We have had a huge amount of tax cuts in the last 5 years"
Where are you living?
How can you describe GST going from 12.5% to 15% in exchange for some minor realignments of income tax rates as "a huge amount of tax cuts". Then there are the levies, rates etc etc, which tend to trend in one direction - up.

39% to 33% is a big drop

Check the stats, bugger all paid the 39% rate. Indeed there just happened to be an uncanny amt of people who earned just enough to be below it.

Well done the RBA on the 50 basis points rates cut ........ that's indicating how weak the non-mining part of the Aussie economy really is .....
...... and an indictment upon the zealous addiction of the treasurer Wayne Swan to produce a governmental " surplus " in the next budget , regardless of the parlous state of the economy..

GBF.   What other part is there? Sooner or later, wealth had to match the underwrite.
When all the horseshyte is removed, the interwrite is resources.
Welcome to the peak of growth - if you try GBF's recipe, you just get more dollars chasing the same finite pile, so they're all worth less.
And at some point,  you get to run the last two words together.

Sure pollies are attracted to beamers like moths are to a flame, but this is drawing a pretty long bow.
In terms of titillation, Swiss Balls seem to do it for the Labour party and are a hell of a lot cheaper.

Some gems of debate in here. WOW