Here's my Top 10 links from around the Internet at 11 am 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 #2 on the risks of an Australian hard landing.
1. 'I'm mad as hell and I'm not taking this anymore' - This is how the world's biggest bond investor, PIMCO CEO Mohamed El Irian, characterised the various voter revolts in Europe against the austerity policies favoured by bond market vigilantes over the weekend.
He describes this as a 'complication'.
He hopes this rejection will encourage politicians to take decisive action, although his own warnings about fractured electorates suggest this is unlikely.
El Irian, who's a pretty savvy commentator on these things, also says it will trigger short term volatility.
We've already seen that with the New Zealand dollar and local wholesale interest rates dropping sharply. Here's El Irian's view via CNBC:
Simply put, this translates into more fragmented European politics, at least in the short run. A politically more disparate Europe will find it even more challenging to reach common ground on a range of important issues.
Do not expect the sudden appearance of the type of decisive leadership that is needed at the national level to overcome long-standing impediments to growth, jobs and financial stability. And look for more fragmented regional interactions as cross-border coordination and collaboration become an even greater nightmare.
Markets will likely price in a larger risk premium following Sunday’s election outcomes – on account of political uncertainty and the related range of specific risk factors, including greater concerns about creditworthiness and eurozone exit. This speaks, first and foremost, to the spreads of certain European sovereigns, with negative spillover effects on equities and other risk assets.
2. 'The mother of all hard landings' - Societe Generale Uber bear Albert Edwards reckons in this CNBC piece the Australian economy is set for the mother of all hard landings.
“(In Australia) We see a credit bubble built on a commodity bull market based on a much bigger Chinese credit bubble,” Edwards said in a report. “Of all the bubbles I have seen over the last 30 years in this industry, this one is even more obvious.”
3. 'Japan's corporate zombies' - Hugh Hendry reckons in this CNBC piece the the Global Financial Crisis is set to spread to China and Japan.
Hendry, who runs Eclectica Asset Management, which has around $700 million in assets, said in his first investor letter of great length since the winter of 2010 that he was "more pessimistic on Chinese growth than ever."
"This makes us bearish on most Asian stocks, bearish on industrial commodity prices, interested in some U.S. stocks, a seller of high variance equities and deeply concerned that Japan could become the focal point of the next global leg down," the manager said in the April-dated letter obtained by Reuters.
Hendry said in the letter that some Japanese companies are "corporate zombies" which will sooner rather than later fall prey to over exposure to Chinese exports, high leverage and opaque and bloated balance sheets. "It is hard to escape the impression that Japan's blue-chip companies are teetering on the brink of extinction," he wrote.
At the heart of Hendry's concerns about China lies his belief Beijing has presided over a massive property bubble while allowing government debts to grow too large.
4. Generational angst - Here's Eva Wiseman writing in The Guardian about the obscene cost of apartments to buy or rent in London, even in the poorest areas.
In my borough, Tower Hamlets (one of the poorest areas in the UK), the charity Shelter calculates that the annual earnings a tenant needs to make renting a flat affordable are £67,669. It's a figure I find difficult to read out loud without lisping, let alone conceive of earning myself. It's not achievable – in fact, it makes me feel like I'm going a bit mad. And it highlights the ever-lurking threat of homelessness – that slow slide over a year from being made redundant, to being priced out of your shared flat, to carrying your rucksack between friends' futons, and then, after a clipped conversation in their little blue kitchen, sitting on a bench at dawn with nowhere to go.
So what happens now? What happens to a generation living with the quiet and dreadful realisation that we might only be capable of buying a flat if our parents or grandparents die? A generation holding its breath when they see their fathers slip on ice, sliding more fried toast on to their mothers' breakfast plate. The awful coming-to as they adjust their grandma's three-bar fire. Will we be here hunched over our computers in 20 years' time, addicted to the property porn that we'll never be able to afford?
5. Please be nice to us - South Africa's central bank governor Gill Marcus, has written a piece in the FT complaining about all the money printing going on in the developed world and how it's not fair on smaller developing and commodity-linked currencies such as South Africa's (and ours by the way)
She muses about capital controls and currency intervention, but ultimately just says she hopes the the money printers will be nicer in future to countries like South Africa.
I reckon the only reaction that is sensible is currency intervention and capital controls.
Allowing exchange rates to adjust to global pressures provides some cushion in the event of capital flow volatility, but this is only partial. Smaller economies, particularly those with relatively well-developed and open financial markets, bear a disproportionate share of the burden of advanced economy spillovers.
Some see the solution as tightened currency and trade controls. This can only lead to an intensification of trade and currency wars, which is not in the longer-term interests of the global economy. But too often the discussion relating to how the world returns to sustainable growth is only about the large economies. Greater consideration must be given to the implications of policy choices on smaller economies.
6. Keep an eye on India - The New York Times points out a slowdown in the Indian economy is hurting the poorest the hardest. HT David.
If the slower rate continues or worsens, many millions of Indians, for another generation, will fail to rise above extreme penury and want. The problems of the euro zone are a pittance by comparison.
China commands more attention, but Scott B. Sumner, the Bentley College economist, has pointed out it is India that is likely to end up as the world’s largest economy by the next century. China’s population is likely to peak relatively soon while India’s will continue to grow, so under even modestly optimistic projections the Indian economy will be No. 1 in terms of total size.
India also is a potential force for energizing the economies of Bangladesh, Nepal and, perhaps someday, Pakistan and Myanmar. The losses from a poorer India go far beyond the country’s borders; furthermore, the wealthier India becomes, the stronger the allure of democracy in the region.
7. Bastions of privelege - Richard Wolin writes at The Nation about how America's increasingly costly university system is now acting as a bastion of privelege. He makes some interesting points about the GI Bill of 1944 and how it powered the growth the middle class during the 1950s and 1960s.
In retrospect, the GI Bill, as the 1944 Servicemen’s Readjustment Act is called, was one of the greatest democratizing forces in American history. Delbanco rightly remarks that the bill “brought onto campuses throughout the nation—including the most elite—students whose fathers would have once set foot there only as janitors.” Of 15 million returning veterans, just over half took advantage of the bill’s generous incentives and provisions in order to satisfy their aspirations for self-cultivation and professional advancement. By 1948 veterans counted for nearly 50 percent of all college students, thus fulfilling the promise of the land-grant public university system, mandated by Congress with the Morrill Act in 1862. Thereafter, both university life and American society were transformed by a seemingly irreversible process of democratic inclusion and upward social mobility. Most colleges and universities ceased being bastions of privilege, the exclusive preserve of a moneyed, Protestant elite. For the first time, men and women of diverse social backgrounds were afforded the opportunity to cultivate the knowledge and self-understanding necessary to surmount the oppressive constraints of class, race and gender.
The postwar project of democratic expansion is steadily being reversed, to the point where today, as Delbanco convincingly demonstrates, the college admissions process serves to reinforce the prerogatives of class and economic privilege rather than diminish them. Many qualified and aspiring students are deterred from attending college, fail to complete their degree in a timely manner, if at all, or must assume onerous levels of debt to meet the spiraling costs of an education. Among the current crop of college students, about two-thirds will be forced to borrow money for tuition, and upon graduation will owe on average nearly $34,000—twice as much as the average debt ten years ago. Americans now owe more in student loans than they do on credit cards.
9. Greeks reject bailout - Reuters reports Greece's anti-bailout parties of the extreme left and right have done very well in elections over the weekend. It doesn't bode well for Greece's austerity measures.
"I cannot take it anymore, living as beggars in our own country. The Left Coalition can shake them up, and wake them up," said Kate Savvidou, 65, a pensioner who deserted PASOK.
Left Coalition leader Alexis Tsipras, at 37 Greece's youngest political leader, hailed a peaceful revolution and said German Chancellor Angela Merkel should understand that austerity policies had been defeated. "Greek people gave a mandate for a new dawn with solidarity and justice instead of barbaric bailout measures," he said.
In another indication of the extent of public anger, the extreme right Golden Dawn party was poised to take nearly 7 percent of the vote. This would allow such a party to enter parliament for the first time since the fall of a military dictatorship in 1974.
10. Congratulations to the people of France - Sacha Baron Cohen wishes the people of France good luck with their new President.
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