Thursday's Top 10 with NZ Mint: The Barclays scandal exposes corrupt Mega-banks; The amazing invisible Kenyan mobile bank; When too much money is not enough; The end of economics; Dilbert

Here's my Top 10 links from around the Internet at 12 pm today in association with NZ Mint.

We welcome your additions in the comments below or via email to

See all previous Top 10s here.

My must read today is #2 on Kenya's mobile phone banking system. Certainly gets you thinking about how things could be different in our payments systems.

1. The problem with investment banks - This John Gapper article in the FT is a brilliant description of what's wrong with the 'mega-banks' that now dominate banking in the Northern Hemisphere.

They are run by the investment bankers who merged the casino-like investment banks with regular commercial banks over the last 20 years and then ran amok in all their amoral glory.

This breaking down of the species barrier between the staid old world of commercial/retail banks with the high flying-bonus driven world of investment banking was only made possible with the repeal of Roosevelt's Glass Steagall Act and the 'Big Bang' in the City of London.

The Barclays implosion around the LIBOR scandal is a perfect example of how US-style investment banking culture infected and engorged a 'regular' bank to create mayhem.

Thank goodness our banks in New Zealand haven't gone down this track.

I'd like to think that's through the good management of the banks, their shareholders and the regulators on both sides of the Tasman. But it may just be a luck thing. Luckily for us Paul Keating banned the sale of the big four in Australia to one of these Northern Hemisphere monsters and stopped them from buying each other.

Here's Gapper in good form:

In the longer-term, the question is how to reform high street banks that now employ financial traders who exclaim: “Dude, I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger,” to a colleague who distorts a quasi-official index for profit.

An obvious start would be to clear out the investment bankers who now run universal banks – Stuart Gulliver at HSBC, Brady Dougan at Credit Suisse, Stephen Hester at RBS – and return to high street banks being run by high street bankers. They may be honourable individuals but, as a group, they symbolise the relentless ascendancy of the securities trading floor.

“It would be a very good thing if an awful lot of people lost their jobs in a lot of banks,” says one former bank executive. “Not because I wish them ill but because only by making many examples will you get through to people that this is a very important business.”

Boards are unlikely to do that until banks are broken up. This generation got to the top by being clever and worldly enough to understand institutions that are very complex and opaque. The late Sir Brian Pitman of Lloyds, exemplar of the astute high street banker, carefully avoided “merchant banking”, as it was then known, as being too much trouble. Reinstating the barrier would be a sound idea in itself – it would create more manageable institutions.

2. The amazing invisible bank - This National Geographic article describing the amazing growth of m-Pesa, the mobile phone based banking system in Kenya, is a fascinating story about how banks aren't necessarily crucial.

It suggests a way forward to for a mobile payments based world.

For people who live in isolated areas, the service means no longer having to carry lots of cash to markets or towns, risking losing huge amounts to banditry and theft. For people without permanent addresses or bank accounts, the service means they can pay what cash they have to m-Pesa in exchange for mobile credit, making payments and transfers and building up savings – becoming participants in an economy from which they had previously been locked out. For migrants, the service allows them to send money home to their families and villages safely and simply. Safaricom’s international money transfer service uses a similar system for international immigrants, coordinating great webs of remittances and payments across the world. For Kenyan businesses, the service means payments for stock or repairs can happen almost instantaneously, wiping out the need to rely on bank clearances and flawed infrastructure which had clogged the economy with inefficiencies and delays.

So how does it work? m-Pesa relies on a network of small shop-front retailers, who register to be m-Pesa agents. Customers come to these retailers and pay them cash in exchange for loading virtual credit onto their phone, known as e-float. E-float can be swapped and transferred between mobile users with a simple text message and a system of codes. The recipient of e-float takes her mobile phone into her nearest retailer when she wants to cash in, and swaps her text message code back for physical money. There are already more m-Pesa agents in Kenya than there are bank branches.

3. Enough is enough - Robert and Edward Skidelsky, the authors of  'How much is enough?: The love of money and the case for the good life' write in this excellent opinion piece in about why the world is richer than ever at the same time as people seem to work longer hours and many are poorer than ever. They wonder why we don't work fewer hours, employ more people and have a 'better' life rather than jumping on the bandwagon of ever more consumption.

Many of the older generation of economists underestimated insatiability. Having more seems to make us want more, or different. This is partly because we are by nature restless and easily bored. But it is mainly because wants are relative, not absolute: the grass is always greener on the other side. The richer we become, the more we feel our relative poverty.

There is a third factor, however, for which the earlier economists can’t really be blamed. They were not egalitarians, but they did think that growing prosperity would lift up all boats. They did not foresee that the rich would race ahead of everyone else, capturing most of the fruits of increased productivity. (Karl Marx is the main exception here.)

The result has been to leave big holes in our consumption society. A lot of people still do not have enough for a good life. In Britain, 13m households, 21 per cent of the total, live below the official poverty line. There is a lot of underconsumption going on relative to what society is producing. Earlier socialists called it “poverty in the midst of plenty”.

4. Boom, boom, boom, boom - Here's Alistair Helm at Unconditional with some useful extra analysis on yesterday's Barfoot and Thompson figures on house prices in Auckland. Central Suburbs prices were up 22% in June from a year ago.

This situation of new listings lagging the growth of sales can best be seen when stacking up the two sets of data (sales & listings) on the same chart. The data used in this chart below is the 3 month moving average and I have split the axis to emphasise the significant gap appearing between sales and listings – a situation not seen before over the past 5 years of data.

5. Balance Sheet Recessions - Nomura economist Richard Koo is the prime proponent of the Balance Sheet Recession theory, which says that the ageing, indebted developed economies face similar problems to those already seen in Japan where deleveraging households and corporates will drive economies into debt deflation spirals unless governments step in on the other side to borrow and spend to keep economies from slumping into full-on depressions.

I agree with Koo on this.

Here's FTAlphaville with a report on Koo's recent visit to unnamed leaders  in Germany. They're not on board. A pity.

Koo says while he found some common ground on the subject of Greece, he and the Germans were miles apart on Spain and Italy, and his own balance sheet recession argument hadn’t really reached the policymakers there. Back to square one, then.

So he told them about Japan in 1997, and the US fiscal cliff, in an attempt to explain balance sheet recessions inevitably spawn massive private sector debt retrenchment, leading to a deflationary spiral.

Koo’s first effort did not go so well: "While the Germans politely listened to my explanation of this new (for them) concept, they continued to insist the competitiveness issue could not be resolved without structural reforms."

At this point, Koo writes, he was running short of time to elaborate with these non-economically-trained folk on exactly why the balance sheet/deflation problem was just as important, but somewhat more urgent, than the structural reforms.

So he resorted to a medical metaphor, with a patient suffering both pneumonia and diabetes — both need treating, but the former needs treating right now. You’d think his hosts would have heard the likes of this many times already (we certainly have), but not really. And… jackpot! "The politicians seemed to understand what I was saying, with one remarking that sometimes a patient being treated for cancer needs a shot of morphine."

6. The death of advertising-funded free-to-air television - Here's a Roy Morgan survey showing one million New Zealanders now use their MySky or other recorders to 'time shift' their watching of pay television, which usually means they fast forward through the ads on the free-to-air channels they see via Sky.. Good. I do that too. I haven't watched ads on free to air television since we got MySky in 2005.

According to the latest Roy Morgan data, 55% of New Zealanders who subscribe to Pay TV are recording TV programs to watch them at a more convenient time. This equates to approximately 1 million Kiwis. These are the findings from the Roy Morgan Single Source Survey of 11,800 New Zealanders in the 12 months to April 2012.

Pausing or rewinding live TV programs is the second most popular TV activity amongst Pay TV subscribers. Using an electronic programming guide comes in third, with 23% of New Zealanders making use of this technology.

7. New South Wales a 'State of Stagnation' - Miranda Devine writes at Sydney's The Daily Telegraph tabloid about why New South Wales just can't get any houses built.

Sounds awfully familiar. HT Hugh P.

From Sydney to the regions, there are councils dictating everything from the thickness of a doormat, the position of wardrobes in a bedroom, how a deciduous vine should be trained over a pergola and the size of condoms in a brothel.

Petty bureaucrats drunk with power, along with greenies and NIMBYs, have successfully slowed investment and development in NSW, forcing up the price of housing to the point where Sydney is now the third most “severely unaffordable city” in the world.

The examples of bureaucratic control freakery above are taken from real life complaints by developers to the Property Council of Australia, which last month published a booklet collating their beefs entitled Planning Gone Mad.

8. Growing grumpiness with Kiwis across the Tasman - ABC reports More than 1,000 workers rallied in Perth yesterday to protest against plans to bring in more foreign workers to Western Australia's mines.

Yesterday, the CFMEU said the boom needed to be used to train local workers. Opposition Leader Mark McGowan says the policy will also require resources projects to employ local workers in the manufacturing sector before foreign workers are sought. He says West Australians should be getting jobs ahead of foreign workers.

9. The end of economics as we know it - This series looks interesting from Ian Fraser (the UK journo not NZ's former TVNZ CEO).

I don’t know if it is just me, but I am increasingly detecting parallels between the Laputans portrayed by Swift in his 1726 satire and today’s neoclassical economists – who, let’s not forget have played a key part in shaping macroeconomic policy and, to a large extent, guided the trajectory of the global financial system for the best part of three decades.

There is now a growing clamour of dissent from a group of ‘new economists’ who are calling time on neoclassical economics and shaking it right down to its Laputan foundations. This series of articles and blogs is written for those who would like an introduction to the key players in this bid to define a new economic paradigm that takes what happens in the real world and empiricism into account.

10. Totally Aaron Sorkin on The Colbert Report talking about his new show about the news.


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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The first 5min of The Newsroom were brilliant. Most of the seasoned actors are extraordinary. The younger actors still need work. They sound like they are waiting to talk rather than feeling like they are having a natural conversation.

#6 - Isn't the title better described as "the death of free-to-air television"?  For how is the programming going to be paid for if not by advertisers?  Only answer I can come up with is: "consumers" - so are you saying, Bernard, that it would be  good for all television to be pay-per-view?
I can see the internet going this way as well - whereby one has to watch the ad first before accessing the content.  Sure someone is working on the app while we speak :-).

O/T, Kate, but since you told me where you live you might be interested in this which has been passed to me. I doubt that many have seen it

OMG, thanks - no I hadn't seen it.  We are not an affected party but many of our neighbours are - will circulate the .pdf in case they haven't got it.  Thanks again.

Actually this is the really big issue - the videos from Oz say it all - frankly I doubt Turitea will ever be built, and for you sake and all your neighbours I certainly hope it isn't.
I think your neighbours need to keep the pressure on PNCC over Te Rere Hau, because PNCC is hopelessly compromised by the corrupt contract with MRP. Its all here.
The foundation document for the wind farm is based on fraud. Palmerston North ratepayers have had their rights as property owners cancelled by the formerly secret contract between PNCC and Mighty River Power, which overturns the Local Government Act 2002. This contract is on the MFE website.
             Letter re PNCC MRP contract
             christopher-shaw-attachment-1-part-a  The full contract.
Your neighbours need to know about this when lobbying the Council.

I agree - it will likely never get built - nor will this one just consented;
I think it's just a consent/territory grab bag by the powercos to boost the value of their intangible assets in readying for JKs great "sell off". 
And this is the vehicle set up to see these future project consents through at a lower cost to the grab baggers;

Correct, these wind farms are for adding book value to be in turn onsold to gullible investors - that's fraud in my book, especially as Turitea and Puketoi are on the country's most dangerous fault lines after the Alpine fault! 
Its all here Kate, the result of some very hard detective work by people with a conscience.

Earthquake risk sounds like a good argument for building more wind farms to me. I'd rather have some windmills fall over rather than a dam breach, gas/oil/coal pollution, or a nuclear meltdown.

Sorry, but that has to be one of the most stupid comments I've yet read.

Considering how blinkerd you are on this, hardly surprising....classic NIMBY really.

Now aren't you the global warming nutter telling somone a day or so ago to invest in insulation, heatpump etc, the whole nine yards. when you should have been telling them to buy airconditioners ?
Still if you green dorks want to build wind farms on fault lines and thereby defraud unwitting investors, then who are we to stop you, as long as you are the ones to pay for them and pick them up when they certainly come crashing down.

The comment was tongue in cheek. But seriously, the Clyde Dam is on a fault-line, gas-powered cities like 1906 San Francisco burnt to the ground, and we saw what happened to Fukushima. Diversity in power generation systems are a good thing. I'm not sure if your issues are due to nimbyism or  a love of hydrocarbons.

What "happened' to Fukushima? It is still happening.

Yes, they ( world media) seem to have no interest in the new world's latest 'no go' area

Looking at the state of the programs it seems "free to air" pays for crappy old USA sitcoms that are not worth a dime...I'd certainly prefer that those brain dead enough to want to watch them pay for them...
In terms of ads before you view, tis simple, Sony, Ft and their ilk want a restricted Internet, basically a portal they provide and we pay for.  They dont get it, we dont have to buy a Sony TV...or use a FT portal....most of the good info isnt locked down.
So unless Govn's are stupid enough to hand them a monopoly  such hardware and software is going to go bye bye, (I just bought a TV, it wasnt a Sony) so no I dont think the Internet will go that way, its too big....

#2 Kenyan friends told me about  m-Pesa last year and said it was a brilliant way to lift people out of poverty

re#8 --pommy union officials whinging about foreign workers coming to australia--no irony there

Keep up the good work ostrich. Not going un-noticed. This will not end well.

China. Chemicals company. Synica --> Pengxin. Melamine. Milk. Sanlu. (connect dots)

And one they deserve to win.

Yes on the equal pay score - but interesting that they are taking through the Waitangi Tribunal route as it seems very much a similar matter to this one;
and of course the Govt is not legally bound by Tribunal findings/recommendations - which means it will then likely head to the High Court as well.
Point is - this Government is getting itself involved in so many legal wrangles (iwi claim regarding SOE sell off / water rights; Crafar deal; Sky deal etc.) - that they are looking anything but "pragmatic" as Key liked to describe himself in the first term. 

"I agree with Koo on this"
Pray tell, BH, why is it the govts. responsiblity to prevent the natural reset of a system that has got out of balance?
Without the lesson one does not learn.

meh - spot on.

Well there is nothing to say its natural....besides that, because its the Govn's responsibility to lessen bad impacts caused by others on those who dont deserve it....that I suppose is the choice we make as a societ bu the type os society we have.


Some humour from the Greens (they actually sent this out):
The Green Party has called for an independent inquiry into why the Green Party calls for so many inquiries.
The Greens have been criticised by Prime Minister John Key, who said, ‘The Greens call for an inquiry on virtually anything.’
The remark prompted immediate calls from the Green Party for an inquiry, which would focus on why the Greens call for so many inquiries. According to a spokesperson for the Green Party it would focus on why the Greens insisted on holding the government to account and whether it was appropriate behaviour for an opposition party to oppose the government and inquire into its activities.
The Green Party announced it would convene a working group to determine the make-up of the inquiry committee, which would then report to the national executive before December. Once the gender-balanced committee was selected its first task would be to draft its terms of reference. Those would be ready sometime in the new year and the committee would report its draft by July.
The committee will not be headed by Paula Rebstock or Dame Margaret Bazley.
Sources within the Green Party predicted that the inquiry would probably be a whitewash, with its recommendations ignored. A subsequent inquiry into why the inquiry was ignored was likely. The Green Party would not approach Margaret Bazley or Paula Rebstock to lead the subsequent inquiry.
The statement by John Key prompting the inquiry was in response to the call for an inquiry into the police raid on Kim Dotcom’s mansion, which the High Court ruled illegal.
"It’s sort of the boy who cried wolf a few too many times I think," Mr Key said, rejecting the request.
The Green Party has previously obtained inquiries into such matters as the ACC privacy breach, fracking, the Sky City Convention Centre deal, the wrongful release of striking workers' details,  SAS prison transfers, and the price of milk.  
They were also considering an inquiry into whether the Prime Minister or any of his senior Cabinet Ministers were wolves, explaining, "every time the Green Party cries wolf it turns out there is one."

Hilarious, perhaps SimonP, PDK or steven could provide "clarity"?

Yes, its known as humour.

Battle of the Adds is a place we have visited recently eh Bernard:-P

Am I reading right? Regulating the size of condoms in brothels? So that would be XL, L, M, S and bureaucrat or politician sizes?

@7 So that's where the CCC get their ideas from.
Come on Hugh - have a dig.

china's concrete bubble
"This is economic madness on a scale never before seen in history and it wont end well for anyone."

Isn't this the Government that has put up legislative amendments that intend to refocus local government on core services?
Taxpayers will also be picking up part of the tab.
Economic Development Minister Steven Joyce said the Government's Major Events Development Fund would make a one-off investment of up to $2.2m to support infrastructure upgrades in Auckland.
Like the Dunedin stadium - had central government not kicked in it's "help" toward that fiasco, Dunedin ratepayers (and NZ taxpayers) would not be paying dearly for that "help" at the moment.
When will they ever learn ...

That is a priceless comment, well done

V8 racing falls squarely under the Four wellbeings (Sec 10b, LG Act 2002):
Social - brings families together with the heady smell of petrol fumes and burnt castor oil
Cultural - petrolheads and drifters
Economic - {hot,mot,broth}el spend plus food, alcohol, and other chemical propellants
Environmental - well, honestly, some externalities there, but then that's precisely what the Infrastructure support is for:

  • hospitals for the inevitable accidents
  • ACC for the flawless no-fault accident payments arising out of aforesaid racing, chemical propellants consumption, and the occasional interpersonal encounter gone bad
  • Roads to transport the patients from A to B
  • Trains and buses to transport those triaged as 'likely to die anyway'
  • Counsellors to wring hands alongside the grieving relations
  • Legal aid for the cases where for some reason ACC won't stump up or argues too much

Fully legal according to current legislation and fully in line with 3 of 4 wellbeings.
And we all know how important Wellbeing is!

Yes, but jest aside - it's those very four wellbeings that the National Government intends to remove from the purpose clause of the Local Government Act.  

"I haven't watched ads on free to air television since we got MySky in 2005"
Careful what one wishes for, how is this website funded?

An obvious question relating to #8. Those union officials sound real Aussie?

Say what you will about those who rely on free to air tv for entertainment, but what is one to do now channel 7 has been scrapped? What are the alternatives? Surely to god MySky is not the only thing we can pin our hopes on.
 I enjoyed channel 7, programmes such as Back Benches, Media Watch, and international documentaries et al. What are our alternatives, internet TV?
It's a poor reflection on the government charged with the welfare and development of society to scrap such a service in favor of the alternative commercial mind numbing rubbish.

"government charged with the welfare and development of society".
Who did the charging?

It's a poor reflection on the government charged with the welfare and development of society to scrap such a service in favor of the alternative commercial mind numbing rubbish.
But it is a consistent action from a government so keen on fact free and scrutiny free  decision making.