Here's my Top 10 links from around the Internet at 11 am today in association with NZ Mint.
As always, we welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read chart is #3 showing China's population structure. Look at it for a few minutes and think. Then take panadol.
1. 'Halve the leverage' - Bloomberg reports Former Federal Deposit Insurance Corp Chair Sheila Bair has written a book saying US banks should halve their leverage from around 25 times equity to more like 13 times equity to fundamentally improve the safety of America's banking system.
By extension, she's talking about the global system.
New Zealand banks are leveraged between 10 and 20 times capital, with a weighted average of 12.7, according to our measure.
Some of the worst leverage levels are in Europe, and that hasn't even started to be solved.
Bair points out the bank lobbyists are always pushing for more leverage.
She worries the lobbyists will win.
Leverage is at the root of most of our problems. Particularly in Europe.
The European Union, as it moves to implement the Basel rules, has wavered on leverage, saying it needs to study the potential impact before committing. The leverage ratio would forceEuropean banks to raise additional capital at a time when they’re struggling with a sovereign-debt crisis.
“Europeans’ failure to have a leverage ratio is why they’ve had more problems than us,” Bair said in an interview last week. “How much leverage French and German banks have is astounding.”
2. 'Nice Libor. Hahaha!' - Why is it traders and bankers always let their hair down in emails and instant messages?
Bloomberg reports on what Royal Bank of Scotland's Libor-fixing traders said to each other as they rorted the system. It's up there with 'Done for you Big Boy' in the Barclays scandal.
Royal Bank of Scotland Group Plc trader Tan Chi Min told colleagues the firm was able to move global interest rates, according to court filings. Transcripts of internal RBS instant messages were included in a 231-page affidavit filed Sept. 19 by Tan, the bank’s former Singapore-based head of delta trading for Asia, who’s suing Britain’s third-biggest lender by assets for wrongful dismissal after being fired last year for allegedly trying to manipulate the London interbank offered rate, or Libor.
“Nice Libor,” Tan said in an April 2, 2008, instant message with traders including Neil Danziger, who also was fired by RBS, and David Pieri. “Our six-month fixing moved the entire fixing, hahahah."
3. The chart that should make China bulls more cautious - I'm looking at you Prime Minister Key.
This chart, courtesy of Econbrowser, shows how unbalanced the Chinese population is and how a falling population relatively soon will slow economic growth.
hina has more 45- to 50-year-olds today than it has 5- to 10-year olds. That means that in another decade or so, the number of people retiring will be greater than the number of new young people coming into the labor force. For the last ten years, the number of new 20-year-olds was greater in each succeeding year. For the next ten years, the number of new 20-year-olds is going to be fewer in each succeeding year.
A slower growth rate and eventual outright decline in the number of people working has to translate into a slower growth rate for total GDP. It also will lead to a number of other changes, such as an increase in wages as compensation to the scarcer factor is bid up. That in turn will undermine the current basis for Chinese competitive advantage, and could mean lots of changes for Chinese society.
4. It's already hitting us - The Guardian reports on a new survey estimating climate change is already costing the global economy US$1.2 trillion a year and killing millions.
Climate change is already contributing to the deaths of nearly 400,000 people a year and costing the world more than $1.2 trillion, wiping 1.6% annually from global GDP, according to a new study.
The impacts are being felt most keenly in developing countries, according to the research, where damage to agricultural production from extreme weather linked to climate change is contributing to deaths from malnutrition, poverty and their associated diseases.
Air pollution caused by the use of fossil fuels is also separately contributing to the deaths of at least 4.5m people a year, the report found.
The 331-page study, entitled Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet and published on Wednesday, was carried out by the DARA group, a non-governmental organisation based in Europe, and the Climate Vulnerable Forum. It was written by more than 50 scientists, economists and policy experts, and commissioned by 20 governments.
5. Blame the mining boom investment - FTAlphaville reports on ANZ research on the surge of Foreign Direct Investment into Australia in recent years that has boosted the Australian dollar.
Sounds a lot like the surge of foreign capital into New Zealand in the last 18 months in the form or reinsurance payments.
The FDI boom has resulted in Australia’s first basic balance surplus since the early 1970s (the basic balance is the current account plus FDI). This is genuinely a different environment for the AUD. Typically low-yield, current account surplus currencies run basic balance surpluses (think Norway, Switzerland or Japan at one point). For a commodity exporter to do so is almost unheard of. A basic balance surplus currency will tend to be reasonably stable, and less cyclical, than currencies where portfolio flows dominate the capital account.
6. Inventories piling up in China - FTAlphaville reports on research from Nomura's Kevin Gaynor showing massive inventory buildups in China and elsewhere, suggesting trouble ahead for the global economy. It's worse in China than in late 2008...
We all know inventories are piling up in China – the FT and then the NYT wrote about it, and it’s been showing up in the PMIs for some time. But they’re REALLY piling up, by this measure — far worse than in the 2008 when there was a much better argument that no-one could’ve seen it coming. Plus, stock is piling up everywhere — even Japan, which invented ‘just in time‘ inventory management, and Taiwan, which apparently also tends to be good at the practice.
What it means is if demand turns up soon, the destocking will be unpleasant. If demand doesn’t turn up soon…
7. Baconmageddon - America is in turmoil. Pork prices are rising. Supply is dwindling.
The Los Angeles Times reports a shortage of pork because of the worst drought in 50 years means there will be bacon shortages there from early next year...
Might want to get your fill of ham this year, because "a world shortage of pork and bacon next year is now unavoidable," according to an industry trade group. Blame the drought conditions that blazed through the corn and soybean crop this year. Less feed led to herds declining across the European Union “at a significant rate,” according to the National Pig Assn. in Britain.
And the trend “is being mirrored around the world,” according to a release (hat tip to the Financial Times).
8. Bailouter in Chief - Sheila Bair's book sounds like a cracker.
She also has a go at Treasury Secretary Tim Geithner for being too keen to bail out his banker mates.
The Obama and Bush administrations largely ignored the needs of beleaguered homeowners while focusing too narrowly on the well-being of Wall Street during the worst financial crisis since the Great Depression, according to a new book by a top participant in the government’s response.
The book, “Bull by the Horns,” by former Federal Deposit Insurance Corp. chairman Sheila Bair, says both administrations’ top advisers paid little more than lip service to helping borrowers at risk of foreclosure, instituting programs they knew were likely to fail and ignoring her recommendations about how to improve them. By contrast, she said, senior advisers were willing to go to great lengths to rescue the nation’s top banks — without demanding accountability from top financial executives.
A Republican who became a champion among liberals for her firm stance toward Wall Street and noisy presence in favor of homeowner assistance, Bair reserved her sharpest words for Treasury Secretary Timothy F. Geithner, who served as president of the Federal Reserve Bank of New York in the lead-up to the financial crisis.
After she recommended that President Obama name former Federal Reserve chairman Paul Volcker as Treasury secretary, she wrote, Obama’s decision to tap Geithner was “a punch in the gut.” She considered Geithner the “bailouter in chief” because he wanted to make unconditional guarantees to top banks to keep them afloat without demanding much in return.
9. Really big data - This Cisco graphic talks about the dawn of the age of the Zettabyte.
10. Totally Jon Stewart on the US Presidential Election.
Watch it and shake your head. The stuff Romney is saying is extraordinary. Obama is back in.
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