Tuesday's Top 10 with NZ Mint: Why not cut the retirement age to boost the economy?; Southern Europe's internal devaluation may have to cut wages 50%; IMF drops opposition to capital controls; Dilbert

Here's my Top 10 links from around the Internet at 3 pm 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 watch is #6 on bank profits. One for both Graeme Wheeler and Russel Norman.

1. Why not reduce the retirement age? - Here's James K Galbraith at Foreign Policy thinking the unthinkable.

He suggests cutting the retirement age rather than raising it.

He points out the poor don't live as long and are punished more when retirement ages rise.

And we have way too many people not doing enough work.

Encouraging a few to retire might give the work to the kids, Galbraith reckons.

Worth a look, if only because it is so contrarian to the perceived wisdom of the moment.

In the first place, "we" are not living longer. Wealthier elderly are; the non-wealthy not so much. Raising the retirement age cuts benefits for those who can't wait to retire and who often won't live long. Meanwhile, richer people with soft jobs work on: For them, it's an easy call.

Second, many workers retire because they can't find jobs. They're unemployed -- or expect to become so. Extending the retirement age for them just means a longer job search, a futile waste of time and effort.

Third, we don't need the workers. Productivity gains and cheap imports mean that we can and do enjoy far more farm and factory goods than our forebears, with much less effort. Only a small fraction of today's workers make things. Our problem is finding worthwhile work for people to do, not finding workers to produce the goods we consume.

In the United States, the financial crisis has left the country with 11 million fewer jobs than Americans need now. No matter how aggressive the policy, we are not going to find 11 million new jobs soon. So common sense suggests we should make some decisions about who should have the first crack: older people, who have already worked three or four decades at hard jobs? Or younger people, many just out of school, with fresh skills and ambitions?

The answer is obvious. Older people who would like to retire and would do so if they could afford it should get some help. The right step is to reduce, not increase, the full-benefits retirement age.

2. Internal devaluation required - Zerohedge makes a good point about the inevitability of more crushing austerity in Southern Europe as wages are forced down to improve their competitiveness of their economies, given their economies are locked in the euro stone. It won't last. The politics will take over and overthrow the governments. It's why no one has any real confidence in the euro lasting.

while protests against “austerity” (which as we observed recently has still not been truly implemented in Europe, and certainly not in Portugal or Spain) are a daily event in most PIIGS nations, “you ain’t seen nothing yet.“ The reason: to achieve the unavoidable macroeconomic rebalancing, and to collapse the spread between soaring labor costs in the periphery and those of Germany (see chart below), the bulk of European countries will need to see wages collapse by anywhere between 30% and 50% to compensate for the lack of state-level currency devaluation optionality. And yes, this includes France.

3. Business as usual is over - This video from Ross Ashcroft at Renegade Economist, who made the Four Horseman documentary about the financial crisis, is worth a watch. HT Chris via email.

4. IMF drops opposition to capital controls - It's official. The arbiter of orthodoxy has changed its mind. Here's the full paper.

The International Monetary Fund endorsed nations’ use of capital controls in certain circumstances, making official a shift, which has been in the works for three years, that will guide the fund’s advice.

In a reversal of its historic support for unrestricted flows of money across borders, the Washington-based IMF said controls can be useful when countries have little room for economic policies such as lowering interest rates or when surging capital inflows threaten financial stability. Still, it said the measures should be targeted, temporary and not discriminate between residents and non-residents.

5. The 10 China myths that collapsed this year - The New Yorker's Evan Osnos is an excellent observer of China.

For China, 2012 was a humbling year. When the history of China’s reform era is written, this moment may prove to be a pivot point, a time when the myths that China and the world had adopted about the politics and economics of the People’s Republic began to wash away, leaving blunt facts about what China’s idiosyncratic national system has and has not achieved.

6. Too Big to Fail - Australian think tank Percapita has produced a report called 'What Price Stability' that looks at Australian bank profitability and moral hazard. Here's the conclusion:  

We find that the Big Four banks are more profitable than the risk attached to their equity would justify, thanks to implicit insurance provided by the state and a market structure which makes their operations more capital intensive than necessary. The report identifies three market failures which contribute to this mismatch between profitability and risk. The first is a lack of competition brought about by ‘stickiness’ in customer behaviour. The second is the familiar moral hazard problem, in this case created by the implicit public guarantee provided to the banks by government. The final failure is the perceived need amongst policymakers to accept a trade-off between competition and banking system stability, underpinned by the fear that some banks are too big to fail.

7. A new tax for companies in the tax heavens - Britain's government wants a launch a coordinated crackdown with other governments in Europe on companies in the 'cloud' that avoid tax such as Google, Facebook, Amazon and Apple.

Here's the Telegraph with the plans:

The Treasury wants to work with other jurisdictions, including the US and continental Europe, to close the loophole that allows web-based companies to avoid millions of pounds of tax on earnings around the world.

The Chancellor is expected to appoint a tax expert to lead a consultation into the practicalities of a new levy following public and political criticism of the low levels of tax paid by some of the biggest companies operating in Britain. The move is expected as early as the Autumn Statement on Wednesday.

More pressure for reform will come from the Public Accounts Committee which is publishing its report into Britain's treatment of international earnings. The Parliamentary Committee has accused Google, Amazon and Starbucks of being "immoral" in paying low levels of corporation tax.

8. 'Worse than a world war' - The Telegraph reports the Bank of England's executive director for banking stability, Andrew Haldane, has said the global financial crisis has been as financially devastating as a world war and will be 'a burden on our grandchildren.'

Andy Haldane, the Bank’s executive director for financial stability, added that public anger at the banks was fully justified and that pay in the industry remained too high.

“In terms of the loss of incomes and outputs, this is as bad as a world war,” he said. “It would be astonishing if people weren’t asking big questions about where finance has gone wrong.

“If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren. There is every reason why the general public ought to be deeply upset by what has happened – and angry.”

9. Keep an eye on Japan's general election - The election on December 16 is shaping up as a cracker. The winner is expected to impose a full-on money printing Governor on the Bank of Japan and their are rumblings of nationalism to keep things interesting too.

Here's the Reuters analysis:

Waseda University Professor Masaru Kohno said his recent Internet surveys show younger Japanese increasingly keen to see the government take a tough stance toward Beijing and Seoul.

"The phenomena (territorial rows) are not entirely new, but the reaction is extraordinary so maybe you have to think the mood of the nation is tied to something like economic conditions or being politically fed up," Kohno said. "It's not like an ideological surge to the right, it's more like frustration."

Some fear that such frustration is translating into a longing for a strong leader, regardless of policy content.

"Fundamentally, the Japanese people are looking for leadership with a clear sense of direction," said a former U.S. diplomat. "Abe's way of addressing this is to project strong views associated with nationalism."

10. Totally Jon Stewart on Cliffpocalypsemageddonacaust