Here's my Top 10 links from around the Internet at 10 am in association with NZ Mint.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must watch today is #7 on US wealth inequality, which is going viral. It's all very ironic on a day when the Dow hit a record high and household income is at a one decade low.
1. Cash for access - Just when we all thought the culture of the City of London couldn't get any more corrupt and cynical, it does.
The FT has reported that investment banks are pimping out access to chief executives to fund managers at US$20,000 an hour, often without the CEOs knowing it.
The cynicism is laid bare.
Hedge fund managers and other big shot fund manager are buying the time of CEOs to get inside information on how companies are being run.
Investment banks are essentially using their relationships with companies to make a profit at the expense of regular investors and faith in a level playing field.
They are the pimps and the CEOs are the prostitutes.
The poor old Mum and Dad investors are the 'Johns' in this process.
Just extraordinary. It better not be happening here. Email me if you're in the investment banking or funds management scenes in New Zealand and you've seen this sort of thing happening.
Investment banks are charging asset managers up to $20,000 an hour to meet the chief executives of their corporate clients – often without the chief executives having any idea that their time is being sold. The revelation comes amid a push by regulators and the fund industry in the UK to lift the lid on payments for corporate access, although the practice is also commonplace in continental Europe, the US and, increasingly, Asia.
Figures from the annual Thomson Reuters Extel Survey show European asset managers paid 29 per cent of their dealing commissions for corporate access in 2012, up from 21 per cent in 2010, despite a 2006 ruling in the UK by the Financial Services Authority that commissions should only be paid for execution or research. A quarter of asset managers in both the US and the UK allocate more than half their commissions for corporate access, according to research by CA Cheuvreux, a French broker.
China is “fully prepared” for a currency war should one happen, central bank Deputy Governor Yi Gang said in Beijing yesterday, the official Xinhua News Agency reported.
“China is prepared,” Yi was quoted as saying by the agency, which gave no further details about where he spoke. “In terms of both monetary policies and other mechanism, China will take into full account the quantitative easing policies implemented by central banks of foreign countries.”
3. How the plutocrats get what they want - Chrystia Freeland at Reuters writes here about research showing people in the top 10% of incomes tend to get what they want when it comes to government policy.
The Demos study draws in part on the quantitative research of Martin Gilens, a professor of politics at Princeton University and author of “Affluence and Influence: Economic Inequality and Political Power in America.” Gilens, who focused on the divide between the top 10 percent and everyone else, found a high degree of what he calls political inequality.
“I looked at lots of survey data that indicated what people at different income levels wanted the government to do, and then I looked at what the government did,” Gilens explained.
“For people at the top 10 percent, you could predict what the government would do based on their preferences,” he said. “But when the preferences of people at lower income levels diverged from the affluent, that had no impact at all on the policies that were adopted. That was true not only for the poor but for the middle class as well.”
4. 'The age of austerity is ending' - So says Anatole Kaletsky in this Reuters piece.
He thinks the Italian revolt signals the end of the German-led austerity strategy for Europe.
Discussing the outcome of Friday’s “sequestration” of U.S. government spending is best left to the month ahead, when we see how the public reacts to government cutbacks. But in Italy, Britain and the rest of Europe, this week’s events should help convince politicians and voters that efforts to reduce government borrowing, whether through public spending cuts or through tax hikes, are both politically suicidal and economically counterproductive.
In Italy, and therefore the entire euro zone, this shift is now almost certain. After the clear majority voted for politicians explicitly campaigning against austerity and what they presented as German economic bullying, further budget cuts or labor reforms in Italy are now off the agenda, if only because they would be literally impossible to implement. If Angela Merkel demands further budget cuts, tax hikes or labor reforms as a condition for supporting Italy’s membership of the euro, a majority of voters have given an unequivocal clear answer: Basta, enough is enough. Most Italians would rather leave the euro than accept any further austerity – and if Italy left the euro, total breakup of the single currency would follow with an inevitability that might not apply if the country exiting were Greece, Portugal or even Spain.
5. Basics of banking: loans create a lot more than deposits - Here's John Carney from CNBC with a few home truths about banking. Well worth a read.
What we have here is a functioning bank, a demonstration of how the basic infrastructure of banking is not built on a foundation of a bunch of cash that is then lent out. It's built on the loans themselves, with capital and reserves raised to meet regulatory requirements.
6. Here come the technocrats - Ambrose Evans Pritchard reckons Italy's President is planning to foist another unelected bunch of technocrats on Italy to keep the German creditors happy.
Italy’s president Giorgio Napolitano is exploring the creation of a second technocrat government to break the political log-jam and calm markets after key parties failed to reach an accord, risking a serious popular backlash. The EU policy elites are increasingly alert to the danger of losing popular consent for the EU Project.
European Central Bank governor Benoit Coeure said Europe must pay more attention to the “social contract” if it is to avoid feeding “nationalist temptations”. Mr Coeure warned that record unemployment across much of Europe - reaching 59pc for Greek youth -- was eroding the job skills of a generation and doing lasting damage to future growth, While the tone is changing, there is no sign yet of a retreat from fiscal belt-tightening. “Given that average debt exceeds 90pc of GDP in the EU, I don’t think there’s any room for manoeuvre to leave the path of budgetary consolidation,” said EU economics chief Olli Rehn.
7. Viral wealth Inequality video - Well worth a watch. One day a few Americans might revolt at this. Maybe. HT Tracey Barnett.
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"What I'm against is seniors stealing from future seniors."
10. Totally a 'Funny or Die' video previewing a new movie: 'Dow Jones'. Topical given it hit a record high overnight.
"I'll see you on the flip side Jive Turkey. Your stock's about to plummet!"
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