Tuesday's Top 10 with NZ Mint: The madness of Portugal's austerity; The Bitcoin bubble; Where did the Internet's productivity miracle go?; Why QEternity will never be reversed; Dilbert

Here's my Top 10 links from around the Internet at 1 pm 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 reads today are #6 on why the money printing oop north will never reversed. I have a coffee bet in the office that central banks will start cancelling the bonds they have bought by the end of 2019. Your views?

1. Here come the NIMBYs - A bunch of Auckland councillors revolted overnight at the drive by Len Brown and Penny Hulse to get the Auckland Unitary Plan in place by the end of the year.

They sent a letter to the government behind the back of the Mayor and Deputy Mayor to the government egging them on to delay the Unitary Plan by at least three years.

There seems to be an upswell of opposition by grumpy villa dwellers over the prospect of infill housing, apartment blocks and townhouses in their neigbourhoods.

There's no suggestion these NIMBYists want to stop the migration to Auckland.

That would hurt the ever upward spiral in house prices, which (of course) benefits (mostly old) landowners at the expense of the aspirational and landless (and young).

Here's the NZHerald version of the revolt and the NBR version.

Auckland-wide community meetings have sparked angry reactions to plans in a draft copy of the unitary plan for high-rise and in-fill housing in more than half of the urban area.

Meanwhile, St Heliers residents turned out in force last night to oppose more "concrete monstrosities" destroying the character of the seaside village.

Ms Hulse and senior planner Penny Pirrit were given a clear message that plans for 12.5m and 16.5m buildings were unacceptable.

2. Chinese money laundering in Hong Kong - Reuters reports only the small fry seem to get get caught. HT Gareth.

3. What about us too? - FT reports China and Australia have agreed to start exchanging yuan for Australian dollars directly.

4. Beware of economists peddling elegant models - So says physicist Mark Buchanan in this Bloomberg opinion piece.

If economists jettisoned elegance and got to work developing more realistic models, we might gain a better understanding of how crises happen, and learn how to anticipate similarly unstable episodes in the future. The theories won’t be pretty, and probably won’t show off any clever mathematics. But we ought to prefer ugly realism to beautiful fantasy.

5. The madness in Portugal - Over the weekend Portugal's Constitutional Court smacked down some government austerity measures for being unfair on civil servants. The European Union then threatened to pull Portugal's bailout, so Portugal announced big new cuts to social security and health.

Here's Italian economist Francesco Saraceno surveying the madness of austerity.

• Austerity did not work. Portugal is in a recessionary cycle. The economy will shrink by 2.3 per cent this year, more than twice as much as the previous government forecast (and the slowdown of exports to the rest of the eurozone, is not helping).
• Austerity is self defeating: the deficit-to-GDP ratio widened from 4.4 per cent in 2011 to 6.4 per cent last year, and is forecasted to be 5.5 per cent in 2013. Far above the target of 3 per cent that the government had agreed with the Troika. My guess is that it will be even larger than that.
• The magic wand of confidence is not magic. The budgetary cuts did not boost private spending, and expectations remain gloomy. The Financial Times article cites the Portuguese daily Público writing “Portugal has entered a recessionary cycle. People have no reason to believe the future will be any better. The [adjustment] programme has failed and has to be changed.” So long for the confidence fairy…

6. Helicopter QE will never be reversed - That's what Ambrose Evans Pritchard is reporting in The Telegraph, citing a bunch of very serious people.

Lord Turner, head of the now defunct Financial Services Authority, made the point more delicately. "We must tell people that if necessary, QE will turn out to be permanent." The write-off should cover "previous fiscal deficits", the stock of public debt. It should be "post-facto monetary finance".

The policy is elastic, for Lord Turner went on to argue that central banks in the US, Japan and Europe should stand ready to finance current spending as well, if push comes to shove. At least the money would go straight into the veins of the economy, rather than leaking out into asset bubbles. Today's QE relies on pushing down borrowing costs. It is "creditism". That is a very blunt tool in a deleveraging bust when nobody wants to borrow.

Lord Turner says the current policy has become dangerous, yielding ever less returns, with ever worsening side-effects. It would be better for central banks to put the money into railways, bridges, clean energy, smart grids, or whatever does most to regenerate the economy.

7. Where did the Internet's producitivity miracle go? - John Cassidy writes at the New Yorker about the mirage of a productivity dividend from the rise of the Internet.

All the talk of “Web 2.0”—2004 was the year that Tim O’Reilly, a notable Silicon Valley booster, held a conference devoted to that topic—the technology optimists argued there was plenty of scope left for further gains. Broadband penetration was rising rapidly. Social networking was in its infancy, as was the mobile revolution. Once practically everybody was permanently online, with the entire resources of the Internet at their fingertips, surely productivity would take another quantum leap.

It didn’t happen!

Since the start of 2005, productivity growth has fallen all the way back to the levels seen before the Web was commercialized, and before smart phones were invented. During the eight years from 2005 to 2012, output per hour expanded at an annual rate of just 1.5 per cent—the same as it grew between 1973 and 1996. More recently, productivity growth has been lower still. In 2011, output per hour rose by a mere 0.6 per cent, according to the latest update from the Labor Department, and last year there was more of the same: an increase of just 0.7 per cent. In the last quarter of 2012, output per hour actually fell, at an annual rate of 1.9 per cent. Americans got less productive—or so the figures said.

8. It's a bubble - So says Felix Salmon of the amazing growth of Bitcoin's market value. The chart tells the story.

There are a couple of reasons why the bubble is sure to burst. The first is just that it’s a bubble, and any chart which looks like the one at the top of this post is bound to end in tears at some point. But there’s a deeper reason, too — which is that bitcoins are an uncomfortable combination of commodity and currency. The commodity value of bitcoins is rooted in their currency value, but the more of a commodity they become, the less useful they are as a currency.

Still, it’s worth taking a look behind the bitcoin bubble, because there are fascinating implications for anybody who cares about payments, or currencies, or trust.

9.  A fun bike ride - This is totally irrelevant but fun. HT @samfromwgtn

Brooklyn Brewery Mash - A trip through BK in 3000 photos from Paul Trillo on Vimeo.

10. Totally Jon Stewart on how legislation is made in America. Just plain ugly. In an hilarious way.

And Part 2...

(Updated with cartoons, corrects link to NBR article in #1)