Tuesday's Top 10 at 10: The dangerous opacity of the People's Bank of China; Another ghost city; Britain's still over-valued house prices; The young and the isolated; 'Too big to fail and too big to exist' ; Dilbert

Here's my Top 10 links from around the Internet at 10 am today.

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 read today is #7 on the young and the isolated in America. It's a nice companion piece to Elizabeth Davies' excellent piece on our site yesterday.

1. That crazy Chinese central bank - The mayhem on China's interbank credit markets on Thursday and Friday last week has freaked plenty of people, many of whom are questioning the Peoples Bank of China's lack of communication. 

Interest rates spiked to over 20% and there were rumours a major bank defaulted.

The situation only calmed down somewhat when the People's Bank intervened to lend to one of the banks and interbank rates have since eased somewhat.

But plenty of nerves are jangled.

Here's Reuters with more detail on the lack of comment from the People's Bank. I must say it makes the RBNZ look a paragon of virtue. Perhaps we could export the RBNZ comms team to China? :)

Traders blame the absence of a clear and public signal from the central bank for panic at some smaller banks, as the cost of borrowing overnight funds spiked to as high as 25 percent for some institutions.

Those jitters spread more broadly late last week, as rumours - passed on by Chinese media outlets - that two major banks had received emergency funds from the PBOC circulated in financial markets in London and New York on Thursday.

The lenders denied the rumours, after which money markets calmed somewhat on Friday.

The panic in the otherwise arcane marketplace even sparked a flurry of activity on social media as the Twitter-like service Weibo lit up with comments from Chinese worried that a financial crisis was unfolding.

2. Et tu Bernanke?  - Speaking of central bank communications, Paul Krugman is very worried the US Federal Reserve Chairman Ben Bernanke is jawboning interest rates higher much earlier than he should. 

Fed officials are, consciously or not, responding to political pressure. After all, ever since the Fed began its policy of aggressive monetary stimulus, it has faced angry accusations from the right that it is “debasing” the dollar and setting the stage for high inflation — accusations that haven’t been retracted even though the dollar has remained strong and inflation has remained low. It’s hard to avoid the suspicion that Fed officials, worn down by the constant attacks, have been looking for a reason to slacken their efforts, and have seized on slightly better economic news as an excuse.

And maybe they’ll get away with it; maybe the economic recovery will strengthen and all will be well. But rising interest rates make that happy outcome less likely. And now that everyone knows that the Fed is eager to slacken off, it will be hard to get interest rates back down to where they were.

It’s sad and depressing, in both senses of the word. The fundamental reason our economy is still depressed after all these years is that so many policy makers lost the thread, forgetting that job creation was their most urgent task. Until now the Fed was an exception; but now it seems to be joining the club. Et tu, Ben?

3. Another Chinese ghost city - Matthew Niederhauser from Foreign Policy went to Chenggong in Kunming in Southern China to find some people. He found a lot of buildings, but not so many people. Click through to the pictures.

 Chenggong, which means to "submit tribute," features a Central Business District dotted with dozens of office towers, a massive government compound, and 15 university campuses. Ten-lane highways crisscross the city, rolling over previously tilled fields, while farmers living in surrounding areas face eviction. Perhaps the only thing Chenggong lacks, as I saw on a trip to the city in February, is people. The municipal government claims that the population reached 350,000 in 2012, and expects one million inhabitants by 2020. Considering that the city features rows upon rows of empty buildings, that seems unlikely.

Chenggong, in short, is a ghost city. Like the better-known Kangbashi district of Ordos in Inner Mongolia, it was built in response to supposed macro trends in urbanization that would drive demand for housing and services. Beijing hopes that roughly 850 million Chinese will be urbanites by 2020, and plans to spend $6.5 trillion to encourage it. Indeed, Chinese cities will continue to grow -- but Chenggong may remain empty.

4.  Another Greek meltdown - The New York Times reckons there's a chance the Greek government could fall and be replaced by Syriza, which would demand a new bailout deal. In that case, buckle up.

5. Europe remains a mess - NYT reports European ministers failed again over the weekend to agree on a set of rules for a banking union. Many believe Europe's banks are insolvent if they were ever forced to crystallise their losses on Southern European bonds and property. 

The Bank for International Settlements, a group representing central banks including the Federal Reserve and the European Central Bank, warned political leaders on Sunday that they should not expect central banks’ cheap-money policy to hold the global economy together forever. The organization, based in Basel, Switzerland, said in its annual report that politicians should do their share of “the hard but essential work of adjustment.”

The report was published a day after a political leaders’ meeting in Luxembourg had provided a vivid example of what the central bankers were complaining about. Despite debating well into the early morning on Saturday, European Union finance ministers could not agree on new rules to reduce the chances of taxpayers bearing the burden if commercial banks collapsed.

6. 'It won't work' - The Bank for International Settlements has always taken a fairly Austrian and some would say Austerian line on all the money printing that has gone on over the years. It came out again over the weekend to say the money printing is not working. It has a point. The bolding is mine. Here's the BBC report.

“How can central banks encourage those responsible for structural adjustment to implement those reforms? How can they avoid making the economy too dependent on monetary stimulus? When is the right time for them to pull back ... [and] how can they avoid sparking a sharp rise in bond yields? It is time for monetary policy to begin answering these questions,” the report said.

Mario Draghi’s rallying cry, uttered last summer at the height of the eurozone turmoil, that the European Central Bank would do “whatever it takes” to preserve the currency bloc was now being misconstrued, it warned.

“Can central banks now really do ‘whatever it takes’?” the BIS asked. “It seems less and less likely. Central banks cannot repair the balance sheets of households and financial institutions.”

7. 'Young and isolated' - Elizabeth Davies wrote an excellent piece for Interest.co.nz this week on life for an indebted student on the minimum wage in New Zealand. Here at the New York Times Harvard fellow Jennifer Silva has written a book called 'Coming Up Short: Working-Class Adulthood in an Age of Uncertainty.' It captures many of the same themes.

When and how will the young revolt? We're seeing an idea in Brazil and Turkey. In America the Occupy movement petered out. 

This piece is today's must-read. It makes the great point that many of these young people blame themselves and become increasingly isolated.

These are people bouncing from one temporary job to the next; dropping out of college because they can’t figure out financial aid forms or fulfill their major requirements; relying on credit cards for medical emergencies; and avoiding romantic commitments because they can take care of only themselves. Increasingly disconnected from institutions of work, family and community, they grow up by learning that counting on others will only hurt them in the end. Adulthood is not simply being delayed but dramatically reimagined along lines of trust, dignity and connection and obligation to others.

9. 'As safe as houses' - Roger Bootle writes at The Telegraph about Britain's housing market and the danger of the government's subsidies for home lending. He predicted a 20% fall in British house prices. He has been receiving abuse ever since.... Sounds familiar...He makes the point that house prices are still overvalued with price to income multiples of over 6... Sounds familiar

This is a tale of two countries: London and the rest. In many ways, London has ceased to be British. It is a global city. Only New York is in the same league. At present, for the internationally mobile global elites, London property is perceived as a safe, attractive place to park your wealth – whatever the prices. The result is that prices in the capital are 7pc above the 2007 peak. By contrast, in many other regions prices are well down. For example, in the North West and Yorkshire, they are now more than 20pc below their peak, and they have fallen by more than 25pc in the North East.

Even within the capital, there is a marked divergence between outer London and prime central London. In the former, since the previous peak in early 2008, prices are still down by 2pc, whereas in the latter they are up by almost 30pc.

Interestingly, despite the large price falls outside London, house prices still look stranded in mid-air. The ratio of average house prices to average earnings is at 5.2, down from 6.3 at the peak but well above the historical average of 3.7. It is even still above the peak at the top of the previous boom in the late 1980s.

So what does the future hold? Prices appear to be gently rising again, but without much support from the economic fundamentals. The UK economy is probably on the up, but not by very much. In any case, I doubt whether average earnings will increase much faster. And it is possible that employment will fall back as the public sector cuts more jobs. At some stage, interest rates will have to return to normal. Admittedly, I think that is likely to be far distant. Nevertheless, it will come. At that point, unless something else has intervened to make houses more reasonably priced, there is going to be mayhem.

10. Totally John Oliver on James 'Whitey' Bulger.

(Updated with must read at #7)