Thursday's Top 10 at 10: The PBoC's embarrassing climbdown; Irish banking 'craic'; 'The feral hogs' fighting the Fed; The tragedy of the under-employed; Going from monetary policy Wild Turkey to cold turkey; 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 #5 from quote machine Richard Fisher, a hawkish US Federal Reserve Governor. Even he is against turning off the money printing too quickly. "I don't want to go from Wild Turkey to cold turkey overnight," he said.

1. 'Educated with a dead beat job' - Reuters has a useful analysis of the crisis for young educated workers in Europe.

This is theme growing all around the developed world. 

The longer the Great Jobs Recession goes on the bigger the lost generation becomes. 

The article makes the good point that little data is collected on the skill levels of all these kids.

There are plenty of figures on unemployment, but what if a major part of the 'output gap' is trapped in under employment?

The article talks about a Swedish graduate job-hunter called Linnea Borjars:

When her contract ended in December, she declined the offer to stay on as an unpaid intern. Since then, dozens of applications and endless hours of networking have yielded just two interviews, despite a resume boasting a stellar academic record and a string of hard-to-obtain internships.

"I feel in some ways that I'm of no use anymore. It's like I'm posing nude in my cover letter, begging for approval, but I just keep on getting dumped," says Borjars, who lives a few train stops south of where young Swedes rioted last month, in part in an outcry against their miserable job prospects.

Borjars' situation is a reflection of the depth of the European economic crisis. It is not only unemployment but also underemployment - including workers who are overqualified, interns who are unpaid or low-paid and part-time employees who want full-time work - that has reached critical levels in many EU countries, and could leave a permanent financial and psychological mark on a generation.

2. Oops - FT reports the 100 basis point rise in bond yields in the last 6 weeks may hammer banks' equity positions in Europe and the United States, given many of them have been forced or chose to hold lots and lots of government bonds. Talk about unintended consequences.

3. Time to go back to cubicles? - WSJ reports on how open plan offices may actually reduce productivity by increasing the number of distractions. 

4. 'It'll never happen' - Tim Hunter (Chalkie) at Fairfax does a nice job of highlighting the risk for the Australian (and New Zealand) banks to new rules that could force banks to put aside up to US$300 billion (that's billion with a b) of capital as collateral for its over the counter swaps deals. Although our own Gareth Vaughan did have it first. 

It seems the Australian banks are fighting this one hard...

Even in the least costly scenario, they said, "We would expect the Australian banking system to be required to maintain a gross initial margin pool of US$30 to US$40b."

The main culprit for such a large margin requirement for the Australian banks was the cross-currency swap.

"The Australian banking system has a significant requirement for this product, which would be severely impacted by the potential requirement for both parties to post initial margin. For every US$1000 million issued by an Australian bank, the global system will absorb approximately US$160m of initial margin based on current assumptions."

Such a high cost was peculiar to the Aussie banking system and not warranted by the actual risk of the swaps, they argued.

5. 'The feral hogs vs the Fed' - Dallas Federal Reserve President Richard Fisher has told the FT that the 'feral hogs' in global financial markets might try to fight the Fed. They will lose, he says.

Mr Fisher, a member of the rate-setting Federal Open Market Committee, warned that markets should not think the Fed would end up propping up the economy indefinitely, or that it could be pushed to keep buying Treasuries at the same pace and, in so doing, keep inflating asset price bubbles.

The former hedge fund manager likened the market reaction to Fed chairman Ben Bernanke’s signal that the bank could begin reducing its $85bn monthly bond purchases before the end of this year to the 1992 attack led by investor George Soros on the Bank of England. The latter led to the UK crashing out of the European exchange rate mechanism.

“Markets tend to test things,” Mr Fisher told the FT. “We haven’t forgotten what happened to the Bank of England [on Black Wednesday]. I don’t think anyone can break the Fed . . . But I do believe that big money does organise itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.”

6. Such fun - Ireland is in uproar after a bunch of tape recordings emerged from the dark days of the Irish banking crisis. The comments from the bankers as they tricked politicians into bailing them out are hilarious in a not very hilarious way.

Here's the Independent with the banking 'craic' as the Irish say...

ANGLO Irish Bank boss David Drumm laughed about "abusing" the bank guarantee and warned his executives not to be caught abusing it, the Anglo Tapes reveal. Drumm is also heard giggling as one of his executives sings the German national anthem as deposits from Germany flow into Anglo as a result of the bank guarantee.

Drumm can be heard laughing at the financial regulator's concerns about being seen internationally to be "abusing" the bank guarantee in late 2008. "We won't do anything blatant, but . . . we have to get the money in . . . get the f***in' money in, get it in," he tells his senior manager, John Bowe.

7. Oops - China's central bank has stepped back from the brink in recent days. It all feels a lot like that period between the bankruptcy of Lehman Brothers and the near collapse of AIG a few weeks later.

The Fed let Lehman go 'pour encouragement les autres', but then thought better of it when AIG threatened to take down the world economy. 

When will the central banks learn that letting banks get too big to fail through very fast lending growth is a dangerous business in the first place?

Here's the FT with the PBoC eating some humble pie.

When money market rates in China last week spiked to double digits and the country’s interbank market froze, there had been talk about whether Beijing was nearing its Lehman moment. Instead, the central bank’s commitment to backstop every bank ensures that there will be no spectacular collapses and no imminent meltdown.

The central bank’s decision to let interbank rates rise was in large part aimed at limiting the growth of shadow financing flows. By reining in credit growth, it hoped to curb banks’ use of off-balance-sheet lending vehicles. However, its actions were beginning to produce the exact opposite of its intended effect. Strapped for cash, banks were pushing out huge numbers of risky, high-yielding “wealth management” investment products to attract depositors.

Last week there was an 18 per cent jump in the number of banks selling wealth management products and a 67 per cent increase in the overall number of products sold, CN Benefit, a wealth management survey found.

8. That's some tightening - Long term US interest rates have risen almost 100 basis points in the space of 6 weeks. Thanks Ben.

Here's Martin Wolf from the FT worrying about the effect of such a fast tightening of real world monetary policy on the world's largest economy. He does in the context of the BIS' warning over the weekend about central banks fueling asset bubbles.

The BIS argues that if yields were to rise by 3 percentage points across the maturity spectrum in the US, mark-to-market losses would be more than $1tn, or almost 8 per cent of GDP. Losses elsewhere would be even bigger. Financial shocks are possible, as “carry trades”, in which investors have borrowed short to lend long or borrowed in low-interest currencies to lend in higher-interest ones, unwind sharply. Indeed, one of the reasons why policy makers must be careful is that investors in such trades know how vulnerable they are to a rush for the door. They will flee as soon as they fear others may do so, creating a big danger of self-fulfilling panics

He also has a good old swipe at the BIS's warnings about overly loose monetary policy.

it suggests that the private sectors should run bigger financial surpluses, as heavily-indebted agents repay debt, while governments should run smaller deficits. Unless one assumes that advanced countries will run vast current account surpluses with the rest of the world, this is a plan for a depression. The BIS does not even consider the possibility that monetary policy has been ineffective because it is competing with the fiscal tightening the BIS has recommended.

9. Totally irrelevant but great piece of writing from Stephen Fry on depression and loneliness.

10. Totally John Oliver on Canada's banking regulation. Seriously. It's good too.