Tuesday's Top 10: China's coal mountain range; Strong middle classes, not lower taxes, create jobs; 3D faxing; Why the US should double its minimum wage; Dilbert

Here's my Top 10 links from around the Internet at midday 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 is #5 from venture capitalist Nick Hanauer arguing for a doubling of the minimum wage in the US. 

1. The problem for Solid Energy - The government is now negotiating with bankers over the size of the haircut they will take on their debt with Solid Energy.

Meanwhile, the state owned coal miner continues to lay off staff and reduce production.

Its customers such as New Zealand Steel and Genesis continue to import coal from Indonesia.

The New Zealand dollar's 10-20% over-valuation is a factor, but the massive over-supply of coal in China is also a driver.

This piece in Quartz explains just how big that coal mountain is and the scale of the challenge for Solid Energy. The story in aluminium is very similar.

Here's Quartz:

Years of excessive investment are catching up with China, and the latest example is coal. Its reserves now contain 220 million tons (200 million tonnes) of coal, as the Hao Hao Report notes. That puts China on track to have as much as 440 million tons by the end of 2013, according to the China National Coal Association (CNCA)—around 40% more than the combined weight of the entire human population.

This excess coal has driven prices down by half, compared with the same period last year. Now 24 of China’s biggest coal companies—nearly one-third—are losing money, says Jiang Zhimin, vice-chairman of the CNCA.

2. Increase the wages - US average real wages have fallen since 2009. This is why America's economy is struggling. Not vice-versa. 

Here's the WSJ with an excellent report. 

Four years into the economic recovery, U.S. workers' pay still isn't even keeping up with inflation. The average hourly pay for a nongovernment, non-supervisory worker, adjusted for price increases, declined to $8.77 last month from $8.85 at the end of the recession in June 2009, Labor Department data show.

Stagnant wages erode the spending power of consumers. That means it is harder for them to make purchases ranging from refrigerators to restaurant meals that account for most of the nation's economic growth.

All told, Patrick Newport, an economist at IHS Global Insight, expects real wage growth of only 1% by the end of 2014. That is "good news for employers," he said, "not-so-good news for workers."

Consumers remain the biggest driver of the U.S. economy, but without more money coming in, it will be difficult for them to spur robust growth.

3. Ageing and browning populations slow US growth - This research cited by the WSJ suggests US growth could continue to remain very subdued for demographic reasons.

New research by two economists, Richard Burkhauser of Cornell Universityand Jeff Larrimore of Congress’s Joint Committee on Taxation, suggests things may get even worse in coming years—thanks to two basic population trends. After supporting the economy during their peak earning years, America’s Baby Boomers are starting to retire, which will mean higher numbers of lower-income older individuals. Second, the researchers argue, relatively high-earning whites are over time being replaced by minority workers, especially Hispanics, who tend to make less money.

Burkhauser and Larrimore project these two factors will reduce growth in median incomes by about 0.5% per year through 2030.

Demographic trends used to support income growth. The median household income rose about 9% between 1979 and 1989 and 13% between 1989 and 2000, the researchers note. A key driver was the increased employment and earnings of women.

But in the mid-2000s incomes slumped. Many Americans apparently took this in stride since home values were climbing significantly, boosting wealth, and credit was easy to get. To offset stagnant incomes, Americans took on more and more debt, which made the Great Recession that much worse, according to a separate paper by New York University economist Edward Wolff. As the crisis took hold, net worth plummeted. At the same time, median household income dropped about 7% from 2007 to 2010, more than the 3.5% fall seen between 2000 and 2004 and a 4% decline between 1989 and 1992.

4. 'We need to grow the middle class' - US venture capitalist Nick Hanauer makes a strong case in this TED talk that was never broadcast that the very rich are not job creators and what's needed to get the US economy going is a stronger middle class and public investment in infrastructure funded through higher taxes on the very rich, like him. 

The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the median American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally.

I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

5. A capitalist argues for a doubling of the minimum wage - Here's Hanauer again with this opinion piece in Bloomberg. He makes a good point that if wages had tracked productivity gains since 1968 the minimum wage in the United States (currently US$7.25) would be more like US$21.72 an hour.

Wouldn't it be great to see a New Zealand capitalist do this? Although to be fair,  Stephen Tindall's Warehouse does have to be congratulated for adopting a higher retailing career wage.

The fundamental law of capitalism is that if workers have no money, businesses have no customers. That’s why the extreme, and widening, wealth gap in our economy presents not just a moral challenge, but an economic one, too. In a capitalist system, rising inequalitycreates a death spiral of falling demand that ultimately takes everyone down.

Low-wage jobs are fast replacing middle-class ones in the U.S. economy. Sixty percent of the jobs lost in the last recession were middle-income, while 59 percent of the new positions during the past two years of recovery were in low-wage industries that continue to expand such as retail, food services, cleaning and health-care support. By 2020, 48 percent of jobs will be in those service sectors.

Policy makers debate incremental changes for arresting this vicious cycle. But perhaps the most powerful and elegant antidote is sitting right before us: a spike in the federal minimum wage to $15 an hour.

6. 3D printing - Quartz have done a nice job here summarising the latest on a trend that could be big. It cites Citi saying the market for 3D printing could triple in 5 years.

3D printing will explode in 2014, thanks to the expiration of key patents. Soon, you won’t have to master the (challenging, time-consuming) task of learning how to model things in 3D, because you’ll just be copying them from the real world usingcheap, effective 3D scanners. This technology will also enable 3D faxing (should anybody want it) and the democratization of fine art.

The materials with which you can 3D-print something continue to multiply—the latest is plain old printer paper, not to mention human tissue. But it’s not just materials—the ways in which 3D printing, or really 3D fabrication, can be accomplished are also multiplying. There’s 3D subtraction—i.e., cutting shapes out of blocks of material—which is a lesser known but actually much more mature technology, and it’s already being used to create new models for localized manufacturing. Crane-operated 3D printers are even being used to fabricate entire buildings.

7. Derailing the recovery? - Gavyn Davies writes in this FT blog (ie not paywalled) about whether the emerging markets exodus of recent weeks might derail the global economic recovery. He looks at a couple of expected shocks, including a slide in Chinese growth and a surge in US growth.

The markets seem to be broadly correct in their assessment of the two significant shocks which are currently hitting the global economy. These are likely to have a marked effect on the relative growth rates of the major regions, with the emerging world being hit while the US gains, but the net effect on the entire global economy may not be very large.

The outcome would, however, be different if the size of the shock hitting China were to increase significantly. For example, if the initial shock were to increase by one half, from -2 per cent of GDP to -3 per cent (which would take Chinese GDP growth down into the 5 per cent region for a while), then the overall adverse impact of the two shocks on global GDP growth would peak at about -2 per cent for a couple of quarters. This would probably be enough to threaten a renewed global recession, even assuming that the expansionary shock in the US remained intact.

In other words, the emerging market malaise could indeed take the global economy down with it, but only if the the Chinese shock turns out to be much larger than currently seems likely.

8. A strike in Singapore - This WSJ piece on a strike by Chinese migrant bus drivers in Singapore is a good read. I lived in Singapore for a couple of years and the idea of a strike is deeply unsettling to the family that runs the place.

9. Israel tightens its own speed limits - Our Reserve Bank has watched the Bank of Israel's attempts to bring in macro-prudential tools such as limits on high LVR lending. Israel announced a fresh tightening in the last week, Bloomberg reports. 

10. Totally John Oliver's summer holiday story.