Top 10 at 10:'The end of the end of the recession'; Fund managers 'worse than useless'; US dollar collapse looms?; Dilbert

Here's my Top 10 links from around the Internet at 10 am. I welcome your additions in the comments below and please send any suggestions for tomorrow's Top 10 at 10 to bernard.hickey@interest.co.nz I don't have any spiders in my skull...luckily. 1. Here is Tyler Durden at Zero Hedge's view on the US economic outlook. It's a detailed piece called "The End of the End of the Recession." HT Willoughby via email. There's plenty of juicy little bits in there, including that there are 1.2 cars per licensed driver in the States (ie too many),  US consumer credit has contracted at an annual rate of 11.5% since the collapse of Lehman and New York is nearly bankrupt. Tyler is a bear, it's fair to say.

We suggest that readers approach any definitive statements, be they from investment banks or the mainstream media, on the topic of the recession's duration with infinite caution. That said, by many metrics the economy is leaps and bounds away from anything remotely resembling a recovery.

2. Wolfgang Munchau at the FT, who keeps a close eye on the European banking morass, says central bankers have little choice but to let inflation balloon because any attempt to execute an exit strategy would cause financial meltdowns on both sides of the Atlantic.

Before 2007, independent central banks would have had no problem presenting credible exit strategies. They would have pointed to their inflation target, and how they would use their medium-term inflation forecast or some other analytical framework to ensure that the price level would remain on a stable trajectory. The financial markets would have mostly agreed with the central bank's decision on interest rates, give or take a quarter point. That is simply not the case any longer. There are two big problems that need to be considered. One is the commercial banking system. This is more of an issue for the Europeans than the Americans, given the European governments' inability to resolve the difficulty of continued bad debts. If the European Central Bank, for example, decided to exit tomorrow by raising interest rates, the likely consequence would be a banking meltdown. A credible monetary exit strategy, in Europe at least, would read like a suicide note. The other problem, which is more troublesome for the US than the eurozone, is fiscal policy. As James Hamilton, professor of economics at the University of California, San Diego, pointed out in a recent analysis*, the direction of US debt, combined with the intermingling of monetary and fiscal policy, is inconsistent with the goal of long-term price stability.

3. There is talk bubbling around about a potential collapse in the US dollar. The magicians who follow the charts at fxstreet.com say it's looking vulnerable. That of course would be very bad news for our exporters, who would see the New Zealand dollar rise potentially towards 70 USc. HT Andrew Patterson via email. 4. I've only just picked up on this study by Wilson Sy and Kevin Liu of the Australian Prudential Regulatory Authority (APRA) on the performance of 115 Australian fund managers in the five years to 2006. It found the average actively managed superannuation fund underperformed a passive benchmark index by 0.9% a year, which, perhaps coincidentally, was the same as the average cost of managing these funds.

On average, value adding from active management appears statistically to be unable to overcome higher costs associated with attempts to exploit market inefficiencies. Higher management expenses leads to poorer net investment performance of the firms.

That is academic speak for fund managers are a waste of time and the more money you pay them the more useless they get. Here's The Age's version of the article.

The results follow US research regularly showing most active US fund managers underperformed relevant market indexes, including a study by Lipper Analytical Services showing 53 per cent of active managers underperformed the market between 1999 and last year. To make matters worse, the APRA research finds fund under-performance was worse in a bear market.

So why are we so keen on Kiwisaver? Could it just be a way to employ fund managers? Maybe all that KiwiSaver money should be put into government bonds? 5. This is one to watch from Adele Ferguson at The Australian about Australian companies needing to roll over a mountain of debt in the next three years. This will keep the big 4 Australian banks very busy.

CORPORATE Australia is sitting on a $200 billion debt bomb that needs to be refinanced over the next three years, with analysts warning some infrastructure and small companies will collapse under the mountain of debt. Available information suggests companies face $38.5bn of debt maturities next year, another $97.3bn maturing in 2011 and $64.7bn in 2012. But the problem could be even worse. Data on corporate debt in Australia is based on publicly accessible databases and does not include private deals companies do with banks, so the real debt figure could be much higher than $200bn.

6. Ambrose Evans Pritchard at the Daily Telegraph paints an interesting picture of Iceland recovering because its currency collapsed. Somehow he turns it into a lecture on not joining the euro, which is fair enough. Maybe we need a currency collapse here in New Zealand too to reorient our unbalanced economy. Please can we have a credit rating downgrade?

Those who point to Iceland as a scarecrow exhibit of what happens to a small country caught in a financial storm without the shield of euro membership have the matter backwards, as will become ever clearer over the next two years. The OECD expects Iceland's economy to shrink 7pc this year. This is much better than Ireland at minus 9.8pc, and recovery will come sooner. So next time you hear the Sacra Congregatio of the euro faith incant yet again that EMU saved Ireland from a terrible fate, know that they deceive only themselves. You take your punishment early with devaluation, as Britain did on leaving Gold in 1931, or ending the D-mark torture in 1992, or now. You look a sorry sight at first, but sweet vindication comes later.

7. Mike Heath, the GM at Raboplus, makes some interesting points on how transparent New Zealand banks are when they promote call accounts.

If you compare this to Greg McAweeney observations then the practice in NZ does appear to be more transparent and less complicated.  Greg has a pretty clear view that there is a need for greater transparency and less conditions, when it comes to bonus-type products in Australia. It's good to see, yet again, another example of Kiwi's doing a better job of something than the Australians.

8. Joe Hagan at New York Magazine has a big feature on Goldman Sachs. The backlash is building. And fair enough too. The US government bailed out AIG with US$85 billion of public money and then AIG promptly handed much of it over to the Vampire Squid. HT Felix Salmon

By that weekend in September, Goldman Sachs had collected $7.5 billion from its AIG credit-default swaps but had an additional $13 billion at risk"”money AIG could no longer pay. In an age in which we've become numb to such astronomical figures, it's easy to forget that $13 billion was a loss that could have destroyed Goldman at that moment.

Hank Paulson and then"“New York Fed chief Tim Geithner called an emergency meeting for the following Monday morning"¦ At the meeting, it was hard to discern where concerns over AIG's collapse ended and concern for Goldman Sachs began: Among the 40 or so people in attendance, Goldman Sachs was on every side of the large conference table, with "triple" the number of representatives as other banks, says another person who was there. The entourage was led by the bank's top brass: CEO Blankfein, co-chief operating officer Jon Winkelried, investment-banking head David Solomon, and its top merchant-banking executive Richard Friedman"”all of whom had worked closely with Hank Paulson two years prior"¦ On the government side, Goldman was also well represented: Geithner himself had never worked for Goldman, but he was an acolyte of former Goldman co-chairman and Clinton Treasury secretary Robert Rubin. Former Goldman vice-president Dan Jester served as Paulson's representative from the Treasury. And though Paulson himself wasn't present, he didn't need to be: He was intimately aware of Goldman's historical relationship with AIG, since the original AIG swaps were acquired on his watch at Goldman. The Goldman domination of the meetings might not have raised eyebrows if a private solution had been forthcoming. But on Tuesday, Paulson reversed course and announced that the government would step in and save AIG, spending $85 billion in government money to buy a majority stake"¦

9. Surprisingly, Nouriel Roubini called for Ben Bernanke to be reappointed as US Federal Reserve Chairman in this Op-Ed in the New York Times.

The Fed's creative and aggressive actions have significantly reduced the risks of a near depression. For this reason alone Mr. Bernanke deserves to be reappointed so that he can manage the Fed's exit from its most radical economic intervention since its creation in 1913.

10. Here's a very interesting piece from John Maudlin about how China's 8% GDP growth appears mostly due to a new credit bubble rather than anything substantial.

The volume of credit that is flowing into China is equivalent to one-third of their GDP. Banks that already have large problem-loan portfolios are now lending even more, in a very short time frame. China has severe capacity-utilization problems, as trade has sharply fallen; and the US consumer is unlikely to return to anywhere near the level of consumption that was the case in 2006. The Chinese stock market is up 85% this year, and commodity and real estate prices are rising. And no wonder: the money supply shot up 28.5% in June alone. That money is looking for a home. My friend Vitaliy Katsenelson has written a very perceptive essay for Foreign Policy magazine, talking about the nature of the current growth in China. "But don't confuse fast growth with sustainable growth. Much of China's growth over the past decade has come from lending to the United States. The country suffers from real overcapacity. And now growth comes from borrowing -- and hundreds of billion-dollar decisions made on the fly don't inspire a lot of confidence. For example, a nearly completed, 13-story building in Shanghai collapsed in June due to the poor quality of its construction. This growth will result in a huge pile of bad debt This growth will result in a huge pile of bad debt -- as forced lending is bad lending. The list of negative consequences is very long, but the bottom line is simple: There is no miracle in the Chinese miracle growth, and China will pay a price. The only question is when and how much"