Top 10 at 10: Germans say 'Nein!'; Greece may default; China's real estate crackdown; Jon Stewart lashes Apple; Dilbert

Here are my Top 10 links from around the Internet at 10 past 1pm I welcome your additions and comments below or please send suggestion for Monday’s Top 10 at 10 to bernard.hickey@interest.co.nz 1. 'Ticking time bomb' - Standard Chartered chief economist Gerard Lyons has written a piece in FT.com pointing out that China is pushing to undermine the use of the US dollar by asking some of its biggest exporters to invoice in Renminbi rather than US dollars.

Gradualism dictates the Chinese approach to most policy measures. The process is logical. Look at the theory, examine the pros and cons, debate the issue, implement slowly and observe. If the project works, roll it out. On that basis, there is more to come. Since a pilot programme started in July 2009 the volume of international trade settled in the Chinese currency has totalled Rmb11.6bn ($1.7bn). Although only 0.1 per cent of Chinese trade in that time, it has gathered momentum. This has encouraged the authorities to expand the programme. Renminbi invoicing has been restricted to 400 mainland companies in five cities: Shanghai, Shenzhen, Guangzhou, Dongguan and Zhuhai. It will soon widen to cover thousands of mainland companies and more provinces, including Heilongjiang in northeast China which has sought approval to settle trade with Russia in renminbi.

2. Nein! - Steven Rosenberg at the BBC has a nice backgrounder on just why the Germans (and Chancellor Angela Merkel) are so reluctant to bail out the Greeks.

There are so many zeros on the front page of the tabloid Bild, you almost need a calculator to understand the story. The headline declares: "25,000,000,000 Euros!" and "Now the Greeks want even more of our money!" Twenty-five billion euros is rumoured to be the cost to Germany of participating in a three-year bail-out of Greece. "Is Greece now a bottomless pit for taxpayers' money?" the paper continues.

3. So how would it be done? - Larry Elliott at the Guardian has a thinkpiece that looks at the actual mechanics of Greece leaving the Euro. It wouldn't be easy or painless, it seems.

The short answer to the question of how a country would leave the euro is: with extreme difficulty, at considerable cost and only as a last resort. It would first have to consider the three Ds – devaluation, debt and default. In theory, this could happen smoothly enough. A country would announce its decision to leave and would go back to issuing its former currency. The value of that currency – shorn of the protection from the euro's safety blanket – would fall sharply. The weaker currency would provide a boost to competitiveness but would add to the domestic value of the country's debts. Interest rates on that debt would also rise, making it harder for the country to meet its obligations. It would then seek to restructure its debt, asking its creditors to "take a haircut" – accept a loss. But in the chaos of a financial crisis, it might not be possible to operate in such a textbook fashion. The member state might default on its debts first, triggering exit from the euro and a run on its currency. Or it might be asked to leave.

4. 'Something bigger' - Mohamed El-Erian, the CEO of the world's biggest bond fund PIMCO, has suggested a Greek default and debt restructure is inevitable. He explains the (ugly) implications in this comment piece on PIMCO's site.

The disorderly market moves of recent days will place even greater pressure on the balance sheets of Greek banks and their counterparties in Europe and elsewhere. The already material risks of disorderly bank deposit outflows and capital flights are increasing. The bottom line is simple yet consequential: The Greek debt crisis has morphed into something that is potentially more sinister for Europe and the global economy. What started out as a public finance issue is quickly turning into a banking problem too; and what started out as a Greek issue has become a full-blown crisis for Europe. Absent some remarkable change in the next few days, things will get even more complex for the official sector. It may have no choice but to combine its own exceptional financing efforts with talks on a controversial approach that will be familiar to veteran emerging market observers – PSI, or “private sector involvement.” PSI is the polite way to talk about the restructuring of some of the sovereign debt held by the private sector. It is based on a concept of burden-sharing in a disorderly world. It can appeal to governments as a seemingly easy way to ensure that massive public sector support to crisis countries does not flow back out in the form of payments to private creditors. Yet PSI is also hard to design comprehensively, harder to implement well and involves collateral damage and unintended consequences.

5. Revolting at the banks - Public protest at the banks is growing. Here's a Huffington Post report with a handy picture slide show showing a protest overnight in Manhattan where hundreds of protestors blocked the lobbies of the big banks.

The initial scene, which unfolded in the building lobbies of JPMorgan, Wells Fargo, and Wachovia, was just a prelude to today's rally on Wall Street led by National People's Action and the AFL-CIO. Ten thousand workers, union members, and community groups are expected to show for the "bank showdown," with thousands of others gathering in cities across the country.

6. 'Complete disconnect' - Now the dust has settled after the Goldman Sachs hearings this week, the FT has written a thoughtful piece on what it means for banks. Essentially, the hearings showed the complete disconnect between Main St and Wall St and how tougher regulation seems inevitable.

US Senator Susan Collins repeatedly pressed four different Goldman Sachs executives on whether they had a duty to act in the best interest of their clients at Tuesday’s hearing on the financial crisis. The fact that none of them gave a direct “yes” to the question revealed just how wide the gulf between Washington and Wall Street has become. Investment advisers owe this “fiduciary duty” to retail clients when selling financial products but, as Lloyd Blankfein, Goldman’s chief executive explained, Goldman acted in a different role. As a marketmaker and a principal, Goldman simply buys or sells “exposures” to securities or risks to the clients who demand it. The bank may feel differently about that investment at that particular time, he argued, but the clients are presumed to be sophisticated investors who can make up their own minds. “We will not necessarily disclose and won’t even know, and the buyer won’t care – we could be negative on the equity market and negative on the oil market. It still won’t matter,” Mr Blankfein told the committee. But that explanation may prove to be the one thing Goldman cannot sell. Bankers and financial industry lobbyists on both sides of the Atlantic agreed that this part of the hearing was an unmitigated disaster for an industry fighting to stave off new regulations and legislation that strike at the heart of its current business model. “There is such an utter disconnect,” said one US bank executive. “The testimony might make sense to me, but somebody watering their lawn in Missouri is going to understand about 5 per cent of it.”

7. The crackdown goes on - China has put a moratorium (what a lovely word) on real estate firms there raising fresh capital, Reuters reports. How long before the cash spilling over the sides from China into the top ends of the property markets in Vancouver, Sydney, Melbourne and Auckland stops spilling over?

The move could stand in the way of about 110 billion yuan ($16.1 billion) in share issues planned by 45 companies, unnamed sources close to the China Securities Regulatory Commission told the China Daily. The suspension will allow the authorities to examine whether companies have used illegal methods to manipulate market prices, the newspaper said. Beijing, wary about the risks of an asset bubble, has been trying to cool the real estate market, raising mortgage rates and down payment requirements for second homes and pushing local governments to control speculative buying.

8. Powerpoint disasters - HT John Burland for pointing out a followup to the New York Times piece I linked to a few days ago. This is a piece that includes some comments by graphics guru Edward Tufte

Alas, slideware often reduces the analytical quality of presentations. In particular, the popular PowerPoint templates (ready-made designs) usually weaken verbal and spatial reasoning, and almost always corrupt statistical analysis.

9. US$1 trillion bailout package required - Peter Boone and Simon Johnson comment at Baseline Scenario about the European crisis. It is compelling reading. Their recipe is radical and plausible. It requires a US$1 trillion bailout package and the resignation of the IMF chief. They make the very good point that much of the blame for the crisis is the freedom the euro gave to Southern European banks and governments to borrow like crazy using Germany's low rates and its central bank.

The underlying problem is the rule for printing money: in the eurozone, any government can finance itself by issuing bonds directly (or indirectly) to commercial banks, and then having those banks “repo” them (i.e., borrow using these bonds as collateral) at the ECB in return for fresh euros. The commercial banks make a profit because the ECB charges them very little for those loans, while the governments get the money – and can thus finance larger budget deficits. The problem is that eventually that government has to pay back its debt or, more modestly, at least stabilize its public debt levels. This same structure directly distorts the incentives of commercial banks: they have a backstop at the ECB, which is the “lender of last resort”; and the ECB and European Union (EU) put a great deal of pressure on each nation to bail out commercial banks in trouble. When a country joins the eurozone, its banks win access to a large amount of cheap financing, along with the expectation they will be bailed out when they make mistakes. This, in turn, enables the banks to greatly expand their balance sheets, ploughing into domestic real estate, overseas expansion, or crazy junk products issued by Goldman Sachs. Just think of Ireland and Spain, where the banks took on massive loans that are now sinking the country. Given the eurozone provides easy access to cheap money, it is no wonder that many more nations want to join. No wonder also that it blew up. Nations with profligate governments or weak financial systems had a bonanza. They essentially borrowed funds from the less profligate elsewhere in the eurozone, backed by the ECB. The Germans were relatively austere; the periphery enjoyed the boom. But now we have moved past the boom, and someone in Greece, Portugal, Spain, Ireland and perhaps Italy has to repay something – or at least stop borrowing without constraint. So Mr. Trichet and Mr. Strauss-Kahn go, cap in hand, to ask Germany for further assistance.

10. Totally irrelevant video - Jon Stewart unleashes on Apple in this piece from The Daily Show.

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