Top 10 at 10 with NZ Mint: Fresh air in Albany; Fed firing up its helicopter; Stressful tests; Cuddly rabbits; Dilbert

Here are my Top 10 links from around the Internet at 10 to 3 pm brought to you in association with New Zealand Mint for your reading pleasure.

I welcome your additions and comments below or please send suggestions for Tuesday's Top 10 at 10 via email to bernard.hickey@interest.co.nz

1. The problem with Albany - The Sunday Star Times' Greg Ninness reports again on the problems Rick Martin (and his bank Westpac) are having selling some fresh air and dirt on the North Shore. Development property is just plain dead right now. Values are collapsing and the banks (and any investors) are taking the pain. Another part of the Podmore empire is collapsing.

Rather than undertake the development risk himself, Martin retained freehold ownership of the land and created leasehold titles over individual development sites, which he sold to a joint venture company (the JV) set up by businessmen Colin Reynolds, Kevin Podmore and Mike O'Sullivan. All three had extensive backgrounds in the property sector.

Reynolds rose to prominence in the 1980s as chairman of the ill-fated Chase Corp which crashed and burned after the 1987 sharemarket crash, leaving investors $800m out of pocket. Podmore and O'Sullivan's family interests are ultimately the largest shareholders in property financier St Laurence, which collapsed into receivership in May.

The JV was backed by Westpac, which provided a mortgage-secured loan for up to $150m over the JV's leasehold interests.

2. Martin Wolf's earthquakes - Martin Wolf at FT.com has written an excellent article at FT.com about the stresses in the global financial and political systems. He points out that 'deals' done between groups in economies such as the United States and between developed and emerging economies are breaking down. Fault lines are forming and earthquakes are at risk. A must read, I reckon. HT Girol Karacaoglu at PSIS via email.

Wolf points to an amazing factoid. Between 1976 and 2007 58 cents in every extra dollar of income growth went to the top 1% of the population. No wonder America's middle and lower classes are in a revolting mood.

“The political response to rising inequality ... was to expand lending to households, especially low-income ones.” This led to the financial breakdown. As Prof Rajan notes: “[the financial sector’s] failings in the recent crisis include distorted incentives, hubris, envy, misplaced faith and herd behaviour. But the government helped make those risks look more attractive than they should have been and kept the market from exercising discipline.”

The era of easy credit, much of it backed by housing, is now over (see chart). Meanwhile, in all western countries, the state supports the welfare of the individual. But the fiscal consequences of this crisis – a huge rise in deficits – will interact with pressures from ageing, to make fiscal stringency the theme of policy for decades. The long bear market in shares and prospects for a “jobless recovery” add further to these woes.

We can see two huge threats in front of us. The first is the failure to recognise the strength of the deflationary pressures (see chart). The danger that premature fiscal and monetary tightening will end up tipping the world economy back into recession is not small, even if the largest emerging countries should be well able to protect themselves. The second threat is failure to secure the medium-term structural shifts in fiscal positions, in management of the financial sector and in export-dependency that are needed if a sustained and healthy global recovery is to occur.

The west is not the power it was; its debt-fuelled consumers are not the source of demand they were; the west’s financial system is not the source of credit it was; and the integration of economies is not the driving force it proved to be over the past three decades. Leaders of the world’s principal economies – both advanced and emerging – will need to reform co-operatively and deeply if the world economy is not to suffer further earthquakes in years ahead.

3. QE II on its way - Ambrose Evans Pritchard at The Telegraph is back to his bloodcurdling best with his latest missive on how the US Federal Reserve is preparing its next bout of useless money printing as the US economy dips back towards recession.

"The worm is turning," said David Bloom, currency chief at HSBC. "We're in a world of rotating sovereign crises. The market seems to become obsessed with one idea at a time, then violently swings towards another. People thought the euro would break-up. Now we're moving into a new phase because we're hearing alarm bells of a US double dip."

Mr Bloom said a deep change is under way in investor psychology as funds and central banks respond to the blizzard of shocking US data and again focus on the fragility of an economy where public debt is surging towards 100pc of GDP, not helped by the malaise enveloping the Obama White House.

"The Europeans have aired their dirty debt in public and taken some measures to address it, whilst the US has not," he said. The Fed minutes warned of "significant downside risks" and a possible slide into deflation, an admission that zero interest rates, $1.75 trillion of QE, and a fiscal deficit above 10pc of GDP have so far failed to lift the economy out of a structural slump.

"The Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," it said. The economy might not regain its "longer-run path" until 2016. "The Fed is throwing in the towel," said Gabriel Stein, of Lombard Street Research. "They are preparing to start QE again. This was predictable because the M3 broad money supply has been contracting for months."

4. China's gated neighbourhoods - To give you all a flavour of the political tensions in China, here's this AP story on how some lower income rural migrant neigbourhoods in Beijing are being gated and locked at night to keep the grumpy, poor workers quiet. HT Troy via email.

The government calls it "sealed management." China's capital has started gating and locking some of its lower-income neighborhoods overnight, with police or security checking identification papers around the clock, in a throwback to an older style of control. It's Beijing's latest effort to reduce rising crime often blamed on the millions of rural Chinese migrating to cities for work.

The capital's Communist Party secretary wants the approach promoted citywide. But some state media and experts say the move not only looks bad but imposes another layer of control on the already stigmatized, vulnerable migrants. So far, gates have sealed off 16 villages in the sprawling southern suburbs, where migrants are attracted to cheaper rents and in some villages outnumber permanent residents 10 to one.

5. 'No fool like an old fool' - Businessweek has a story on how elderly investors are increasingly being targeted by elderly scammers. HT Kokila via email. An issue here?

One out of five Americans over the age of 65 has been the victim of a financial scam, according to the Washington-based Investor Protection Trust, a nonprofit that promotes shareholder education.

That means more than 7.3 million seniors have been taken advantage of financially through inappropriate investments, high fees, or fraud, which insurer MetLife says comes at a cost of more than $2.6 billion a year.

"Older people are being targeted because, as 1930s robber Willie Sutton said when asked why he robs banks, 'that's where the money is,'" says Kathleen Quinn, executive director of the National Adult Protective Services Assn. in Springfield, Ill.

6. Land of the setting sun - Bloomberg's William Pesek has an insightful piece here on the problems in Japan, which are worth watching by the rest of the developed world. Japan has been 'here' for the last 20 years, trying to deal with a collapse in its real estate bubble in the late 1980s. Two decades of 'extend and pretend', zombie banks and money printing haven't worked. Yet that is exactly what the developed world is trying. Two decades of stagnation anyone?

Pesek sees the Bank of Japan being relied on to get Japan out of its problems. We are seeing the same in America and Europe. All the politicians are looking to the central bankers for support.

Yet greater reliance on the BOJ is dangerous. In 2000, it was one thing to rely on monetary largess. Ten years on, it’s quite another.

Moody’s Investors Service and Standard & Poor’s are sniffing around Tokyo for any whiff of optimism to offset Japan’s toxic fiscal and demographic trajectories. As Japan’s credit rating edges lower, so will investor confidence. The Land of the Rising Sun is becoming the Land of the Setting Sun. With the benchmark interest rate at 0.1 percent, what can Shirakawa do? He could return to the quantitative easing of the early 2000s. He could buy loads of government and corporate debt, essentially monetizing the economy. He could leave the yen-printing presses on indefinitely.

Any of these actions will take even more of the onus off politicians to do their jobs. Two decades after the bubble years ended, Japan still doesn’t know how to grow without massive government subsidies. BOJ moves to bail out the government will punt true change another five or 10 years down the road. Japan doesn’t have that kind of time to spare.

Pressure for the BOJ to take the lead smacks of desperation. It’s also a sign that Japan may underperform to an even greater degree in the years ahead.

7. Goldman's problems over? - Chris Whalen writes at Reuters about whether the Goldman Sachs settlement is enough to regain the trust big pension fund investors (the buy side). He thinks not... Here's a taste of the wild world of US investment banking. They'd eat their own mothers for a big bonus, it seems.

Buy side investors don’t do business with GS or the other major sell side firms because they trust them; they do business with firms like GS because they believe that the firm has better access to information. The sad fact is that the trust that once made firms like GS and the old JP Morgan & Co special has long since been lost, leaving the marketplace that remains a hideous, barbaric place bereft of honor — and a source of infinite operational risk to all participants.

The reputation of GS as a firm for being smarter and better informed than the larger firms on Wall Street goes back many decades, to the turn of the last century when Wall Street was run by the white shoe securities firms in Boston, Philadelphia and New York. In those days, firms like GS had to be smarter than everyone else as a basic matter of survival. And in those days, GS protected and nurtured each client relationship because the trust that these clients put in the firm were considered to be a precious asset.

In order for GS to complete at least the superficial process of dealing with the ill-effects of the crisis, I believe that they need to select a new CEO and CFO to not only placate key corporate and buy side investors, but also to satisfy the concerns of the SEC and, more importantly, the Fed.

8. Plenty of stress to come - The release of stress tests for Europe's banks this coming Friday night are being closely watched, but will they have the same calming effect that US stress test results in early 2009 did? Maybe not, according to Felix Salmon at Reuters, citing Mohamed El Irian from Pimco.

Last year’s stress test in the US applied to institutions that were the main cause of the financial instabilities, and the government had budgetary room to support the sector. Europe’s situation is different. The concern about banks is a derived concern, reflecting worries about sovereign debt in some countries and the overall economic situation; and there are greater limits today on budgetary resources.

In other words, if bank solvency is the problem, then the government rescuing the banks — or forcing them to recapitalize — can be the solution. But if government finances are the problem, then it’s very unlikely that any kind of intervention in the banking sector can solve anything much.

The one thing which no one was worried about during the financial crisis of 2008 was US banks’ exposure to the US government. But the one thing that everybody is worried about in 2010 is European banks’ exposure to European governments.

9. 'It's all in your head' - Gold historians spend a lot of time looking at the actions of various central banks in the 1930s and whether they stayed on the gold standard. Britain and America eventually abandoned or suspended their gold standards, while France kept the link. Some blame France for the depths of the Depression.. Kenneth Moure has had a close look at that claim and Julian Jackson has reviewed it at MRZine.

Moure eventually concludes the Gold Standard held no one back from what was necessary. It was all in their heads, he reckons.

Mouré sees no evidence that the Bank of France deliberately sought to lower world prices. What it did want was above all to avoid inflation. The Bank of France took the view that it was incumbent upon countries losing gold to take the necessary corrective action, and that when they did the Bank of France was to put no obstacles in the way of the resulting outflow of gold from France.

As far as Eichengreen's argument is concerned, Mouré's corrective comes in his view that it is wrong to see the gold standard as a system in which policy makers were imprisoned. Mouré's point is that the "fetters" described by Eichengreen were in the head: it was because people believed in the automatically equilibrating qualities of the Gold Standard, that they misunderstood the problems they faced; hence Mouré's title, "the Gold Standard illusion."

10. Totally irrelevant video - Cuddly rabbits. Completely not cynical or anything. Just rabbits. My daughter will like this one. I'm going soft in my old age