Excellent piece , Neville . A ghastly bursting of the bubble looms . Question is , how NZ as a country , and how individuals , can prepare for this eventuality . China and America are locked together . As America deflates thru massive treasurey issuances , China is still buying much of it . Neither are watchig ( nor caring ) about the consequences of this behaviour upon the rest of the world . They are playing a selfish " bugger you " game . And screwing us , who are playing by the rules , being prudent .

@RT: but that's the USA....it has always been that way....that's why I consider the "free trade" agreements with the US such a joke

It will be a one way screw...

An interesting read. ( atricle 39 in English)

"Indeed the consumer-as-we-knew-him in the past decades is dead, with no hope of resurrection "
"..The international and social (within each country) « everyman for himself » rule is beginning to prevail.."

http://www.leap2020.eu

Excellent piece Neville. I for one am rather glad our currency is high as it has protected us from another doubling of house prices caused by new money flowing in. If the NZD collapses then a rerun of 2003 is a real possibility as better quality houses and rural properties get bid up. Have not heard of that too much as yet but NZ does get more desirable as the world gets more unstable....

"well the gold price definitely looks like a bubble being created on borrowed money"

I would say that any gold bubble will be driven by paper claims on gold. However, the demand coming out of India and China appears to be very real. The Japanese are converting savings to gold unlike ever before. Unlike the Anglo Saxons, they're not that keen on borrowing for speculation.

Staying liquid also means no fixed mortgages...suppose that depends on how safe your job is....these days I wouldnt bet on most ppls being secure for a significant fixed term...one reason why Im floating, been made redundant 4 times so far...

regards

What is happening is APPALLING. but what can the man in the street do?????? Yes there are big asset bubbles, but there is crap deposit rates on offer thanks to low rates and after tax i am hemourraghing my savings at the moment (1.8% after tax I get now which relative to CPI is a loss - and relative to REAL inflation is probably a lot worse). I guess that only leaves gold, hmm wonder why that is doing so well now.

The inmates are running the asylum - thats for sure. DISGRACEFUL. Lets give up all pretense here folks. Global govts no longer act in the the interests of the people. The rot goes so deep we cant expect any substantive change. The GFC should have provided the political capital to rebalance both our economies AND moral outlook. So whats happened. Bailouts, guarantees and free money to the idiots who caused the mess in the first place. And now they are back getting record bonuses AND HEAVEN FORBID JUSTIFYING IT!!!!!!!!!!! It makes me want to cry seeing how much of a hold parasite bankers have over the Western World. The last 25 years has seen a 3 fold rise in banking services AND household debt relative to the GDP. Is this a conincidence?? Their gain our pain. Good bye middle class, good bye western economies. Hello serfdom.

Where is the 1933 Saint-Gaudens Gold Double Eagle?....that's the mystery!

Ross,

Thanks for very interesting post

Here's the thing...if you lived on the W Coast and when digging a new long drop happen upon a bed of nuggets...would you a. Inform the green party. b. Tell the media. c. Shout the bar at the local. d. Keep your gob shut and finish the dunny.?

Every day I learn a few new words here - lotto tickets.

Better than money in the BANK. eh Roger...and Wally...and W.KUNZ....and Hang on...just been to the BANKS to sort out a few affairs and seems they do not want my money in some places and others will snatch yer hand off and give a good rate into the bargain for these lean times....

Me.... I just watched em squirm as they have to TOTE the BANKS line..

Had a good chat with one....he says that they LEND on the DOLE income and un-SOCIAL....(What's social about it)... Welfare benefits, DPB and the like.

The BANKS do not actually mind where the MONEY comes from....a bit like HONE-Y and HIDE and GO SEEK and SQUASH ...the PUSSY

But funnily enough HE did. It galled him to see and process those LOANS, we pay for.

So we are actually PAYING twice and thrice in this BAIL-OUT of the POLIIES and their mates LAC's etc.

No wonder the banks have no money now.... if the borrowing for WELFARE ever dries UP, they are truly STUFFED.

HELL-en and CULL-ed em, did the BANKS a real estate favour, cos the WELFARE...d 1.7 million end up with MORE than the earners.

So there WAS a never ending well to siphon off into REAL ESTATE.

As we have 1.7 million on a BENEFIT of some sort and RISING, it should never dry up, as long as the GOVERNMENT...idiots one and all...keep funding them....AT THE TAXPAYERS expense and lining their pockets with one hand and lapping at the trough with those sticky fingers of the other.

A rort is a rort, a PONZI is still a PONZI.....Wish I was crooked...like some.

So Around and Around she goes, where it stops NODDYLAND doesn't know.

The guy even said that most of these LAYABOUTs end up with more than he and his WIFE.....and they are both WORKING and struggling to buy their FIRST HOUSE..

Funny....I laughed all the way back to my Computer.

Now LAUGH............. KEY...and keep smiling and tell us that all is OK.

We will all BENEFIT from his leadership....Unfortunately I think we will all end up on one.

The CARRY TRADE works both ways....and the NZ dollar can only FALL....and you all then OWE even more money to yer mates overseas.

Should BOOST the KIWISAVER returns in your OLD AGE., pity it will not buy too much.

The land of the MILKED and HONE-y.

Anyone one overseas want to INVEST here...only 500K per mug.........just bring dollars, gold, anything....and WE WILL STEAL it., by HOOK, or by CROOK.

DO-NATIONs this way.

HEDGE...yer bets guys.

Wakey Wakey NZ TAXPAYERS. Nothing CHANGES...

SINGAPORE SLING...anyone. We are back on the BOOZE.

They say on a quiet night you can hear the new long drops being dug, between Kumara and the Haast. The digging stops as a Cricket would... when Greenies drive past. All the nuggets that have been found these many years gone past, were stashed away, they say...really bloody fast. They'll tell you tales of long ago where gold was being found..but not a bloomin word is said, about what's still in the ground. So if you go there, remember do.......to shine a light, into the hole, in which you leave your....

gold in long drops..... brings new meaning to the saying "having your money on deposit"

If the US raises rates their economy will come crashing down. Unemployment will skyrocket and it is already over 10% by the narrowest measure. The US can't raise interest rates and it won't. What it could do is prevent it's large banks, the ones that are "to big to fail", from using the free money made available by the FED from speculating. There is absolutely no questing that that is what they are doing. The markets are completely driven by technicals, they have very little fundamental under pinning. This means that the moves are completely predictably. What is their plan for when the music stops you might wonder? Worry about that did not stop them playing the game the last time round. Who are the likely winners you might wonder. Those with the best access to market liquidity, servers closest to the exchanges and the most competent traders. Think Goldman Sacs and JP Morgan. Who are the likely losers? Well almost everybody else because once again a terrified central banking and political community will rush in to try to stabalise the markets with public money. The resulting loss of confidence in the financial system will cause global trade to fall again unemployment to rise and the widespread recognition that things are really really bad and the ones who are supposed to be providing leadership are not able to do so because they have long since been bought and paid for by those caught up with playing the great game. Is anyone still surprised by gold rising in value?

US Carry Trade . Indian Curry Trade . Chinese Take-Away .............Kiwi Carried Away .

"By pegging interest rates at zero-percent, the Fed is inflating speculative bubbles worldwide. Right now, Gold has become the most coveted sanctuary from the G-20's money printing orgy. Even with gold zooming above $1,100 /oz, Bernanke said on Nov 16th, "It's extraordinarily difficult to tell if a bubble is forming. It's not obvious to me in any case." His right-hand man, Fed governor Donald Kohn, went one step further, revealing for the first time, that the Fed's ultra-easy money policy is in fact, meant to encourage traders to shift money into risky assets, and argued that hiking interest rates isn't the appropriate tool for deflating asset bubbles."

http://www.financialsense.com/fsu/editorials/dorsch/2009/1119.html

So what's going to cause this house of cards to collapse???

Interesting that the Fed is unlikely to start to riase rates until 6~20months after unemployment peaks.....which is reckoned as after 2010....of course oil is at $80 so thats stiflling the recovery and looks to remain there...so unless they do tobin taxes or something to chop the carry trade off at the knees another dip is assured (dunno if thats no2 or no3 we will be seeing myself) as the bubbles all over burst...and then what do they do...

So we are all buggered for a decade then....of course as ppl see their pensions being hammered they are going to realise they have to save....so that means even less money in the economy....just what is going to drag us out? WW3?

They are not giving it away Nev, anything that you create as debt book entry then con someone into repaying from the realsector is a gain of that repayment minus infrastructural costs, when they can once again ramp up the compound interest is the icing on the cake. Bait has to be used in most cunning traps.

@Marky Mark: #1 "My sympathies are with the public rather than Mr Krugman." Then you are in sync with PK, you should read in detail what he says. He wants to get un-employment down as the over-riding policy. The stimulus is just that, there to keep ppl in work or get them back into work.

The stimulus was too small I/he think(s), but more importantly it was diluted with tax cuts and pork barrel politics to get it through that returned poor value for money, or if you will poor multipliers compared to one of injections into projects.

Indeed I generally agree with you, the money has been spent poorly in some if not many cases, but PK also says this. Cash for clunkers is a joke...its just a subsidy for Ford and GM to keep going and not for them to turn their businesses in a new direction ie hybrids and all electrics, re-ttol in other words...I can understand why its been sppent so badly, the Democrats are desperate to stop their heartland dying on them but die it will I think.....it should have reformed over the last 10~15 years but didnt, now its paying the price for that.

@Wally, indeed the water has been murky, but now the monster that is multiple asset bubbles all over the word fueled by cheap money and a gambler free for all is near the surface...its seems to have many heads, many moths and lots of sharp teeth....pretty it isnt.

@Kristian J: Like "Sir" Dodgy Roger Douglas you mean? infamy is more like it...

I think Shylock has had is pound of flesh but now he's after the interest, currently I suspect its both legs and arms...

regards

Are you being rude Shazza....?

Yes, Mortgagee sales are up....that does not look good...and ppl are defaulting now at low interest rates...let alone a year from now...with higher and rising rates and a poor economy (still).

For me I wonder how many ppl/investors have for the last year struggled to cope, hoping we'd come out of recession and if at some point we dont see them giving up...

regards

Just finished reading the Treasury article in The NZ Herald and it looks as they they have decided to go round the govt and let the public have it in the face. No more games now. Key and his lot are looking very sick on this matter. Some serious damage being done to the govt.

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