grrrr.... watching that makes me angry. Heads need to roll !

Bernard,

Nice collection. I enjoy this morning briefing as saves time though generally puts me off my breakfast :-)

The strong theme coming from all these reports is that the banks are still walking corpses. The deleveraging process will take many years which will make it all the more painful. Unemployment really is key which is why Europe will take a very bad hit as well as the US and UK.

It does however offer opportunities for a small economy like NZ. We can be nimble and respond quickly to changes in the marketplace. Off course we have the property bubble albatross weighing round our necks.

And as for our overseas debt.......how long will we put up with it?

Last night's 20/20 show had an eye-opener into the homeless situation in the US. Estimates are for 1,000,000 homeless children by the end of this year. It featured the story behind this YouTube clip;

http://www.youtube.com/watch?v=_WMTTrOrKVI

And a tour around one of the homeless shelters in LA.

What stood out for me was that many of those families struggling are struggling because of one job loss in a normally two working parent family. Additionally, there is talk of people working two jobs not being able to make rent payments. Something is dreadfully wrong when wages are so poor that they do not provide a living wage.

It seems so socially unjust to me when in a country as advanced as the US - so many of its ordinary citizens aspire to get back into the workforce for jobs that they know will earn less than a living wage - the "logic" being I suppose that something/anything is better than nothing. This seems to be the new American psyche - there is no future for our children in that.

Bernard, William Black was worth the 9.05 mins (you cited 4mins!).

If NZ'zzzzzs financial system is in any way part of the systemic ponzi scheme he deducted exists we are in real strife (many writers on this site have claimed it is) .

Hard questions we need to ask:

How many farming loans sustainability was made on prospective income of a inflating economy while chasing buckets of fools gold at he foot of the Fonterra rainbow?
How many home loans are based on two income projections?
How many business loans were made on cooked books and optimistic projections?
How many are losing equity in their homes to maintain ailing businesses?
How many are eating equity to survive and when will that larder empty?
How many former mortgage free pensioners had companies plunder their equity?
How many pensioners have had their $ supplement.. interest generated income wither?
How many 'liars loans' do we sitting there?...far more than a few if mortgagee sales and bankruptcies are indicators
How many NZ children are suffering in economically disintegrating home circumstances?

If we have many 'liarsloans" then perhaps Banksters, developers, real estate agents, mortgage brokers, and accountants and lawyers have aquiested to be a rather dubious factor, if, as Black points out little verification of submitted detail was made on the virtual reality foundation .

How many will be locked away for fraud and misrepresentation (apart from a few finance house rogues)?

While banks controlled from abroad blindly continue to profit in a parasitic manner I suspect the the imagined tank of NZ$$$$$ they are sucking on will run dry.

Kate agree socially unjust for children whol suffer. They have no voice...I mentioned that months ago that even before the economic conundrum 20% of NZ's children came from home on or below the poverty line. NZ has the Rank solution!

Andy - that article is amazing! And through all that, never a mention of even contemplating selling the house? Surely the time to put it on the market would have been at the time of getting the re-valuation (as at least the asset had increased in value!) - but instead they re-financed to pay off credit card debt! And then promptly started re-spending on the cards!

Unbelievable stupidity.... what got them was vanity - too vain to accept the great American dream, in the dream colonial-style American house, in the dream leafy suburb, with the dream kids in their designer clothes, going to the dream American school with other kids from families probably equally in debt up to their eyeballs ... was only that - a dream.

Kate:
"It seems so socially unjust to me when in a country as advanced as the US ..."

As advanced....is it?
Has it been for some time?
Or is it just a matter of "tell people something enough times they will believe it" propaganda.
US prison rate, crime rate, slum rates, urban terrorism, its economic failure.
Just because 'Rome' can fix Hubble, has the biggest guns, this doesntmean it is as advanced.
We live in times where we believe what we are told and learn and no longer question the faddility

Raf:
"It does however offer opportunities for a small economy like NZ. We can be nimble and respond quickly to changes in the marketplace. Off course we have the property bubble albatross weighing round our necks."

Yes, but step back "the property bubble albatross weighing round our necks."
Step back, is it really as big as we make out?
Mortgage sales are up what 3x times, but the numbers are not exactly catastrophic per head of population or total $ value.
Forced sales, recession or not thats what happens with a bad business call...
What does weigh heavy is employment, real production, and how THAT effects taxation, social services.
Those who remain employed, able to service loans greater than the home is worth will struggle, but be ok...simply responsibility for poor judgement.
Housing Investors the same...and these homes now become..eventually more affordable to those who couldnt.
The property collapse is a long term positive, not a "bubble albatross weighing round our necks"

Raf:
"It does however offer opportunities for a small economy like NZ. We can be nimble and respond quickly to changes in the marketplace. Off course we have the property bubble albatross weighing round our necks."

Sadly, our major exporters and export producers do not think like that. They still think in terms of commodities.

New Zealand needs better leaders, better thinking and better management, but our education system does not generate them and the sad reality is that the politicians do not care.

Steps,

I agree wholeheartedly that property prices coming down is a good thing in general i.e. where prices reflect general equivalence with yields and returns on other forms of capital.

Of course it may not be good news for those who have mortgages or have borrowed against the perceived value of their houses but that's the way it goes.

My concern is more the impact on the banking system but I agree employment is the biggest issue which is why the US is going to be buried for a long time and the UK as well.

Trev,

Food will continue to be important as a global product but you're right we can do much better in generating income from high and low technologies as well as showing others how to build a self sustaining economy.

Next month the second tranche of AltA and OptionArm mortgages ($30b US) will begin to be reset. Another $60b will reset next year. At today's rates the average mortgage will soar 63% overnight. Many of these homeowners will not qualify for the increase and be forced into foreclosure; this on top of the 8 million homes in foreclosure at the present.

As China quietly dumps their US Treasuries in favour of Gold, just who is going to bankroll US debt? At the very least, higher borrowing costs are just around the corner for debtor nations like New Zealand.

Oh, and none of that stuff has been factored into Geithner's Stress Test. It is beyond me how $7trillion in rotten assets among the top 19 banks can be dealt with if they only have to raise $75 billion in new capital. Green shoots? Bottoms?

Trev, I'm glad I clicked on your link.

It is to a Jefferson Memorial lecture which Elizabeth Warren gave two years ago, entitled "The Collapse of the Middle Class". Her analysis is superb and casts a new light on severe financial pressures that the US middle classes face today (which in many respects will ring true for NZ). These are issues which we shouldn't ignore, but for some reason don't pay enough attention. Perhaps because they are so mainstream that they don't interest our drama-addicted society.

One of her more jawdropping findings - more US children born into two-parent families will experience the bankruptcy of one or more of their parents than will experience their parents' divorce. Why is that not more obvious? Apparently because you can't hide divorce, but you can hide bankruptcy.

Sorry to break the comment trend of increasingly sagging jaw, heaving stomach, and churning intestines.

At least that's what I take from the above. Doomsterism.

Cheer up, chaps and chapesses.

- we don't have the toxic mortgage products which in the uS will re-set and re-cast (see doctorhousingbubble for the finer details, he's been on this jag for a year or three).

- we grow our own food and are sitting on or near a very great deal of oil, gas, and coal-to-liquid fuel inputs.

- we aren't so mired in the infantilism so evident in UK and Europe, where the masses will do anything, anything to keep their 8 weeks holiday and hooses in Spain. Except actually work, or have enough kids to keep them paid and healthy in their dotage.

- We have a happy cheer-germ leader, and that attitude is priceless at a time like this.

- We are served by the Four Pillars of Oz in terms of banks, and they're in the top 20 world-wide. (Don't even think about KB, whose biz activities are farmed out to one of the US ZombieBanks - Citi).

- We have a friendly neighbour, and massive markets in Asia.

- And we can probably come to grips with our new Asian overlords, who aren't running a Debt Star - take a stroll down Broadway. Feel threatened?

Sits back, folds arms, awaits the torrent of bile. Have ter continue the bodily metaphor shtick, what?

Kate & Andy, you have both given me very thought provoking things to look at.
An amazing video and a very good read.
Thank you :)

Trev - re. your points at May 15th, 2009 at 1:11 pm, how can those issues be fixed? Anyone? The question is how, not what, and most know the why - so how?

I see Tony Alexander today calling Bernard's predictions "strange"
Of course Bernard will never be directly critical of Alexander on this blog because there is obviously a relationship with BNZ (BNZ Economists on this forum)

Waymad - I think you are way off, you said;
"we grow our own food and are sitting on or near a very great deal of oil, gas, and coal-to-liquid fuel inputs."

Increasingly foreign corporates grow their food on land brought off us, if we cant pay we dont get their food. When the Queen St farmers have their way with Fontera, get it listed on the stock exchange so they can reap maximum capital gain from selling to foreign elite, the situation will be worse.
As for Oil and Gas, because it is decreed we do not have enough money to pay for our own exploration, we get a little from selling exploration licenses to oil moguls, then when they find some we recieve roughly 10% in royalties.
Dont even think about taking anything back in the national interest when the poo hits the fan, the cost of fighting them and the World Trade Organisation when they sue us for expropriating their assets, would further increase the grip the internationalist receivers have upon us now.

This will go down as the most fraudulent period in American business history, it makes Enron look like small fry.
How can people still be out there saying that you don't need regulation and that it just gets in the way of the market and that the market always knows best.
If the market knows best, the American and much of the worlds financial system would no longer exist.

Thanks Ian, interesting read, in the states it seems if a corporation or group is big enough or has enough money, when they lobby hard enough they generally get what they want.
Maybe the general public are quite supportive of big organisations in the US.

While I think business needs to be nurtured and helped, it shouldn't be bowed down to at every turn, like often seems to be the case in the states.
Big business will generally push the limits as much as possible, until they are forced not to do things.
In fact if you watch the movie "The corporation" you will see they are legally obliged to put the profits before almost anything else, including the good of the community.

Not many green shoots in Europe it would appear:

http://www.telegraph.co.uk/finance/economics/5331129/Europe-in-deepest-r...

good link Trev isint it funny that the morning business shows on TV and the endless newspaper blurbs dont report on this stuff
Baz

Thanks for that video Andy, that helps connect the dots even more, I knew that the world's biggest idiot George Bush would have had a big part in this.
It's no surprise that the biggest sub prime lender was Bush's biggest 2004 election campaign contributor.
That helps explain all the financial deregulation during those years, no doubt he made it as easy as possible for his sub prime lending buddies.

Thanks for the link Les. I cannot see PWC adding anything useful, although tax reform might be something they can comment on.

Maybe PWC realised that the value that can be added to agricultural products is limited and therefore they made no recommendations in terms of $$$.

That $30 billion of debt in the dairy industry is frightening.

Trev, et al - another one for you, and look at the date:

Brian Gaynor: Big picture doesn't mean a 45-inch TV

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1051...

".... the outgoing chief of the New Zealand Institute, was quoted as saying: "My view increasingly over the last several years is that the real challenge facing New Zealand is that we don't know what we actually want as a country."

and

"The New Zealand economy is rudderless, there is no consensus on the direction it should take."

An election, change of gov., some external economic pressure, a 'Jobs Summit' - what's changing? (Am not meaning to heap coals on the heads of the present gov., the last one was, and would have been no better, in my opinion.)

As for any 'vision' coming out of the forthcoming tax review, it'd probably not be a great idea to bet against Wally's view, here:

http://www.interest.co.nz/ratesblog/index.php/2009/05/08/have-your-say-w...

"Come on, get real. It's no more than a diversion and an old tool to keep the peasants happy arguing while Stalin drives a tank over the top of them all."

(Plus read his other 'Yes Minister' skits.)

If we don't address our overseas borrowing then yes we will go the same way as Ireland and Iceland for that matter.

But we can avoid that if we take the appropriate action.

Trev, U R correct. H&Co did put for Ireland up on a pedestal for NZ to aspire to..I remember H's comment too about tendering Ireland as a model. I remember NZ TV (2004-5? 20/20??) documentary showed the phenomenal growth,wealth and prosperity of Ireland.

'Visions' like mirages rely on the warping reality. Surreal movies, religious dogma, and Walt Disney have all surreptitiously lead our minds to seek the promi$ed land and holy grail of $$$$ (Japan pronounced.. holly gale...JP is politically Disney for sure..Mickey Mouse for PM). NZ isn't the only country with rubbish leadership.. when world leaders meet is the viral economic delusion it is passed on as they shake hands?

And what is reality,well we are about to face it.....

Thanks TONZ. Pleased to know one part of my memory is working.

Steve,
maybe it was this one?

http://www.nzherald.co.nz/company-taxation/news/article.cfm?c_id=691&obj...

Hat Tip to Iain Parker who posted it a while back

Gibber,
It wasn't, but your two posts make the point :)

I can't believe that Celtic Tiger has laid down and died, when did that happen? LOL