Dairy prices dip; Wall Street slips; US factories contract; US construction falls; China readies new stimulus; Aussie retail sales fall; UST 10yr yield at 1.47%; oil down and gold up; NZ$1 = 63.3 USc; TWI-5 = 68.8

Dairy prices dip; Wall Street slips; US factories contract; US construction falls; China readies new stimulus; Aussie retail sales fall; UST 10yr yield at 1.47%; oil down and gold up; NZ$1 = 63.3 USc; TWI-5 = 68.8

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Here's our summary of key events overnight that affect New Zealand, with news financial markets are souring today.

But first, the overnight dairy auction brought little change. Although volumes offered were the highest in ten months, prices dipped -0.4% again, for the third time in a row, and the seventh time in the past eight auctions. However, the falling Kiwi dollar enabled the overall result to post a +1.1% gain in local currency. In fact, that means overall prices are back to where they were in June in New Zealand dollars. But today's auction won't be changing anything at the farm gate and yesterday's confirmation from Fonterra that they are staying with their very wide forecast range for the 2019/2020 season is confirmation of that.

Wall Street has returned from their long weekend holiday in a grumpy mood. The S&P500 is down the thick end of -1% and this time it is economic data that is finally to the fore.

The widely watched ISM factory PMI has dived into a contraction. And that was led by a sharpish drop in new orders. In fact, this is the first contraction in nearly three years. Markets noticed.

They also noticed that construction spending fell -2.7% in July from the same month a year ago.

All eyes on now on August car sales reports. Analysts expect them to be flat in August from July but any undershoot is likely to be market-negative.

In fact, reports are increasing of bankruptcies in the US trucking industry. 640 carriers went out of business in the first half of 2019, up from 175 for the same period last year and more than double the total number of trucker failures in all of 2018.

In China, they are preparing major new stimulus. China will step up fiscal support to boost growth amid more signs of economic slowdown, according to a statement released by the government’s Financial Stability and Development Commission. This is a body led by the top China trade negotiator with the US.

Yesterday, Shanghai equities were up modestly after the announcement.

In the UK, their new prime minister seems to have lost the support of their parliament. A new snap election seems likely now. The EU still has even less of an idea of where the UK stands in its Brexit negotiating position.

In Australia, their central bank has kept its policy rate at 1%, surprising no-one. But they have highlighted growing economic growth concerns. And it made specific mention of the very recent property markets 'turnaround' in Sydney and Melbourne but didn't characterise it in any way. However they are clearly worried by the sharp drop off in building consents.

And the largest quarterly goods and services surplus on record at +AU$19.7 bln and a narrowing net income deficit to -AU$12.2 bln, contributed to Australia recording a +AU$7.5 bln current account surplus for the June quarter 2019, its first in 44 years. (The seasonally adjusted numbers are different.) In the full year to June, Australia ran a -AU$12 bln deficit, or one that is less than -1% of GDP.

Poor retail spending data out yesterday in Australia undermines the concept of using 'helicopter money' to boost an economy. They have just had a AU$16 bln election tax cut delivered as a cash refund - but consumers aren't spending it in the way intended.

The UST 10yr yield is down -3 bps at 1.47%. Their 2-10 curve is flat. Their negative 1-5 curve is wider at -40 bps. Their 3m-10yr curve is out to a negative -60 bps. The Aussie Govt 10yr is unchanged at 0.92%. The China Govt 10yr is also unchanged at 3.08%, while the NZ Govt 10 yr makes it three in a row, unchanged at 1.07%.

Gold is up at US$1,544, a rise of +US$25 since this time yesterday.

US oil prices are weaker again today at now just on US$54/bbl. The Brent benchmark is also lower at just on US$58.

The Kiwi dollar has risen on a weaker greenback and now up marginally to 63.3 USc. On the cross rates we are much lower at 93.6 AUc. Against the euro we are firmer at 57.7 euro cents. That leaves the TWI-5 little-changed at 68.8.

Bitcoin is now at US$10,628 in a rising trend and up another +5.4% from this time yesterday. The bitcoin rate is charted in the exchange rate set below.

 

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68 Comments

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Highlight new comments in the last hr(s).

How Hong Kong protestors avoid government censors. Could be a useful app to have in a major event like an earthquake? "...and are currently working so that some day we might be able to use apps like WeChat, Tinder, Uber, and Whatsapp without Internet."
"https://www.forbes.com/sites/johnkoetsier/2019/09/02/hong-kong-protestor...

watching the british parliament this morning, it looks like an election very soon
https://www.bbc.com/news/uk-politics-49573138

Taking action leading to a loss of majority puts a spanner in the works. Stopping any debate over a controversial topic and starting pro-democracy protests is really bad. No matter what happens Boris is going to be a short lived PM.

Considering that Boris started this whole Brexit fiasco in the first place, I'm sure the Brits will sort him out and vote accordingly. You got to laugh it's a ridiculous situation caused by yet another crazy American (Boris was born in New York, USA) : https://twitter.com/haveigotnews/status/1139170695181676545/video/1

I thought it was Cameron?

it depends which side of the argument you are on,
I agree with Brexit but only from the prospective that the EU will implode over time and that to get out before that happens makes sense.
they went backwards when they started to allow weak economic countries in which the strong countries now have to carry and they have limited say over
they needed to go to one economic voice for the EU which essentially is france and germany calling the shots, and with germany starting to cool they can no longer just through their money at problem countries to delay the evitable.
the irony is Britian before the EU had trade agreements all over the world and has gone backwards since joining the EU
https://www.bbc.com/news/business-49342012

"EU will implode over time" Yes that's exactly what Russia wants to happen.

No Cameron came back fro the EU with quite a good deal that allowed the UK to have their cake and eat it. Boris wanted to grab political power since his London Mayor role had come to an end. Basically he moved back in to politics and started to challenge Cameron, by whipping up support suggesting that the UK should move out of the EU. This caused quite a bit of political disruption in the ranks and Cameron settled them down by saying he would set a date for a public vote on the matter. Big mistake on Cameron's part! What he didn't factor in was a devious Boris who was prepared to sway the public vote by any means necessary for him to grab political power. With or without a actual plan for the UK.

Hot off the BBC press not looking good for Boris: Brexit: No-deal opponents defeat government
https://www.bbc.com/news/uk-politics-49573555

I admit to not knowing enough about the situation (possibly due to only consuming relatively shallow coverage) but as I understand it, the argument some are making for a second referendum is that voters were deceived and manipulated by a Brexit campaign (including Cambridge Analytica) that presented them with outright lies to win their votes. E.g. the 350 million healthcare bus lie.

One wonders what this would mean for wider politics should a referendum (or election, even) be re-run due to dishonest statements from those involved.

That is an issue but by no means the core. The biggest issues is that 'leave' was an undefined option, the equivalent of not-remain. It doesn't tell you anything about what it would look like so Boris (autocorrected to virus, hmmm) and Farage told everyone it could be what ever they want it to be. In reality there's no majority for either of the two available leave options (May's and No Deal) but Boris is doing his best to convince everyone that the unicorns still exist. The only direct way to resolve Brexit is an STV referendum between Remain, May's Deal and No Deal. No deal actually is likely May's Deal anyway because No Deal will violate the GFA which means there'll be no trade deal with the US or EU until the backstop is in place (likely to include all other provisions of May's deal as well).

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Boris was a Brexiteer long before he became PM ...

... but it was David Cameron who foolishly put it to a referendum . .

Clearly the Brits felt they were being flooded with immigrants , sponging off the NHS and other welfare services... as dictated to them by the EU ...

... oddly enough , expressed as a % of their population , the rate of immigration which so incensed the Brits was a fraction of that which we have allowed into NZ each year for over a decade ...

@GBH as a descendant of Brits and having family there , I can assure you there was much more than anti-immigration that caused 76% of the electorate to turn out to vote by a 54% majority to leave the EU .

Being dictated to by dogmatic Germans and the garlic chomping , rude, smelly French was never what the British signed up for in the Common Market in the first place

They have got to be thankful Maggie Thatcher engineered a way to stay our of the Euro

Brexit is Brexit , and exit they must

So the Germans are "dogmatic", the French are "smelly", what adjective would you use to describe the brits? disorganised? arrogant? disillusioned? ...

Yvil, now now, arrogance is not exclusive to the Brits where the French and Germans are concerned ;-) so how about we compromise and say that the British stereotype is that they are sexually and emotionally repressed, and this is why when they are called to make hugely pressurised decisions (like Brexit) they are unable to function in any kind of rational way and deteriorate in to idiotic, jingoistic gibbering idiots?

And let me rephrase Boatman's slurs. The French make amongst the best food and wine ON THE PLANET and if garlic makes one smelly, then oui s'il vous plait et merci beaucoup.

Ginja, d'accord et je ne voulais pas te blesser. Si les anglais sont sexuellement frustrés, alors je pense que tu dois être l'exception qui confirme la règle

Je me considère comme un européen, donc pas d'infraction;-)

Boatman, as an actual Brit, born and bred in Britain, who was actually living in the UK during the referendum campaign I would like to add that it was actually 51.89% Leave vs 48.11% Remain, on a campaign that was deemed to have been illegal by the Electoral Commission, over a non-binding referendum, where both sides used fear and untruths so whip up public sentiment.

Prior to the actual campaign, Brits had been welcome to express their dissatisfaction with the EU every election via voting for UKIP (the anti-EU party) and a very small but slowly increasing minority did (nothing like the level of power Winston has mind). The EU issue wasn't really ever discussed apart from in cheap tabloid's like The Express who rant about the shape of banana's and completely ignore anything factual or balanced about the EU.

Post GFC and after a decade of the Austerity Programme with severely underfunded resources, ever increasingly burdened by high levels of immigration, yes, unsurprisingly, some people were increasingly persuaded that the EU were to blame. And there are of course some major issues within the EU (garlic is not one of them) however, the referendum campaigns didn't even present anything accurately. If I was Greek, Italian, Cypriot, I may have voted to leave the EU myself. The issue of the single currency, the inability to manage your own debt crisis etc, was not terribly well managed by the EU IMO. However, the Brits actually had the best deal ever. And then Cameron went an negotiated an even better than best deal. What the Brits have now is chaos, mismanagement, constitutional crisis and a divided nation.

There was never an option on the ballot to indicate what Brexit would actually look like. No mention of Northern Ireland and the destabilisation NI and Ireland would be subject to. No mention of a food, medication, or a fuel crisis (this is in leaked Brexiteer documents), no one who campaigned Leave ever admitted that whilst they very much wanted to Leave the EU, that they had not actually put any thought into what that would involve in terms of function or provision. They had no plan, just dreams of spitfires, Churchill speeches and the glory days of a long spent empire. I do wonder what Churchill would have thought about his Grandson being sacked after serving parliament honourably for 40 years by a many_times_exposed_liar like Boris Johnson? (who himself goes against the government when he wants to but does not afford others the same freedom)

I'm currently ashamed to be British. I look at the mess and chaos. Families divided. Parliament divided. No investment being made, no decisions on governance being made, business on perpetual standby, unable to plan for the future one way or another, people protesting, hate crimes and stabbings on the rise.

In the face of all that has transpired, that majority of 3.78% Leave at the referendum seems like a shallow victory, I don't know how you can look at the mess they are in and gloat or make childish, lazy stereotypes about Germany and France. Notwithstanding that one of the motivations for the EU was to set aside those nationalistic tensions so that after century, upon century of war between EU countries (ESPECIALLY BRITAIN, FRANCE AND GERMANY) could be laid to rest by uniting under a combined hope in the EU project.

No the EU is not, by any means perfect. Changes do need to happen. But how exactly does the UK Brexiting help that? From within the EU, especially in this era of weakness, Britain could have been a force for change within the EU. Instead the UK has decided to become an International farce and is up there on world stage bare bummed making an absolute twat of themselves.

(To any Germans or French out there reading this, please know that J'aime ta nation, Ich liebe deine Nation)

@ Andrew J ........... you are correct

@dictator ............... he will call a snap election likely for 14 October ............. and he may win !

Problem with Corbyn is twofold , he is disliked by many Brits and he does not have a solution other than a second referendum .

A second referendum would be anti-democratic in the extreme .............. its driven purely by the fact the outcome of the first referendum is something you dont like .

BJ should stay the course and exit on 31 October , the world will not come to an end

A second referendum with actually defined options i.e. Remain, May's Deal, No Deal is the most democratic option. The thought that a single leave/remain referendum is decisive, democratic or sufficient when the terms of leave were never defined is deluded at best. To claim that having a second referendum after all this time is antidemocratic is ridiculous, I would however contend that simply re-running the original referendum rather than an STV options vote would be a waste of time.

They have just had a AU$16 bln election tax cut delivered as a cash refund - but consumers aren't spending it in the way intended.

Don't be so quick to dismiss the power of tax cuts to boost household consumption in the short run. Aussie government's income tax cuts came into effect on July 1, so obviously its effects won't be felt before the September quarter results.

I think you are familiar with comments I have made in years past to watch for Mexico as a trouble spot when its oil production peaks.

Growth engines? Now we're getting closer to identifying the problem :)

https://www.resilience.org/stories/2019-09-03/false-hopes-for-a-green-ne...

http://cluborlov.blogspot.com/2019/08/resurrecting-american-economy.html

https://www.rt.com/news/467833-pilger-julian-assange-warning/

I wonder, sometimes, whether they'll call the 2007-20 era: The Great Turning? One of my favourite wordsmiths thinks so:

https://kunstler.com/clusterfuck-nation/the-quickening/

But you read all that listening to RNZ, and wondering whether we share the same planet. I could ask the same of the Green Party, gender-equity-ing while Rome burns. But the biggest question I have is whether those who lament reductions in growth and cheer increases, are aware of the consequences once you've begun the last 'doubling-time' possible? We are well across that plateau

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If you have credit based money, it's important that you keep making credit or the machine breaks. Thats why interest rates have been forced down, to keep the credit growth. This is the beginning of the end of the credit based monetary system. The past years will be looked upon as the good old crazy days, borrowing from a future that never arrived.

The reason the global economy is weak, and therefore a lot less demand for US goods, is simply the global dollar shortage’s ravaging impact. The very kind we’ve seen three times before now. Link

Notably, US 10 year TIPS sustain the move to a negative yield.

U.S. Dollar Index Cash (DXY00)=99.00

This Gov't and their media are definitely not on the same planet.
Massive loss of faith from business.... Jacinda.. Lets get lunches in schools, and limit what loan shark can charge. Ambulance parking at best.
Labour and Greens supporters saying it's all Nationals fault, dosent matter who's fault is is! What matters is the future and what will be set in place here and now.

Be very sure that business, Labour and the media are on the same planet.

But it's not this one - it's an infinite flat plane, capable of carrying an infinite number of people, none of them in 'poverty'.

I think it was designed by economists.

Lunches in school - good, loan sharks limit - good - dealing with local issues. Business condifence is set by offshore events at the moment, what policies do you think the government should announce - tax cuts for business? Helicopter money?

Running arround cleaning up the elephant in the rooms droppings.
What should be done? I wouldn't have a clue but what not to do is to fail to address the issue and formulate a plan.
Clear my dairy and get everyone in my office that should know what to do. If they haven't got a clue they can clear their desk.

the problem being there is no solution to this predicament....

globally we are in overshoot
our supply chains are complex and global
our promises (= debt) are interwoven and many and MORE IS NEEDED just to keep commodity prices up & supply chains ticking
globally our economic system MANDATES that energy consumption must continue to increase ... while even ignoring pollution, this is proving ever more difficult in practice...
our resource bases are deteriorating fast

we are insolvent, our systems are fundamentally non resilient (too reliant on continued BAU support) and we still need MORE to hold the Ponzi together

Now where is that plan ...

Crawling under a rock is the plan then.
There is always a plan, it is just not found yet, so keep on working to find it.

Me, I've been planning and implementing for a couple if years because there was a good chance of it happening.

Whats your plan Kezza?

As always. Plan for for the most extream situation but hinge your bets on ot not happening.
Zero debt / pay it down as fast as possible, cash in hand, precious metals, stay fit / healthy. Dont get caught up in the fog of war chatter, it's only the blar blar blar that happens along the way. Look at the possible outcomes and act.
The better outcome for me is for the crap to hit the fan BUT I'm not a heartless monster that wants to profit on everyone else's pain. Good luck out there.

Regarding being a "heartless monster" - the cynic in me suspects that being a heartless monster is the default setting for a lot of human beings (not all but a fair few). I was listening to a podcast the other day which basically said that even if the warrior gene was magically eliminated it would reappear within a generation or two. It has it's benefits in society.

Better chance than average.
Survival of the fittest, evolve or die...
When / if it comes down to it, I will not hesitate or loose sleep over what I need to do.

That's the thing - it's not survival of the fittest - it's survival of the good enough. Agree - pragmatism beats some ethical / moral argument about what you "should" do....

if you think you can profit off everyone else's pain then i dont think you understand the scale of the problem

if you think you can profit off everyone else's pain then i dont think you understand the scale of the problem

You do what you can do and ignore what you can't. You play the best card, followed by the next.

First thing was to get rid of the growth-drivers - we were dead as a species if they continued. Funny enough, that seems to be sorting itself out.

Next was to identify what sustainability is - easy. Finite resources not drawn down of fully recycled, renewables not drawn down faster than their rate of renewal, and sinks not filled faster than their absorption-rate capability.

After that I don't mind much - except to note that more resources equals more wealth, so in a limited-resource scenario, less people equals richer people. So we have to set up an accounting system not like the one which clearly failed us. Wellbeing is a word that is here to stay, but it's a stage on a journey.

Right on P.D Kiwi.
The Greens arent going to allow resources to be pulled out with any urgency anytime in the near future. They'll take the let them ride horses and eat lentils approach, which they will claim has helped the environment.

Jacinda, dosent know what to so, the Greens never will and Winston is more concerned about getting his party back in before he hangs up his boots shortly after the next election.
It's a look after yourself from now on for me.

You missed one.

National don't have a plan, are further away from where they need to be than the others, don't have a leader (and personality presidentiality won't cut the mustard) and will be increasingly exposed as fundamentally wrong.

No charge :)

We have a Gov't that is trying to break the habits of being an opposition and an opposition that is coming to grips with not being leaders.
I see it all this way. A team mate has an injury and you get a shot at claiming that spot. Play as good or better you keep that spot untill you don't proform. This Govt hasn't stepped up, it's not going to get another shot.

HK, UK, China, US, production reports, who's doing and saying what is all chatter blar blar blar. What is going to happen is going to happen. It's a foregone conclusion that the crap is going to hit the fan, it either splatters and blows out everywhere or it sticks and stalls the motor causing a fuse to drop out (currency reset) or a fire (war).

luckily Prince Harry has a plan re global travel emissions....

https://www.nzherald.co.nz/lifestyle/news/article.cfm?c_id=6&objectid=12...

" What will Travalyst actually do?

It's not yet clear how exactly Travalyst will work, but Prince Harry said he'd been working on the project for two years and there would be much more to come.""

Anyone know when we can expect the KB *reset*?

10am today

A recession (minimum) has been on the cards for over a year now and this Gov't still ignores the elephant in the room.
One thing I've noticed of late is that any announcements made by Jacinda on mainstream media have comments disabled..... That speaks volumes on her wow factor...
When a plan is finally presented few will have faith that the coalition Govt will be able to get it off the ground.
Winston will start distancing himself from Labour and the Greens before the election once he sees public discontent with Jacinds. That is starting to look like it will be very soon.

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They may be forced to cut spending. That makes govt so popular. They should dump the accomodation supplement first.

This crew won't stop putting dollars in outstretched hands. Poor you here's some money.
I dont understand with the retaired guy.. He owes a $100k but how much is his house worth? If it's a million there is no issue. Also we've had bricks and mortar loans for a long time, same thing. Bad reporting on this subject last night.

This crew won't stop putting dollars in outstretched hands. Poor you here's some money.

Precious little between the two major parties in that regard. Just a slightly different mix of favourite recipients. National were campaigning at the last election on increasing Working for Families and the Accommodation Supplement, and were signed on to fund a road that had no viable business case.

Yes Nation should be standing up and making big calls on how we should move on, in the event of a recession. Not everyone gets it now but the public will turn arround once they see inactivity from Labour.

Depends. National may torpedo their chances with younger Kiwis by looking to do away with the Foreign Buyer Ban, a blatant move to inflate their 3.4 houses per MP portfolios and push home ownership further out of the reach of younger generations of Kiwis.

This coalition has had a chance to proform, it hasn't and highly doubtful it ever will. That is about how the public will look at, when push comes to shove.

People will vote for or against their own self-interest.

Farmers will vote for National for cheaper imported labour, ending the Foreign Buyers Ban, increasing university fees (the wrong people receiving help!).

Young Kiwis will likely vote for a chance of home ownership in the future (not National), and cheaper university fees. National campaigned on it then turned their back and denied any housing crisis existed. At least Labour has made some useful changes there.

Well Labour may be *saved* by the fact that the opposition are totally uninspiring.
If there was an election tomorrow, I wouldn't vote.

Amen, dump the accommodation supplement and redirect the money into something useful.

More bad news for Fonterrible in Australia , a new competitor has emerged , as the mothers of the nation express their desire to have their breast milk included in the economies GDP figures ...

... the combined yield is worth $A 3 billion annually .... ooooooh , mama !

It was interesting to hear the Helen Clark Foundation rabbiting on about cannabis this AM- after the Errington piece on this site.

Errington has been given enough reading-suggestions, to know that this is inconsequential, given the existential waves breaking over us. So the question is: Why? Perhaps it was 'in the pipeline', but it should have been dropped the moment I alerted her.

So we can assume it's being done as a calculated diversion. The question is always: From what?

My guess is 'from being the outfit on watch when the announcement that global growth is over, has to be made'. Remember, Clark was the first NZ leader to run 'sustainability' up the flagpole (2004, from memory) then went ominously silent. Presumably the polls said that pursuing sustainability was political suicide. That left the left pursuing unsustainability, like the other mob.

Only trouble is, unsustainability ends. Worse, you're worse off for having prevaricated. Clark must be well aware of this - pity nobody in the media asks her....

Well if any sensible person had a tax cut .............. they would reduce any debt they had ?

No?

Tax cuts lead to the wealthy investing in passive assets ( stocks shares and Bonds ) and those with debt often use it to pay down debt .

In deflationary environment why would anyone spend a tax cut on non essential discretionary spending when prices could fall and make it cheaper in 6 months time ?

Exactly. Im planning on upping mortgage repayments even as rates fall. If we were given tax cuts or even helicopter money, I'd be paying down debt.

Very sensible, you'd have to change your name though

I would but seeing as i'm a millennial, I am confined to my stereotype of spending all my money on smashed avo instead of buying property

Argue For your limitations - and they're Yours....

Big cycles are harder to spot than smaller ones, but we're at the back end of a (big) lifetime cycle which begun in the second half of the 1940's/20th Century. History points out that big cycles occur every 80-100 odd years or so, give or take a decade. The fact that we've managed to be able to hold onto this one for that long is remarkable I think, considering the world has become such a small place during that time, & more recently, how inter-connected we've become. The irony is that through the rise of the digital world it has created a wedge between the factions, whereby each settles into it's own group-think & slags the others off constantly. Or is it???
The reality was/is that the world was always a terrible place when you left your western bubble, doesn't matter what year or decade it was. In fact, it wasn't that long ago (200 years) that the west was part of that big bad world. The sad fact today is that the people with the most (us) are now the most divisive & the divisions are among our own cultures, as the western nations split into factions of ever increasing & acromonial gaps. Russia was always tough & still is today. Not much has changed. China was always tough & still is today, that's why they all want to live here. Africa was always tough & still is today. So was Asia Central & the Muslim worlds. And still is today. We (the west) still have the best lifestyles on offer on planet Earth today & will have for many more years to come. Sure, we'll run out of a few resources but we'll develop more, or find others, or move on, that's life. We don't seem to understand that given human kinds' minimal multi thousand year history, life has never been so good for so many.... right now. STILL! Yes I know that's only 1.5 to 2.0 billion of us but that's still way better than anything of any earlier age. And if you don't believe me, go back & have a look.
However, all that won't stop what's about to happen & what's been mentioned above. That's also life. The smaller cycles ebb & flow within the bigger cycles, and yes, it might get ugly in places but you've gotta take the good with the bad in this world. That's how we learn isn't it?

The British people told the politicians to get out of Europe. So they just do it. Become an island nation off the coast of Europe again. Sign up with the second most powerful entity in Europe again......... Russia of course! Sign up with USA again, who can then freeze China out. Trade freely with all the old Empire nations again, without France and Germany bullying them. Whatever happens, it won't be dull.