By Alex Tarrant
We are in the proverbial. We have been back in the proverbial for at least six months and we will likely stay there for some time.
That was basically the message from Finance Minister Bill English to Parliament’s Finance and Expenditure Committee today.
Yeah, he joined the Prime Minister in saying they could not rule out there was a technical recession in the second half of last year, but he went further.
The recovery is going to continue to have some challenges.
Sure, getting heavier..
If you thought that households actually need to reduce that level of debt, then there would still be some considerable adjustment for the economy to go through.
Where we were talking about economic growth, then that build-up of debt has been very substantial, and even holding it flat means that in the short term we wouldn’t be expecting consumer spending or the housing market to pick up in a big hurry.
Consumer spending and the housing market were generally the drivers of growth out of a recession, and were to a large extent absent this time around, he said.
Righto. Let's look at that last one in parts:
"If you thought households actually need to reduce that level of debt..."
Er, yeah I do. But you don't need to listen to me on this one because your government is still saying private debt in this country is too high.
"...then there would still be some considerable adjustment for the economy to go through."
Considerable adjustment.
Thesaurus: Considerable
Part of Speech: adjective
Definition: abundant, large
Synonyms: ample, appreciable, astronomical, big, bountiful, comfortable, commodious, extensive, goodly, great, hefty, huge, large-scale, lavish, major, marked, much, noticeable, plentiful, pretty, reasonable, respectable, sizable, substantial, tidy, tolerable
Antonyms: inconsiderable, insignificant, little, slight, small, undistinguished, unnoticeable
My favourite synonym above is astronomical, but that might be being a bit mean to the Finance Minister. How about major?
Right, so there are still some major adjustments to come.
John Key good cop: Bill English bad cop
But no worries, because the PM's much more optimistic about 2011. He's had some good vibes, and hey, businesses are regaining confidence to employ people again.
Key is ruthless with the negatives, brushing them aside like King Kong swatting at fighter planes. A slow down in Australia and the chances of an asset bubble bursting in China may be slight worries, but we shouldn't talk ourselves back into recession, so shhhh.
Back to jobs. More employment means ordainary folk might be a bit more confident themselves, they might even start spending a bit more and because we've got such a skilled workforce we'll have higher paid jobs, pay that debt down and maybe the major adjustments might not be so major after all. Hell, they might even be inconsiderable, insignificant, little, slight, small, undistinguished or unnoticeable.
So let's recap on the government's jobs plan.
Key says the government’s plan to create jobs is to create the right environment, through changes in regulation, to give businesses confidence to employ more. And it's Ok, government's doing its bit. He told me so on Monday.
Our strategy for job creation is to build the economic conditions that will give businesses the confidence they need to hire more workers.
Cool. So let's throw the ball to English and he can tell us where the jobs will be.
Looking ahead over the next few years. Because our non-tradable sector has had a lot of debt, it’s got to clear out that debt, it’s got households being careful – you’re going to have relatively low job growth in that area, which is actually about four times the size, in job terms, as the tradable sector," he said.
So we’re going to need to see, off the back of these high commodity prices, fast job growth in the tradable sector to see unemployment sustainably drop.
You will get growth from the non-tradable sector, but nothing like as fast as it was in the last decade.
Wait, hold on. You're saying over the next few years the government is basically relying on one fifth of the economy to create all those jobs because the other four-fifths have too much debt?
Jeepers. Well I sure hope the productive sector of the economy doesn't have too much debt either. What's a big productive sector in New Zealand that exports stuff to the rest of the world...oh I know, the agricultural sector. Let's have a look at that.
Think it's all good down on the farm? Think again. Property values are plunging, and the crisis could yet hit the cities too. If you asked a city-dweller, most would probably guess that things were pretty good down on the farm right now. Sure, the value of the NZ dollar remains stubbornly high, but meat and wool prices finally appear to be improving, and dairy farmers are widely perceived to be creaming it reports The NZ Herald.
While that should translate to a healthy income for most dairy farmers, in inflation-adjusted terms the payout has mostly fallen since the 1970s, with only a very recent rise. And in the meantime, like their city cousins, many farmers have committed themselves to huge amounts of debt.
Ha, surely you doth but joke. This is the tradable sector, you know the part of the economy that doesn't have so much debt that it won't employ people. They will use their high export prices and good returns to expand, create jobs so that we will all be saved.
This period could give NZ farmers an ideal opportunity to repay a good proportion of their debt burden, which has been it's weakness for years.
Not listening, not listing. Tralalala. Jobs jobs jobs. La la la.
47 Comments
What you been drinking Alex? Tralalala etc. Is it correct that the average NZ household debt is $109,000? Assume that includes mortgage debt?
If so, how does one conclude that is excessive debt, doesn't seem very much at all, and by definition half households actually carry less debt.
The comment is the tradeble sector will provide jobs.....
Reality farming jobs are mostly poorly paid, and farmers need to pay down debt....so the chances of major well paid employment opportunities, close to zero.
Reality, tourism has mostly poorly paid jobs...and jet fuel is going to remain very expensive and spare money for holidyas in short supply.....so the term "pigs might fly comes to mind"...
$109K, yes that's total debt from what I understand....yes half the households carry less, the problem is those are the poorer paid who have less disposable income....The other half have gone into being PI's in a big way hoping to make capital gains and dodge tax, so they are also mostly heavily endebted.....
Look at the historic debt, $109K is many times the historic norm....and the problem is once in debt you lose the flexibity of having cash/no debt.....your future salary/earnings is committed to pay it back, if a shock comes along there is nothing you can do.
Shocks, that $109K is based on current house prices so you are servicing debt on $109K value, if housing drops by 30 to 50% you are still servicing that debt with a huge financial loss. Further if you enter a depression / recession and lose your job, you cant move, you cant sell your house because you cant pay off the loss....the bank wont let you carry that debt over to a new house, they will want paying off. So you will without new work, so default....Even if you can get more work that work, it will very probably be less well paid, result a bigger % of your earnings is going to pay a debt of $109K when the value of the asset is below that....Your credit rating will be bad....no CC, no HP, often power and phone companies wont take you on....or on horrendious terms insisting on insurances or large sums up front.....yet more money lost into a black hole....
Even if this isnt actually you, but friends and neighbours, What does that do for your confidence on spending? it nose dives.....
This is why Pollies are so terrified of depressions, its a self fulling tail spin....and it takes massive stimulus to get out of....and that means more debt....its worse this time of course because the Pollies have set tax rates based on boom IRD incomes, so this will show up their incompetence.........they havnt saved for a rainy day....and mostly neither have we the voter.....this even without Peak oil would be a tough decade.....
Welcome to the test tube........
regards
"NZ will have a soft landing"
"I don't see a double dip at all"
"NZ is different and does not face the same problems as oversea economies"
bla bla bla bla bla................................................................................................................................................................
What's the dogs name on the Simpsons? "Santa's little helper"
This technical part of the recession thing is really getting to me.
And English stated on the news just now that we couldn't afford to have "waffley" policymakers sitting around talking about their "good intentions".
Isn't that exactly what this summary from Alex suggests his Government is doing?
Can't wait to hear how much it's gonna cost us in golden handshakes to pay off all their mates in the quangos and the consultants to advise on how best to create these super Ministries. I suppose the excuse there will be that "technically" we'll be making savings.
Better yet, just can all the "growth" orientated new initiatives - roads of national significance, broadband, cycleways - giving we ain't gonna "grow" - why plan for it?
3% GDP growth projections. Who are they kidding? How many "technical recessions" do we have to have before they amend those projections for negative "growth" and get onto the real business of credible governance.
Another 2 Govn's....I assume National will get in again so wont do anything but spend the next term as Govn being kicked in the goolies.....Labour will probably then get in....and spend the next term getting kicked.............etc........
So by 2017 we will be obviously past peak oil and in for another tougher decade....maybe then some reality might creep in...
All I can say is NZ's govn is just like any other out there....praying for a miracle to save their hide....which wont eventuate....
regards
It been hardly a month since we had the PR that we did not fall into a technical recession that now the pitch is that we may have. How does their change on the recession, debt levels and other economic policy which they have changed their PR view on....all within a six-ten week window ....actually acheive anything except reducing their credibility. Seems wasted words to me.
Their credibility is something they either obviously care nothing for OR they really think very low of the electorate as a thinking whole.
When people continually vote via the 'great popularity contest' for scammers, liars, manipulators, dictators, elitists, and clueless suits and failed teachers, it starts to get a little hard to feel any real compassion.
But Speckles, that's how it's done, Jawbone
Question - June - are we in recession - Answer - No
Question - September- are we in recession - Answer - No
Question - December - are we in recession - Answer - No
Question - January - are we in recession - Answer - No
Question - February - are we in recession - Answer - We were, yes, technically, briefly, last year, but not now, that's history, dont worry about it
While we have the current policy settings which drive the exchange rate to levels way above the fundamentals ( ie we never run a current account surplus ) - the tradable sector can never prosper.
NZ can thus never prosper and will will end up an IMF basket case.
There is no conceivable scenario that will generate external surpluses and thus reduce debt under current settings - It's all just too hard for the Pollies.
English is not prepared to make the tough calls and right now time is running out for soft solutions.
Shame really - nice little country !
Right and wrong.
Right about the Cullen years being wasted years. But you have to remember - the overwhelming mass of kiwi sheeple thought they were getting richer. Thought it was a good thing.
Actually, though, they paid down public debt. Yes, it was from taxing the non-existant, and the result was more private debt, but fools and their money are soon parted.
This problem is not, repeat not, repeat not, repeat not, about 'affordable housing'.
If it wasn't a housing bubble, it would have been something else. Had to be. Exponential growth, fiat-levered lending, and profit demands, demand nothing less.
They kept the numbers up, but had to to get seriously inventive to do so. Inevitably, given that the requirement was to continue growing that process to unprecedented levels at unprecedented rates, it fell over.
The REAL underwriting isn't there to ever go back there, so if the attempt is made - or the figures are claimed - it must be on the back of debt. In other words, the claimed wealth won't exist.
Changing Local Govt rules won't save the situation - the externalities won't alter one jot.
Easy.
We live within our means.
That means more means than economic means, if you see what I mean.
For instance: if we want education, health, the EQC, police, rescue choppers, and/or anything else, that has to be done within a balanced budget. Which means lower wages/salaries.
Worse (and it won't be popular) those income lowerings will have to keep on lowering.
It will happen anyway, better it is controlled, not out of hand.
Private debt will have to be worked out of the same way, again on a lowering income.
Won't leave much over for discretionary activities!
The biggest liability will be energy-use, followed by food production/tdistribution.
Both need to be addressed now. It's possible to run society on perhaps 10% of the energy we use now, and it will happen (unless a magic elixir appears, or the global population crashes) to us anyway, better if we get there first. (I'm there now - someone had to go on ahead). Rail, electrified rail, coastal shipping, exponentially more efficient farm machinery, sustainable houses (or retro-fits), permaculture, locavoring, are all valid goals.
It may be that global finances crash and the debts aren't called in, but I wouldn't bet on it. Maybe finance will morph into non-fiat bartering, who kmows?
Money really isn't the issue - many cultures have crashed with every coin the'd minted still existing.
It's real resources (natural capital) draw-down that is the issue. That vault is finite.
Try googling Yann Arthus-Bertrand, and download his movie 'Home'.:
Some folk probably think I'm a pessimist - but that's not so. A realist - yes. What has been amazing, is the freedom our powered-down lifestyle gives us - but we're not good wee consumers, for sure. Must'a missed that part.
:)
Lets hope no other local bodies follow their lead Hugh.
According to their website the "good people" of Tauranga City Council have increased the average rate on the "good people" of Tauranga by 8.9% this year.
They also seem quite proud of the fact they hacked the measly sum of $ 600,000 out of the total proposed rate of $89m.
The only way to sort out local Govt is to fire some of these clowns.
Why is the economy in the proverbial? Because enough New Zealanders in the 2002 to 2008 years lived beyond their incomes and to support their lifestyles they borrowed 100% of the rentals, farms,commercial properties,cars,boats,holidays,batches,renovations, appliances and alike. In 2010/11 the basic costs of living such as power food and petrol have blown out and many people are stretched. Retailers experienced the double dip in October to December and it was tough for them and many other associated businesses such as the couriers and truckies who deliver goods to the shops. It is still tough for many currently and it will continue until a lot of the above debt is dealt with. Retailing has improved a little but it is not certain that will continue. This is certainly a big wake up call for many of us. I hope as a nation we learn from the stupidity we showed in the mid 2000's.
if they are then they have more money than sense
I wonder how many of them actually do their homework about the state of the economy here and yields, versus just getting a property because of an almost religious belief (probably fuelled by the boom in China) that property goes up up up forever
My Chinese mate at work has an Uncle in China who bought an apartment here mid last year. He bought the property expecting a 5% yield based on what the agent advised him he was likely to get in terms of rent. In fact, the property remained on the market for rent for about 2 months, he had to reduce and reduce it, reduced it so much that the yield went from about 5% to 4%
And has now put it on the market
Maybe Chinese investors are an option for NZ to flick all our leaky homes to
There is one thing to bear in mind - there are too many people on the planet, and much of it (aquifers, soil quality, forestation, climate, species numbers) is being degraded.
When you see sand in the air, and know your desert is encroaching, when you know the water-table that used to be 15 feet down now is 200 feet down..................
maybe you diversify.
would it be so bad to sell off huge swathes of our property to the chinese for a while, give our crafty agents something to do.. then when the returns the talked up failed to materialise they all hit the market and us NZ'ers buy it all back for half the price!
muhahahaha
c'mon Bill
A. Get exports going
B. How?. Lower the exchange rate
C. How? Just do it!
D. Stuff the banks. Tax 'em like the UK has just done.
E. Tell Bollard to earn his salary. He already made some start by putting some acid on where the banks can get their money from. Tell him to be relentless.
F. Recognise that National is stuffed unless it does something useful instead of waffling on.
G. Talk softly but carry a BIG stick!
JK.
Tell BE to get off his arse!
Yeah right.
I will suck the sav if it will get this country off its knees.
This is just typical of the 'Me, Me, Me' attitude.
If you cannot take $3 petrol, ride a bike or walk.
Got any better ideas?
I will even repatriate some cash if BE does his best. i may even invest some at home rather than in London or Sydney
Great article Alex .. well done and I agree with most of the posts too. Its great to read intelligent comments with healthy dose of common sense even if it is not the the most pleasant news. I mean its not rocket science is it when most of the countries up to its eyeballs in unproductive housing debt and / or worried where their next dollar is coming from or wether they will have a job in 6 months ( moi included). What else should we expect. The only quick way out is to do what the yanks did and print a whole bunch of money which would also take the dollar down. But i am dead set opposed to that as it severely penalises savers and rewards poor investment choices. Fortunately our RB and Govt arent that irresponsible ... yet
Quite right, Basel.
The money supply is actually increased on a regular basis, it's just done in less obvious ways (Government Bonds, Foreign Exchange Swaps etc) so that the general public still think they're being responsible!.....
One day we'll be telling our grandkids about the little gold $1 & $2 coins we used to have! My dad's not that old and he can remember going to the movies for a 'farthing' which was 1/960th of a pound, or about 0.2 cents!....
"So we are going to need to see off the back of high commodity prices high job growth"
Who is English and co trying to kid, farmers will be paying of debt, Bank managers are telling dairy farm owners to get back in the cow sheds and ditch the 50/50 sharemilker and many sheep and beef guys shearing their own sheep to save money on costs.Talking to an ag recruitment company yesterday and ag jobs as scarce as hens teeth.
Wasn't last week or so that smile and wave was saying that the world cup, Cant earthquake was going to help drive the economy, now the cant earthquake recovery not going as fast as expected.
So I guess public sector jobs will be cut IRD 500 jobs amalgamate Forestry back with MAF, how that will be cost efficient god only knows. Sell a few assets and spend it on other infastructure like operating theatres when there aren't enough nurses and doctors, thats right more police and prison buildings
Agree with you Basel Brush. The exchange rate could be done with an order of council.The legislations there in Reserve Bank Act
Uk have taxed banks and so are the germans minimum 15%. Interesting article by David Hall Beware of the siren of state sell offs,the jagged public private partner rocks in todays Dom Post
B Brush III couldnt agree with you more...you want jobs in export sector then bring down the xrate so they can make money. Where ulse are the jobs coming from? If they going to cut benefits etc get people back to work..where are they going to work? We have not employed anyone extra for last two years as struggling to grow with xrate so high.
I'm struggling with the concept that people not going out racking up big debts buying rubbish they don't need is bad for the economy.
I would have thought people not doing that, and instead paying off debt is extremely good for the economy, and exactly what we want people to do. If economists thing the former is good for the economy, they are simply not very good at their job and should probably look for a new career.Of course we're in the proverbial. The bankers stuffed up the global economy, so we elected one to stuff up our economy.
We can't complain - we got what we voted for.
Double-dip recession, high unemployment, little to no growth, borrowing $300 million a week etc.
But it's okay, we got tax cuts.
And come November, we will vote the same idiots back into office.
Go on, someone tell me Labour would be worse. Tell me that Michael Cullen would have spent up large on unaffordable tax cuts, undone all his good work by increasing our debt levels again and proposed that we should fix unemployment with a jobs summit and a cycleway.
I dare you.
OK then
1. You vote for National and get National/ACT/Maori. Performance to date hasnt been ideal but they will muddle through.
2. You vote for Labour or Greens or NZ First and you will get all of Phil & Co, Jim, Winstone, Russell & Co & Hone. They will need all of the above to form a Govt & will wreck the place.
# 2 will spread the welfare net and pay for it by way of higher income taxes, and if the Greens get a say a Capital Gains Tax. Little of the additional revenue raised will be used to retire debt - the bulk will be redistributed. That is not the way forward.
I understand the reasoning behind reducing the exchange rate and thereby increasing the earnings of our export sector. What I don't understand is this:
1. If the exchange rate goes down the cost of imports goes up and the consumer/sheep can no longer afford to buy the imported cheap crap that they don't need. What impact does that have on retail and other areas of the non tradeable sector who are already struggling with the lack of consumer spending?
2. Given that most inputs into the farming sector are also imported how does this affect the margins on the farm?
3. How many farms aren't family run businesses and overall what number of new jobs would really be created? Given that the non tradeable sector is meant to be 4 times bigger (in job terms) and would most likely be cutting employment if the factors in 1 above eventuate, would the tradeable sector really be able to grow enough to take up all the newly unemployed?
4. If the farms really start to earn considerably more, will it be enough to take up the slack in consumer spending and continue to buy all the now expensive imported crap that they don't need?
5. Would the cost of living decrease? Would Fonterra reduce the retail price of milk and butter in New Zealand stores? Will the high commodity prices continue or would the bubble burst? What happens then?
6. How do we grow our export sector and export more than just agricultural based items?
7. Who takes over producing the now expensive imported products at a cheaper cost to the consumer?
As I have been saying since shortly after Lehman Bros crashed, the NZ economy hasn't really STARTED to tank yet as it is destined to after exactly the same foolish policy settings on land use as California and Ireland. Excuse me if it's already been posted and discussed here (I don't have much time these days to follow this site) but Michael Lewis's recent article on Ireland is sobering reading. NZ is just a year or 2 behind them.
Do read the whole thing, but here are my favourite bits in the context of this forum:
"When I flew to Dublin in early November, the Irish government was busy helping the Irish people come to terms with their loss. It had been two years since a handful of Irish politicians and bankers decided to guarantee all the debts of the country's biggest banks, but the people were only now getting their minds around what that meant for them. The numbers were breathtaking. A single bank, Anglo Irish, which, two years before, the Irish government had claimed was merely suffering from a "liquidity problem," faced losses of up to 34 billion euros. To get some sense of how "34 billion euros" sounds to Irish ears, an American thinking in dollars needs to multiply it by roughly one hundred: $3.4 trillion. And that was for a single bank. As the sum total of loans made by Anglo Irish, most of it to Irish property developers, was only 72 billion euros, the bank had lost nearly half of every dollar it invested.
The two other big Irish banks, Bank of Ireland and, especially, Allied Irish Banks (A.I.B.), remained Ireland's dirty little secrets. Both older than Ireland itself (the Bank of Ireland was founded back in 1783; A.I.B. is made up of three banks founded in the 19th century), both were now also obviously bust. The Irish government owned big chunks of the two ancient banks but revealed less about them. As they had lent vast sums not only to Irish property developers but also to Irish homebuyers, their losses were also obviously vast—and similar in spirit to the losses at the upstart Anglo Irish.
Even in an era when capitalists went out of their way to destroy capitalism, the Irish bankers set some kind of record for destruction. Theo Phanos, a London hedge-fund manager with interests in Ireland, says that "Anglo Irish was probably the world's worst bank. Even worse than the Icelandic banks."
Ireland's financial disaster shared some things with Iceland's. It was created by the sort of men who ignore their wives' suggestions that maybe they should stop and ask for directions, for instance. But while Icelandic males used foreign money to conquer foreign places—trophy companies in Britain, chunks of Scandinavia—the Irish male used foreign money to conquer Ireland. Left alone in a dark room with a pile of money, the Irish decided what they really wanted to do with it was to buy Ireland. From one another. An Irish economist named Morgan Kelly, whose estimates of Irish bank losses have been the most prescient, made a back-of-the- envelope calculation that puts the losses of all Irish banks at roughly 106 billion euros. (Think $10 trillion for the USA.) At the rate money currently flows into the Irish treasury, Irish bank losses alone would absorb every penny of Irish taxes for at least the next three years.
In recognition of the spectacular losses, the entire Irish economy has almost dutifully collapsed... ...
".......The Irish real-estate bubble was different from the American version in many ways: it wasn't disguised, for a start; it didn't require a lot of complicated financial engineering beyond the understanding of mere mortals; it also wasn't as cynical. There aren't a lot of Irish financiers or real-estate people who have emerged with a future. In America the banks went down, but the big shots in them still got rich; in Ireland the big shots went down with the banks. Sean Fitzpatrick, a working-class kid turned banker, who built Anglo Irish Bank more or less from scratch, is widely viewed as the chief architect of Ireland's misfortune: today he is not merely bankrupt but unable to show his face in public. Mention his name and people with no interest in banking will tell you with disgust how he disguised millions of euros in loans made to himself by his own bank. What they don't mention is what he did with the money: invested it in Anglo Irish bonds! When the bank failed Fitzpatrick was listed among its creditors, having (in April 2008!) purchased five million euros of Anglo Irish subordinated floating-rate notes.
The top executives of the three big banks all operated in a similar spirit: they bought shares in their own companies right up to the moment of collapse, and continued to pay dividends, as if they had capital to burn. Virtually all of the big Irish property developers who behaved recklessly signed personal guarantees for their loans. It's widely assumed that they must be hiding big piles of money somewhere, but the evidence thus far suggests that they are not. The Irish Property Council has counted at least 29 suicides by property developers and construction workers since the crash—in a country where suicide often goes unreported and undercounted. "I said to all the guys, `Always take money off the table.' Not many of them took money off the table," says Dermot Desmond, an Irish billionaire, who made his fortune from software in the early 1990s, and so counts here as "old money".
The Irish nouveau riche may have created a Ponzi scheme, but it was a Ponzi scheme in which they themselves believed. So too for that matter did some large number of ordinary Irish citizens, who bought houses for fantastic sums. Ireland's 87 percent rate of home-ownership is among the highest in the world. There's no such thing as a non-recourse home mortgage in Ireland. The guy who pays too much for his house is not allowed to simply hand the keys to the bank and walk away. He's on the hook, personally, for whatever he borrowed. Across Ireland, people are unable to extract themselves from their houses or their bank loans. Irish people will tell you that, because of their sad history of dispossession, owning a home is not just a way to avoid paying rent but a mark of freedom. In their rush to freedom, the Irish built their own prisons. And their leaders helped them to do it......."
Here is what escapes the optimists:
1) A bubble has to burst eventually
2) Real Estate makes a far bigger bubble than anything that has ever happened in history before. Share markets are chicken feed in comparison. Not just in size, but in extent - WHO is directly affected.
3) Rodney Dickens is right: correct analysis puts "housing" as a DRIVER of the economic cycle, not just one of the followers.
4) Either every part of the economy, including government, has to re-cut its cloth to suit the new "conservation driven" economic paradigm, or we throw the conservation racket in the dustbin of history where it belongs, or we end up in the hands of the IMF. "Stimulus spending" is just futile, it only "stimulates" at the time it is spent. The economy WON'T kick start at all if we've strangled it in red tape. Try removing the red tape.
5) Faith in Government as the big daddy reassuringly hovering up there above us, to fix all and any problem, is misplaced. The government is only as powerful as its potential tax take current and future. When you have a bubble that is 80 per cent of GDP in bubble value; you are stuffed. "Government guarantees" of bank and finance sector debt, is not quite as bad as the Captain of the Titanic providing insurance for the voyage, but it conveys the general idea. Read what Michael Lewis says about Ireland. The Irish will be paying at least 10% higher tax rates for thirty years, paying this off. If they ever do. Too bad for health, education, welfare, etc. The interest alone is 30% of their budget.
We should not let John Key do this to us. Iceland had the right idea. Letting the "systemic risk" worst case happen, is actually preferable to the albatross round your neck for decades; unless you always meant to default sovereignly at some later date; in which case why bother to rescue your finance sector?
"1) A bubble has to burst eventually"
Phil, it burst 2 years ago. It's just been in slow motion as people and government try to patchwork it back together but NOW many more people are seeing the real event for what it was. And there's no way to patch it, It's going to be startover time after a great deal of pain.
In the end it's for the best. The general populice need to harden up, get real, and become innovative and adaptive. This is what life really is about. Survival of the fittest(fittest minds)
PB-
Real Estate makes a far bigger bubble than anything that has ever happened in history before
N0. The last bubble makes the biggest bubble. That's how exponential growth works. But Real Estate was the last, was the biggest, and it is unlikely we can muster the circumstances to top that effort.
Yes 'the economy' won't kick-start.
No - it's not about red tape.
Yes, we have to face living within our means, and whether the debt is held individually of socialised, it won't be repaid, you're right about the Irish.
When your society uses it's energy supply full-noise for a subdued BAU, it's got nothing left for the extra oomph. The extra effort.
Even defaults don't save you at this point - the debt is in natural capital, and it is facing ultimate scarcity. Which you do - rapidly - from the 50% depletion-point on.
Why does ANYONE listen to bank economists? THEY are the ones that screwed the entire global economy. A casino operator has more street cred!
I hear these clowns on TV, National Radio all talking like they know something. Well.... they do, that being sheeple are suckers and will believe just about anything they are told!
Bank economists work for the 'enemy'! I'd line them all up and you know what.........personally. They sell BS! Infact they are made of the stuff! Only people lower are RE's and PI's
NZ weathered some of the recession through 2009 and 2010 as the government threw some money at big infrastructure projects, we had big cuts in interest rates, then tax cuts. Even with all those factors our economy only just survived
Now we have entered into a period where we will be unable to see anything like those stimulatory measures. We can only hope a gradual and sustained global recovery will start to filter through. Even then, recovery is likely to only be subdued in the next 2 years.
that is the best case scenario.
There are tonnes of downside risks including inflationary pressures (food, petrol etc), peak oil, China possibly wobbling (even a decline from 10% to say 6% would have big implications)
And then we have statements like this:
"Banks are being more cautious and customers are taking far less, this is affecting the New Zealand economy. There needs to be an improvement in the economy, people need to be more confident and they will when house prices start to rise."
Taken from the following article in this mornings NZ Herald.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10705462
Isn't that half the reason for the mess we're in now? With the excess credit provided by the predatory banking system during the recent "boom" the consumer felt more confident and spent a whole lot of money they didn't have.
How is the same problem going to improve the economy?
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