I am no economist nor
financier. I am aware of the perils of the economy, having brought my first
house in the 80’s, paying 22% interest on the mortgage. I had some savings
which I had daringly invested in a very buoyant share market. Then came Black Monday,
October 19th 1987. In the USA it was the biggest one day fall in the
history of the stock exchange and the financial world collapsed.
In New Zealand, we had been
swept up in the delirium of the free market, and the following day, October 20th,
we woke up to learn that much of the newly created wealth of the 1980's was an
illusion. I had lost all of my savings.
That event was starting to
become a memory when blow me down, Monday September 15th, 2008 the
bankers Lehman Brothers declared bankruptcy, and insurance companies and banks
began falling like flies. Governments quite literally began printing money to
prop them up.
In 2013 the stock market
finally recovered. In the first six months it gained more points than any year
on record.
In order to try and keep some
insight into what the economy is doing, I subscribe to several newsletters. You
can imagine my concern when, recently reading statements like, "This just in: The crooked tower of debt is
growing taller and leaning further over.”
“...the economy gets more and more
out of kilter…more and more dependent on inflation… And the feds need to tell
bigger and bigger whoppers to keep it from collapsing.” Says one commentator, “It will be like watching to see how many
beer cans a drunk can stack before they all fall down.”
Unsettling questions are being
raised in these briefings and updates. Questions like, Is there an economic storm
brewing? Are we about to feel the full force of another global recession?
Ahead of the 2008 Great
Financial Crisis, the financial sector in the US was rife with greedy, grubby
hands finding inventive ways to make a buck off customers. Hmm, does it remind you of
what recently happened in Australia? An investigation uncovered that most major
banks had been doing some pretty dodgy things…and many of these banks have
satellites or subsidiaries in New Zealand.
ABC Australia reported ‘The commission heard evidence of
appalling behaviour, including that banks were charging the dead and
institutions were badgering disabled people to buy worthless products.’
One news service, Money
Morning, notes concern about debt: government, corporate and household. “The world is now full of debtors…up to their
eyeballs in easy money”, they say, “By
up to their eyeballs, I mean global debt currently sits at over three times the entire globe’s GDP.”
Bank of New Zealand Senior Economist Craig
Ebert notes we are looking at a slowing economy, which might struggle.
According to BusinessNZ's executive director for manufacturing, Catherine
Beard, the drop in manufacturing activity to its lowest point in over six years
is obviously a concern.
84% of first-home buyers in
Auckland now suffer below-average incomes after housing costs as do 52% of
renters. Auckland holds the most job opportunities. New Zealand has low real
wages, and they don’t seem to be getting much better. Why? Mass immigration has
contributed to GDP growth — but not so much to GDP. In other words, more
people, more cars, more demand — but more competition for jobs, pressure on
wages, and in real terms, little growth.
I have to stop, I'm scaring myself. I wonder if my KiwiSaver will be okay in the bank that fought for more than three years to keep its role in New Zealand's biggest Ponzi scheme quiet, and stop a regulator telling out of pocket investors the details?
#globaldebt #economicstorm
