The Crooked Tower of Debt

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 19^th 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 20^th, 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 15^th, 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