New Zealand’s economy plunged into a deep recession in the second quarter of the year and has tumbled a terrible 2% in just six months; the worst fall since 1991.
There’s no need to rely on per capita or technical definitions of a recession any longer as the country is experiencing a substantial economic contraction in real terms. Gross domestic product (GDP) dropped 1.1% in the June quarter and another 1% in September.
This is likely the low watermark, Treasury and the Reserve Bank (RBNZ) both forecast growth to resume after another flat quarter this December, but the sharp decline was a surprise.
Kiwibank economists said the market only expected a 0.2% fall but the sudden drop didn’t necessarily set off alarm bells.
“The larger falls have not changed the overall size of the economy … Essentially, the end point of the economy is not too different from what was originally published in June. But the path in getting there has changed,” they wrote in a note.
Statistics NZ’s revisions have removed any sign of a previous technical recession and show the economy was either stagnant or growing throughout 2022 and 2023. It was only in April of this year that real growth started heading south.
Of course, most of the growth in those years was driven by a fast growing population. GDP per capita has been falling since December 2022. It dropped 1.2% in the most recent quarter and is down a cumulative 4.8%; worse than after the Global Financial Crisis.
Real GDP has only risen roughly 1% in that same period and has fallen 1.8% year to date.
While these numbers demand attention, the historical revisions actually mean the economy is slightly larger than economists thought it was a month or so ago. And the worst may be over.
Stephen Toplis, head of research at BNZ, said the Reserve Bank may be “spooked” by the figures, which show the economy contracting at an annualised rate of over 4%, and would likely deliver another 50 basis point cut to the Official Cash Rate in February.
“We continue to believe the economy will be recovering relatively strongly in the second half of next year but that it will take a very long time before activity on a per capita basis gets back to its previous highs,” he said.
Michael Gordon, a senior economist at Westpac NZ, said the electricity crisis had worsened the September data but that impact won’t be repeated in future quarters.
Other sectors were also struggling, however. Services fell 0.5% which show the economic slowdown has spread beyond just interest rate sensitive sectors. The effects of high wholesale energy prices were clearly visible in a 7.3% fall in metal product manufacturing and 5.7% decline for wood and paper products manufacturing.
Infometrics said residential investment fell for the fifth consecutive quarter, making it the sector’s longest decline since 2007 and 2008. Non-residential investment also dropped.
One bright spot was primary industries which grew 1% in September as forestry bounced back from a contraction in June, and as milk production increased.
Most bank economists agreed the data supported the case for further rate cuts, which RBNZ has signalled will happen in February, but warned against catastrophising the revisions.
However, recession headlines are irresistible for the media and a red hot political football for politicians. The Labour Party was quick to pin the blame on Finance Minister Nicola Willis.
“[Willis’] cuts and austerity has fed the recessionary fire, and today’s GDP figures show this, recording the weakest 6-month period since 1991, excluding Covid-19,” said Barbara Edmonds, Labour’s finance spokesperson
“There’s no creative accounting that Nicola can do to make these GDP figures better. This amount of economic shrink in six months is a dire result”.
In a press release, Willis said the decline was the result of the high interest rates which had been required to tamp down inflation.
“Encouragingly, inflation is now under control and growth is set to revive. New Zealanders can look forward to brighter prospects next year, but there is no avoiding the conclusion that we have work to do,” she said.
“That is why the Government is acting to drive growth by fast tracking major projects, removing red tape, developing an infrastructure pipeline, refocusing the education system on core skills, negotiating additional trade deals, and better aligning support for science with New Zealand’s economic needs and commercial opportunities."
133 Comments
Re covid.
Our solution was a complete lock down. Closed borders. Free money for peeps and ocr dropped too low. The nz gdp was artificially high as a result of the ensuing asset bubble for way too long. And now it's popping.
And all because we hadn't prepped and our health service had been ironically underfunded.
The net result of those poor decisions is probably a lost decade of economic growtg
Rubbish. Would you like to come up with the number that have suffered some sort of permanent injury or medical condition due to the Vax ? That's a number that could actually be quantified but it is being swept under the carpet. Some people literally died a few days after getting the vax.
20,000 lives saved??!! Propaganda much? Crikey our excess death is through the roof. The madness that was the Covid response never had any basis in science. Lockdowns shown to cost lives, livelihoods, cause deep societal rift, deepen our mental health crisis - no room here to write the essay of the harms. Masks - dangerous, costly & disastrous for the environment & don't stop viruses. Covid tests - not based on science, costly & cause injury. Closed borders: expensive, ineffective & a breach of human rights; then then massive immigration spike of unskilled workers ostensibly to fill jobs created by QE & low interest rates. Contact tracing: expensive and never was going to work for a coronavirus. Barely tested novel pharmaceuticals that exploded covid infections, mortality & morbidity. Massive unheard of QE & nearly 0 OCR - asset bubble which exploded the cost of housing and reduced our poor productivity further. Time to study up and stop reading state sponsored media.
"National needs to resign now"
Sadly. They won't. This requires a vote of no confidence. It would take either ACT or NZF to break ranks.
Better that the Opposition parties get together and agree a comprehensive tax system overhaul ...
AND ... agree a 'sales plan' - that educates the voters - without the usual b.s. and bickering.
Thanks. Jarod, Jfoe, myself, et al are thankful that some people are listening.
Alas - just not the powerful people that control these things.
Have I mentioned I am starting a guillotine manufacturing business? Quality stuff too. IPO sometime soon. The velocity of the existing money supply will increase dramatically once we're in full production. ;-)
Why? The Nov 23 inflation rate hasnt been revised. The RBNZ raises or cuts interest rates to combat inflation, not to inflate GDP or prevent a recession. The RBNZ sole mandate is to lower inflation, which is what its started to do. Non-tradeable inflation is still running at 4.9% so its job isnt done yet.
RBNZ is supposed to set the interest rate based on future expected inflation rates not the inflation rate at that time. What we are seeing now is the lagged effect of their not cutting the OCR sooner. They caused this recession and should rightfully undershoot the inflation target (if it wasn’t for massive rates and insurance increases, energy price increases and Trumps upcoming tariffs. None of which respond to the OCR).
Going to the supermarket and buying food for your family.
Putting a roof over your families' heads - (yes, plural).
Getting aged relatives to medical appointments.
Ensuring your kids get to school with food and stationary.
Helping clubs, societies, and other local charitable organisations thrive, but mainly survive.
Need I go on, J.C.?
Gotcha moment? I recommend you learn about the Quantity Theory of Credit and its impacts.
1. Credit creation for non-productive purposes: Boom/bust cycles; inflation without growth; bubbles; and banking crises
2. Credit creation for productive purposes: Growth without inflation
2 is arguably better than 1. Dontcha think?
The 'quantity theory' of credit is taught at every stage 1 and 2 economics course. Mainly stage 2. It is well understood. And drilled down into painfully minute detail in stage 3 papers. Both the pros and cons. The 'elites' - as you call them - do talk about the concepts and how they relate to current economic situations. Methinks they're new to you?
Yawn. Richard is re-packaging stuff that been around forever. It might be new to you. But not to the rest of us.
I see. What has Werner "repackaged"? The idea that fractional reserve banking doesn't exist?
Regardless, the qty theory of credit is not part of most elementary economics courses, which are mostly based around neoclassical economics.
I have never heard of it before as a theory. However it is interesting to know there is one.
It's definitely common sense. Credit creation to strategically build an economy based on innovative productive businesses (arguably what the USA has achieved - though probably burning more credit than intended) is bound to be better than borrowing to inflate asset prices... especially assets that are in many ways 'optional' and have zero ways to grow in value if the economy dips (vs tech companies and export businesses etc)
But we (and the aussies) actually had a strategy to not only boost asset prices via wealth creation.. but to import relatively unskilled labour en masse at the same time, on salaries too low to fund the required infrastructure/public service growth. We also built export business based largely on products that are optional and have most our eggs in a few baskets in the way of global customers (china and au... who are also mutually dependent economies.. if China sinks so does au and nz).
For me the next decade of economic disaster for nz could better be explain using the parable of building our house on sand.... and there was no way anyone with one iota of common sense could misunderstand that it was coming.
Lol. We had no strategy.. just a policy of lazy politicians continuing the poor strategy of the last ones.. til the music stopped (now).
Now we have a country of property investors, RE agents, trades, builders, bankers, cafe owners and retailers...all competing for less and less money. And a govtwith no plans to stimulate the productive economy.. worse os to keep cutting costs.
Good luck reinflating house prices or growing the gdp.
Next warning sign will be low retail spend over Xmas..
Next warning sign will be low retail spend over Xmas..
Credit arrears should be on the up if people were at the denial stage still, and if retail spend is dropping without the credit arrears I'd bank on this being a sign of solidified changes to consumer behaviour. Like OCR lag, behavioural change in reaction to market forces takes time also to revert back, thus I can't see running the country on houses and mass consumerism being the saviour for NZ anytime soon.
The most intelligent comment I have seen here for months - BRAVO, OldSkool - you nailed it!!!
It is tragic to witness here on i.c.n, the number of supposedly informed commenters reducing this problem down to being the fault of a particular political party, or interpreting our dismal performance through a 'left' or 'right lens', whilst remaining 100% oblivious to the root cause.
Also, the tragic rudeness levelled at those with the nouse to work out the problem and to voice some very uncomfortable home truths.
With this level of understanding of real-economics, it is my sad conclusion that there is only one result left for NZ now - a stagflationary spiral into socio-economic chaos. The writing is on the wall, and the articles and comments on this site illustrate precisely why.
If we cannot even identify the root cause of our economic demise, then we have less than a snowball's chance in hell of fixing anything.
Spot on JC - you just explained an extremely simple concept in just two sentences - BRAVO!
What you point to is a major factor in what has eviscerated the Western-centric economic models as they became increasingly financialised.
We also have this societal mental block where most have no clue as to the distinction between money and credit - plus we continue to allow a monopoly of private cartels to create the vast majority of the MS, meaning that the life-blood liquidity doesn't reach the productive economy to create meaningful GDP.
I made a rather lengthy rant laying this out an hour or so ago on this thread.,
Best regards
Col
Spot on JC - you just explained an extremely simple concept in just two sentences - BRAVO!
It's not a particularly radical idea and history suggests that Werner is right. But it's a bitter pill for many to swallow.
What's interesting is that all you never hear about this from our 'thought leaders', regardless of their impressive PhD achievements. My reckon is that there's many reasons for that, but it's important to remember that Werner is considered an upsetter/maverick in Western circles. While he may be admired by the Bank of Japan, Ministry of Finance (Japan), academia and his written works celebrated (Princes of the Yen), what he espouses does not necessarily rub well with our ruling elite.
Richard Werner first proposed Q.E. about 30 years ago.
In his form of Q.E. he proposed direct purchases of non-performing assets from the banks, businesses, etc. by a central bank. Was that new at that time, 30 years ago? Actually not. Central Banks - most usually directed by politicians who were acting for (insert scoundrels here) - have been directly involved if buying up 'un-performing assets' almost since they were created. You know, private enterprises get to clean up their balance sheets by unloading the crap they've bought onto the public purse. Werner, with other fans of Q.E., suggested it should be done at far grander scale so it'd have major macro-economic effect. Was he the first to form this view? Nope. Others, most often within banking circles, had proposed this before. But Werner did stop there. He want to enrich banks ever further. He wanted governments to stop issuing government bond and instead borrow directly from the banks. FFS - that would put banks in control of government!
And why would banks want a Q.E. 'champion' like Werner? The answer is simple: Banks (and their clients) end up with all sorts of dross on their balance sheets, and unloading it for the 'greater good', as Q.E. proponents claim, is exactly what they needed to unload the dross at better prices, while ensuring outsized control over the government.
If I can respond in kind, Colin Maxwell, I find your ravings such a load of nonsensical drivel that I am surprised you can still feed yourself, or wipe your own bottom. Come to think of it, maybe you employ people to do that for you? I expect so.
With regards Werner's work, I understand it quite well, thank you. Might I put it to you that your knowledge of how fractional banking systems work is substandard, weak, and missing many core principles, while also polluted by the conspiracy theories you regurge as as fact.
"...what he (Werner) espouses does not necessarily rub well with our ruling elite."
Spot on J.C. - in fact, his entire solution is an existential challenge to neo-classic economics, fiat currencies, and the continued creation of ~97% of the Money Supply by monopolistic private cartels in present Western-centric financial models.
What he promotes is an entirely different system where thousands of small community banks, non-banks, cooperative banks, etc. become a much stronger force and provide the capital and liquidity for a thriving entrepreneurial renaissance in SMEs - this would form the life-blood of the revival of the middle class and a societal return to a savings mentality.
These savings in turn would supply even more capital in a local setting where the loan disciplines of a functional moral hazard system could return to become the foundation of serious and sustainable long-term societal wealth.
In my ~35,000 hrs of research on this subject spanning three decades, I have only found three individuals who have isolated the source of our broken system and gone that huge leap further - to actually put forward solutions - I might add, that they have done this at great personal risk to their lives - they are...
#1 Professor Richard Werner
#2 Ellen Brown
#3 Catherine Austin Fitts (AKA - CAF)
The likes of commenter ChrisOfNofame in this thread, is a particularly tragic illustration of people not being able to recognise solution-based models. In one absolute shocker he completely misrepresents Werners work, and in doing so illustrates his complete failure to grasp it's most basic premises.
It's amazing to me how poorly researched individuals can demonstrate woefully misleading calls and in doing so, help to throw the baby out with the bath water.
Warm regards
Colin
"....the existing will not go quietly into that night...."
Too true, Frank!
And this is precisely why we all need to work on this massive task. The political and financial architecture required for this fundamental reform will be extremely hard-fought.
Until humanity removes the keys of the counterfeit money printing machines from the clutches of the private banking cartel, Mainstreet will remain on the debt treadmill and the middle class will continue to be hollowed out.
Werner, just like CAF Catherine Austin Fipps (CAF), and Ellen Brown, are the only three entities on the planet that I know of, who work tirelessly at a high level to expose this monumental heist.
Their work is solutions-based, making it so very disappointing to see a very smug and vainglorious ChrisOfNoFame completely misrepresent Werner's efforts.
I am intrigued to know if this is due to plain old garden variety Willful Blindness which, by the way, afflicts an estimated 85% of the world's population*, or does he in fact, harbour a sinister agenda?
* https://blueandgreentomorrow.com/features/ted-talks-the-dangers-of-will…
Regards
Colin
What he promotes is an entirely different system where thousands of small community banks, non-banks, cooperative banks, etc. become a much stronger force and provide the capital and liquidity for a thriving entrepreneurial renaissance in SMEs - this would form the life-blood of the revival of the middle class and a societal return to a savings mentality.
No. What Werner is promoting is the handover of our set of democratic norms to the banking cartels. He pretends such 'de-centralization' would means we'd need less government. In fact, we'd have no government as any government that remained would be beholden to the banks that sponsor Werner's view of economics. Wouldn't it be better to break up the mega-banks to form lots of smaller banks? Funny, Werner never says this with any conviction whatsoever.
You are supposed to be living in a cardboard box and putting everything you have into Bitcoin, after all that's the only way we are really going to improve the GDP of New Zealand.
That's an atrocious take Z.
Crediting the bank accounts of all Aotearoans with NZD that they encouraged to spend not save is far more beneficial for improving the GDP scorecard.
The golden goose of never-ending capital gains and unproductive investment s a falsehood. The sooner we sort this out, the better we will be longer term, but the masses have it culturally and generationally ingrained and don't know any other form of investment they are willing to adopt on a large scale. There's going to be economic pain no matter what happens, or the status quo will have every house worth $1m and unaffordable to most in a decade or so while our pension scheme collapses and the middle income earners get chewed up and spat out as as a product of the wealthy.
Its a world wide problem anywhere that's now worth living. Everyone is now only out for themselves but I don't think that has ever changed, certainly not in my lifetime and trust me you cannot beat them so you end up joining them. The world is in decline, things are only ever going to get worse for most people beyond this point in time. Sorry to be the biggest DGM ever just before Christmas, but that's the way I see it.
An excellent idea, some suggestions:
- no accommodation supplement
- no Working for Families
- no charity, church or iwi tax exemptions
- no central Govt, charity, church or iwi rates exemptions
- no progressive envy income tax regime, change to proportional fair income tax
- no unemployment benefit without community service work
- CGT (with Capital loss tax refunds) on investment properties and businesses (on goodwill component).
- etc
Great ideas. Hopefully the Landlords that indirectly rely on their tenant's accommodation supplements and working for families tax credits can cope without. They'll probably just get better tenants.
I'd be all for a community service based Unemployment Benefit. The alley way near me is still in need of a clean up. I'm sure there's at least one beneficiary within walking distance.
by Nzdan | 6th Sep 23, 10:27am
I think so. I'd be happy if the Government funded shuttle vans to drive around picking up all the beneficiaries for some community work. The alley way down the road from me needs a good water blasting. Maybe give them some paint and a brush, give the corrugated fence a spruce up. Sweep the footpaths. Pull weeds.
https://www.interest.co.nz/property/124123/nz-struggles-resolve-its-lon…
The issue there would be actually getting them to do it. The blokes I've seen assigned to this work in my region get shuttled up to maintain some mountain bike trails, sit around yarning and having a durry, then do a minute bit of work and get shuttled home again. 1 supervisor and a van load of them, no enforcement chance there.
Seriously. Warning: this post is bitter [envy, probably].
We have abandoned NZ. We know a couple who were helped into a home by family a few years ago. In the intervening time, we earned about the same amount of combined incomes. However, our earnings weren't taxed equally - our income was heavily skewed towards one partner, while the other couple's were fairly even. As a result of our 'progressive' tax system, we paid approximately $10,000 extra tax per year compared to the other couple - well over $50,000 more over the course of their mortgage.
They've now sold, and pocketed almost half a million tax-free capital gains.
So, huge capital gains tax free on top of already paying less tax. Any wonder I'm bitter? Note I'm happy for their gain, it's the fact we've paid significantly more tax that bothers me.
NZ's tax system is grossly unfair.
Interesting, however irrespective of this, they have each paid the appropriate amount of individual income tax. There's also no information on the income type. Was one self employed and able to structure their income to minimise tax e.g did one funnel expenses through a business for say, a home office and put the power bill through the company etc etc. Too many variables unknown for me to take that at face value.
Agreed. Many overseas countries allow income splitting between husband and wife. NZ doesn't. Just another part of NZ's woeful tax system.
I was in the same boat, Chaosinflesh. I chose to cease being a 'salary man' and instead live my life far more precariously as an independent contractor. I didn't want to do this. But as you point out, we're basically forced to by our terrible tax system.
This is likely the low watermark, Treasury and the Reserve Bank (RBNZ) both forecast growth to resume after another flat quarter this December, but the sharp decline was a surprise.
Love your optimism, and those of the sources you've quoted, Dan.
But, to be frank, can we trust such sources when they've been so wrong, for so long?
A broken clock is right twice a day. I guess these broken clocks will be too.
Things will get better. But not by much.
Our 'economic system' in NZ is not set up for excellence. Nor mediocracy.
Sub-par is what we do. And we'll continue to do what we do until some government - backed by the people - cry "enough!".
Oddly, and counter-intuitively to modern liberal economic theory, 'growth' can come from an increased velocity of the existing money supply.
History is awash with economic booms following periods where governments have made rich people pay their fair share. (History is also awash with poorly advised governments (usually by big banks) spending unwisely. Ergo, revolutionary governments need to be very circumspect about how they spend, and save lots for future spending.)
Here's a good place to start: Post–World War II economic expansion.
This period was typified by a) a common goal of collective prosperity, b) high levels of real investment (i.e. new stuff and innovation), and c) far more equitable tax systems. Obviously there were other things. People who lived through that era would be horrified at how their hard work has now been corrupted for the benefit of the mega-rich. Here's another: Chinese economic reform (Not driven by Mao, but by Deng Xiaoping.) All the 'Asian tigers' did similar things but in subtly different ways and each is worth a study.
The velocity of money increases because taxes are high on the rich (both corporates and individuals), while lower on the poor who will spend it fast, and governments are spending the tax as fast as they collect it to create 'new stuff'.
This is extremely different to what we see now where the mega-rich get to hoard money that doesn't circulate. Thus the only option is to keep on increasing the money supply at every increasing rates. But it's a doom loop. The more money created, the more gets taken out of circulation by the mega-rich, and the doom loop continues.
Growth will come from the 2 billion saved on the ferries
And selling off ACC, the cash gained from the privatization will be used to stimulate the economy in the form of a $5000 cash payment to each individual landlord/ property investor, who can spend it on improvements(if they want) and lower rents (if they want)...
Might as well privatize the hospitals too, then we can get rid of all the poor people that, since they are getting gutting Worksafe have been injured at work or worn out, literally got nowhere to go
This will greatly improve our productivity too and bring us to surplus in 2066....
This government would be more suited for Africa
Not feeling so bad about my business being down somewhat YoY (sorry IRD, looks like you'll be paying me this year when all is said and done - wonder how that tax take will be looking?) when I look at just how tough the economic conditions are.
Many of my clients report the trading as being as bad, if not worse, than the GFC.
Indeed the Monetary Policy Committee (MPC) does have the OCR at a restrictively high level.
They are way, way way behind the 8-ball.
Some information on the MPC:
- There are 7 members of the MPC.
- The MPC decides the OCR.
- No minutes are published. Just a 'consensus'.
- Orr has the chair.
- 4 members are from Orr's RBNZ.
- 3 members are 'independent' 'appointments' from outside the RBNZ but from within the money'ed establishment.
- It is an opaque and secretive Committee.
Willis said the decline was the result of the high interest rates which had been required to tamp down inflation
You can't make this stuff up if you tried. Hey Nicola, you can have high interest rates AND increase GDP if you weren't running an economy based on speculative investments into unproductive housing. Total face plant.
IMO THESE LOOK OVER HERE NARRATIVES ARE SIMPLY MORE NEOCLASSICAL HOPIUM AND KABUKI THEATRE (read bullshite)
Interest Rate (IR) manipulation is a lagging indicator anyway, and usually the lag is in the order of ~18 months.
The narrative we hear on the root cause of inflation is largely tripe - the biggest effect is from banks making loans out of thin air with ZERO window guidance, and largely invested in existing assets.
In most Western countries, ~97% of the Money Supply (MS) is created in this way - it then becomes patently obvious as to what the vast majority of 'inflation' is caused by.
https://globalsouth.co/.../economics-part-iv-interest.../
Allowing the private monopoly cartel (AKA the plutocratic) to create this money as debt with interest payable back to them, rather than it being created as a public utility for the good of society, is the fundamental reason why all of the major Western countries, except perhaps Aus, are already technically insolvent.
NZ is too - we have to borrow to service our existing public debt and our total debt is over 600% of our nominal GDP - god only knows what the ratio is if it is worked out as a % of REAL GDP - and when I say REAL, I mean all of the paper shuffling of the parasitic financial economy needs to be removed from the calculation.
Inflation is really about the plunge in purchasing power of the dollar.
The only reliable way to accurately measure this is with the gold benchmark, otherwise there is no frame of reference - an ounce of this 'rock relic' still buys almost exactly the same amount of goods and services as it did thousands of years ago.
When you examine its real purchasing power the U$ dollar has lost 98.4% of its purchasing power since the Fed was incorporated in 1912. The £ has lost 99.98% of its purchasing power.
Just since the year 2000, there has been further massive attrition - a low of U$ $263/oz in 2001 and up to today's price of $2645 = attrition of minus 1000% - IOW it's down to 1/10th of the purchasing power in a little over 2 decades.
What this amounts to is a hidden tax on Mainstreet, and a huge feast for Wall Street. The market has been all cock-a-hoop about what the Trumpster is going to accomplish, and yet his entire historical persona revolves around being a glutton for capital and taking on debt, a RE investor, and a market speculator - I doubt that this will change - if anything this habit shows every indication of becoming even more acute.
The TBTF banks especially Citigroup and 'Goldman Sucks' own him anyway. Trump #45 hollowed out Mainstreet and his narrative and his cabinet appointments signal he will do the same this time around - only on steroids - plus with his latest ludicrous Bitcoin conjob and new found love for 'Larry the Fink' of BlackRock fame.
Here's what David Icke sees looking down the pipeline - it ain't pretty - in fact, it is close to a 180˚on everything he promised in his election run-up...
https://ussanews.com/.../david-nino-rodriguez-david-icke.../
In reality, the U$ Fed now operates with zero mandates because both the inflation rate and the unemployment data are utterly fictitious - the formulas were changed so that the financial industry can lie through their teeth to the punters.
It's all heading for a giant fall because real inflation, in a classic stagflationary setting in the U$, is at least 7.5% and more likely 12.5% (compounding) or more - all financial instrument real yields are negative.
If you buy a U$ 30-year bond at a 70bps premium to the Fed rate of 2.5% that's 3.25% - that's a yield of MINUS 9%!
And so why on earth would anyone in their right mind buy a long-dated US T-bond. If you held it to maturity and redeemed say $1k's (coupon face value) worth, it would be barely enough to buy a packet of chips and a can of coke when you go out to celebrate the redemption of your asset.
WHO ON EARTH WOULD EVEN BOTHER TRYING TO SAVE when your wealth negatively compounds literally down the toilet?
IRs that are continuously manipulated penalise savers and benefit spenders - there are many more spenders than savers - without savers and a societal savings mentality, it means that capital and liquidity are not available for the real economy.
There are somewhere between $2.5 - $3.7 quadrillion derivative casino bets sitting out there in the global markets, just waiting to implode and the Bank of America (BOA) gives every indication that they will implode - this debacle is already overdue because their real balance sheet, IOW, based on assets marked to market, and the subsequent $ billions of unrealised hidden losses.
https://members.porterandcompanyresearch.com/run-for.../
Word travels so quickly in our modern-day financial world that deposit flight could eviscerate a bank's equity in a matter of hours.
BOA is only the tip of the iceberg - Citigroup and 'Goldman Sucks' when I worked out their derivative to equity figures early this year, were from memory, around 330:1 and 1200:1 respectively - as the 'Omaha Oracle', Warren Buffet says, DERIVATIVES = RAT POISON SQUARED.
Incidentally, Buffet has been selling shares in big bank stocks like there is no tomorrow.
It will be the casino instruments of mass destruction that begin the systemic financial implosion just as they did in the 2008 subprime mortgage bubble debacle - only this time there are bubbles set to burst wherever you look.
I just don't see a solution for the West until they address the fiat currency problem and the private banking cartel's monopoly on money creation.
As long as that continues there is no solution and neither is there the financial and political architecture to begin the fundamental reform - WITH ONE CAVEAT HOWEVER...
... the fact that there are now 35 U$ States investigating sound money policy alongside public banking utilities and they are legislating to be able to insulate themselves at the state level from the disastrous habits of both the Fed and the U$ Federal Govt.
However, the current U$ political lobby model results in the very best 'representatives' that money can buy. The only rescue for Mainstreet to me, necessitates the mass secession of states and the fall of the existing federal system.
That would also put an end to the Western-centric financial and military hegemon and the birth of a brand new non-predatory multipolar global reality - ENTER THE BRICS!
A Federal system that has a Presidential executive and two houses, IF it follows the written constitution sounded like a grand idea.
However, it falls at the very first hurdle - the Fed model is a complete insult to the Constitution - it was a fundamental violation from day one. It also means that the U$ has zero monetary sovereignty - that was handed over on a plate to the private cartel in 1912.
It falls on its sword because lobby politics means that the 'democratic' Republic system works like the old cartoon - ie, four coyotes (Wall Street) and a lamb (Mainstreet), get to vote on the lunch menu - it's not hard to guess what happens to the lamb?
It's the same old same old - the classic reason why businesses go broke - it's the same in macro-economics too - borrowing short and investing long. Some claim that that rule doesn't apply to the incumbent holder of the global reserve currency - true to a degree, but only as long as that country can still sell its debt.
Trump's explicit intention to weaponise the dollar even more will make this debt increasingly hard to sell and China will use the U$ dollar to provide liquidity where it desires by using them within their own system as they see fit.
They don't actually want to implode the preset system, despite the U$ overtly declaring financial war on them. However, they have ZERO desire for the yuan to be the global reserve currency because they are acutely aware of the disastrous effect the Triffen Paradox can have on the reserve currency incumbent, particularly when it is an export-based real economy.
In short, I think 2025 will be a wild ride for all of the Western fiat currencies and economies. If they continue to refuse to face up to the fact that neo-classical economics and Keynesian tripe are a dismal failure they will sail even further into debt trap vortexes.
It is high time we all learnt the distinction between money and credit - until we do there is zero hope of any recovery.
As long as we continue to parrot this 'look over here' tripe, the present Western-centric model is akin to the Monty Python parrot - it's Veekjie, Al-mawt, Mah, Dood, Tod, Kaput, Mewt, Dod, Maut Dead - we must face up to this reality - preferably sooner, rather than later.
Regards to all
Colin Maxwell
BRICS is too big to negotiate a way out of this. Too many countries, too many culture differences and angles on fiat currency. We can't navigate our way out of a failing reserve currency with one that is supposed to be for a vast swathe of countries with large geographical gaps. Europe was different of course with the Euro over time, but they are all in close proximity and thus easier to manage defence negotiations such as NATO. In a world where we know the cost of oil will eventually start ticking up from reduced EROI, having a 'global' empire to succeed the USA hegemon is too logistically difficult to manage. My bet is on the same old as we have seen in history through multiple failed empires such as the Dutch, Spanish and British. Ray Dalio's changing world order seems simple and clear on the historical pattern of human behaviour, and I can't see this changing.
Hi, Interesting1234 - yes indeed - your nom de plume fits.
I do however find it intriguing and disappointing that the vast number of commenters on interest.co, choose to hide behind a pen name.
YOUR COMMENT DISSECTED...
"BRICS is too big to negotiate a way out of this."
On a population basis, between 87-90% of the population of the planet reside in countries that want to board the BRICS train to escape the flailing AAZ financial and military hegemon. Surely, their sheer size and momentum are an illustration of inherent strength.
..."negotiate out of this" - out of what?
As the old Bedouin saying goes - "the dogs bark, but the caravan moves on" - except this is no caravan - this is a global juggernaut.
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"Too many countries, too many culture differences and angles on fiat currency."
On the contrary - why not let ten thousand flowers bloom, and then observe which are the brightest - this eclectic entrepreneurial diversity can be a huge advantage in a non-predatory multipolar global reality.
Besides they have but one angle on fiat currency - the realisation that they will all self-destruct.
Even the historical main bastion of the fiat illusion, the BIS*, has abandoned this Western-centric trainwreck.
* (for more than 50 years they used every trick in the book to manipulate gold and silver's organic value, in a vain attempt to hide the fact that all of the major fiat currencies already have lost more than 98% of their purchasing power)
The BIS made this move on January 1, 2023, when they reclassified physical gold as a Tier 1 balance sheet asset - ON THAT DAY THEY THREW THE FUTURE OF ALL FIAT CURRENCIES UNDER THE BUS!
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"We can't navigate our way out of a failing reserve currency with one that is supposed to be for a vast swathe of countries with large geographical gaps."
You miss the point entirely. The U$ dollar will be the last dominant global reserve currency that doubles as a national currency.
The new reserve instrument proposed by the BRICS bloc will not be a national currency. It will be a mechanism to be used only by participating countries for settling trade balances, whilst most of the deals will be undertaken in their national currencies, swaps, and using goods for goods bilateral bartering arrangements.
We all should have learnt the lesson by now that global reserve currency status is detrimental in the long run both for the incumbent plus the rest of the world and not the least because of the Triffin Paradox.
No country in their right mind would want to touch this scenario, even with a 40-foot barge pole - let alone any of the productive real economies of the world.
I repeat, the "large geographical gaps" can become an eclectic and stimulating advantage, which encourages a healthy and mutually beneficial brand of mercantile behaviour.
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"Europe was different of course with the Euro over time"
Damn right, they are - it was a CIA model dreamt up as a neocolonial post-WW2 means of controlling and occupying approximately 27 countries - far easy to control just one executive entity (the EC), especially when they are an appointed bunch of NWO shills.
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"...thus easier to manage defence negotiations such as NATO"
Oh boy... the monumentally tragic irony in that observation.
NATO has ZERO to do with defence - it is an offensive NWO construct and has morphed into a Frankenstein-like, out-of-control AAZ attack dog.
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"In a world where we know the cost of oil will eventually start ticking up..."
I am far from convinced about the validity of this statement.
With all of the amazing new methods that advances in technology are opening up, and I don't include the so-called "clean green" hoaxes promoted by the Swedish brat, the supply and demand equation for oil could well deliver the opposite effect.
Furthermore, if you look at the price of oil today, against a reliable benchmark such as the price of gold, today's price is a mere 60% of what it cost in the 1950s.
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"... having a 'global' empire to succeed the USA hegemon is too logistically difficult to manage."
The BRICS vision is as far away from being a "global empire" as you could possibly get.
It is based on collective goodwill and financial/military security for all of its members. This will be defensive - the polar opposite of the AAZ NATO attack dog.
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"My bet is on the same old as we have seen in history through multiple failed empires such as the Dutch, Spanish and British."
I repeat - the BRICS is an entirely different construct from those failed historical models. It is a cooperative mindset, not an empire-building exercise.
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I agree with you, regarding Dalio - he is a visionary, especially given his seemingly contradictory position of his stance in being the brains behind Bridgewater, the world's largest hedge fund.
I imagine he is painfully aware as to the key to this giant puzzle is - IOWs, is money created as a public utility, or as a windfall for the thieving private cartels?
On pain of death, he cannot be too explicit and map out this fundamental flaw that has created the Western casino/Ponzi scheme.
MY CONCLUSION - 2 CENTS WORTH
2025 will be the year that this Ponzi flies to bits and I believe it will come in the form of a 'TBTF' (sic) bank experiencing sudden deposit flight along with a concurrent event with "rat poison squared" becoming exposed.
When the estimated $2.5 - $3.7 quadrillion* of global derivatives begins to implode, the wild ride will begin.
* ( their notional value is between 27- 41 times the annual global GDP)
At that stage, anyone who hasn't read and fully understood the implications of 'The Great Taking' is likely to be a totally ill-prepared victim of the greatest wealth heist in the history of our species.
https://thegreattaking.com/read-online-or-download
Regards
Colin Maxwell
While I share your dislike for the global banking cartels and their ability to create credit from thin air, you openly discount that the price of oil will eventually rise which is a statistical fact (the timeline is the main question), and that historic human behavioural patterns and psychology will prevent BRICS from succeeding. I find your take on many issues somewhat intriguing, but on these two points lacking. Unless we as a species somehow, en masse, develop in a way to be able to be reflective, introspective, progressive, more empathetic, egalitarian, and be willing to sacrifice for others outside our own primitive, tangible realm of understanding, I will stand on my current aforementioned views with the hope that we focus on the core issues in society being education, allocation of resources, the benefit of the community over the self, and helping thy neighbour. Wishing you all the best for your Christmas and new year, we would be a bland world without difference in opinion :-)
All good, Interesting, and season's greetings to you too - as you say, the last thing we all need is a forum that is little more than an echo chamber.
Re your comments...
"...price of oil will eventually rise which is a statistical fact"
This is not a "statistical FACT" - it's a prediction. Also unless you use a stable frame of reference, such as gold, you will miss the hidden home truths - IOW, the example that I used where oil is currently only 60% of the price it was in the 1950s.
"...and that historic human behavioural patterns and psychology will prevent BRICS from succeeding."
NO - that is the exact opposite of my view - I live in hope that a cooperative mindset can win out.
"Unless we as a species somehow, en masse, develop in a way to be able to be reflective, introspective, progressive, more empathetic, egalitarian, and be willing to sacrifice for others outside our own primitive, tangible realm of understanding, I will stand on my current aforementioned views..."
That is precisely what the BRICS bloc's vision is about - as I have already pointed out.
One of the best current updates on BRICS...
https://geopoliticaleconomy.com/2024/10/19/brics-russia-multi-currency-…
Cheers
Colin
The difference this time is that in 90-91 Australia also went through a severe recession, so there was nowhere to escape to. This time, Australia is not only beckoning us in a beguiling way, but actively soliciting Kiwis like an Only Fans content creator at Schoolies.
Im not so sure inflation is under control ... Good luck with the growth projection...many will be churning thru credit just to get thru Xmas ... the average punter just doesnt have the surplus they used to have after a weeks toil.. outgoings making it tough for many...positivity wont pay the bills... economy is out of whack and until it finds a balance ...expect tight belts... Is that a helicopter I hear ?.....lol
I think the crux of our problem can but seen in one moment that might not have seen to be a big deal at the time but to me it's the overall picture and that is Chris Hipkins backing down on capital gains tax or wealth taxes just before the election to buy votes.
Both parties know they lose votes if they do things that affect the amount of money going into the property market. So that's what happens - most of our savings go into property rather than anything more productive because ultimately that what people vote for.
If you go on the Herald comments everyone there is blaming Labour for where we are at, but they don't see that their $million plus regular house is the problem, which isn't Labour's or National's fault - it's ours as the voters.
Labour just need to go back to their knitting. About the working person and families. They went way to ideological and radical and it cost the average working person and many working families and they eroded the voter base (what they did to the Taranaki region perfect example). the greens are no better, seem interested in everything but the environment. Think both got highjacked a bit by TMP and that scared people.
Both parties know they lose votes if they do things that affect the amount of money going into the property market.
Correction, both major parties know that proposing anything that negatively impacts the wealthy (as the wealthy don't save, they accumulate assets) will not get political support. I pray we reach a stage when the voting block is big enough to see that the majority will be better off if we address this core issue at the expense of the minority (wealthy asset owners), which will make a far better New Zealand.
Both the major parties (at least) and the RBNZ need to hang their heads in shame at this result.
Other countries have managed their way out of the sugar high of the COVID quantitative easing to at least some stability.
Just how inept is our management, and how do we change them all, as well as re-democratise the system that selects them?
And the per capita GDP is important as it compensates for the unending shell-game of importing people: we have more people, doing less. That's the path to ruin.
It’s easy to blame the current Government for the state we’re in. In fairness they inherited an economy suffering from the hangover of COVID and high inflation partly caused by COVID supply chain disruption issues and partly caused by unsustainable levels of public sector and consumer spending. To make things worse, there were no productivity gains associated with the overheating economy. They also inherited a housing market coming off the back of serious overheating due to super low interest rates and the ongoing Kiwi obsession with housing. A recession had to come. Was it wise to cut income tax with a massive public sector spending imbalance? Probably not. However, they could have kicked the can down the round but in fairness took the tough, unpopular but right choice of cutting public sector spending.
It’s no wonder that the recession’s so deep and it’s going to take a long time to come right.
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