12 things Forbes has to say about NZs about to burst economic bubble

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trickle_down

Forbes is not known for their socialist or left wing activism, so when they predict a grim economic failure, we should should collectively poo ourselves a little.

National often get given this perception that somehow they are better economic mangers. This list of 12 economic bubble busters helps pop that myth…

1) Interest rates have been at all-time lows for almost a half-decade

2) Property prices have doubled since 2004

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3) New Zealand has the world’s third most overvalued property market

4) New Zealand’s mortgage bubble grew by 165% since 2002

5) Nearly half of mortgages have floating interest rates

6) Mortgages account for 60% of banks’ loan portfolios

7) Finance, not agriculture, is New Zealand’s largest industry

8) New Zealand’s banks are exposed to Australia’s bubble

9) Australian and Chinese buyers are inflating the property bubble

10) New Zealand has a household debt problem

11) Government overseas debt has nearly tripled since 2008

12) The New Zealand dollar is overvalued

…having Key shrug these issues off with the same casual contempt he made when a US drone killed a NZer this week just isn’t cutting the mustard any longer, no amount of “I’m casual about that” crap alleviates any of the failings of this Government’s lack of leadership on economic issues.

Labour are good for the economy, National are good for the monopolies. John Key’s tax cutting government has been for the financial elites, in the interests of the financial elites by the financial elites. The fact that our economy is now dominated by the financial sector (worth 28.8% of GDP) is glaring proof of how these neo liberal policies have fostered an environment where the rich just got a hell of a lot wealthier.

28 COMMENTS

  1. All these points explain why there will be a house price crash in Auckland, either before or after the ‘foreign housing speculators’ are removed from NZ.

    Point 11 should be shown to every National voter, especially when they dare to say or pretend that National is good for the NZ economy and every other party is bad for the economy, as if it’s some unwritten and surely obvious fact.

  2. Happy Easter Martyn
    Do you have some data to expand on 7) Financiers as the dominant industry in NZ. I’m not being a doubter, just alarmed at this as it certainly predisposes us to a gigantic domino effect. Is this from GDP figures?

  3. I’m glad at least in this case, that the Muricans are bringing it to our attention cos our own homegrown presstitutes and lamestream media would never have brought it up. Rockstar economy? Bahahahaha!

  4. Classic!

    You’ve found a commentator that writes opinion pieces that states that the NZ economy is a bubble waiting to burst.

    What you failed to mention is that over the past few months he has basically descibed the whole of South East Asia, China, Turkey, World Stock markets, and Gold as all being bubble economies about to burst.

    Congrats on finding someone whose opinion matches your own. This hardly makes him right or even likely to be right.

    • Actually gold is far from being a ‘bubble’, what with prices being kept artificially low. The UK and The US have a wee bit of a problem, with gold right now. For one thing, there seems to be evidence that neither are any longer keeping honest books, and haven’t done so for a considerable time. It has long been suggested that Fort Knox no longer has much – if any – gold in it, and what there might be remaining there is not quite the 99.9% premium purity. What certain interested parties saw when these concerns were being raised about 30 years back, was just one vault out of several, and one viewer felt, on reflection, the gold was more ‘orangish’ than it ought to have been, which suggests a tiny admixture of copper to eke out the reserve. Ninety-nine point five per cent is still pretty pure, but … not quite the same.

      But the problems go deeper. Of course most US gold reserves are kept in New York (Die Hard III wasn’t making that up), but even then there is evidence to suggest these have been depleted. Now, not all that gold belongs to the US. Some of it belongs to Germany; and Venezuela has also placed in US or UK hands much of its gold reserves for ‘safe keeping.’

      Recently, Venezuela asked for its gold back. They were denied. I gather Germany has also made tentative enquiries. You would think, wouldn’t you, that an honest gold bank would have said simply, yep, how do you want it delivered? Not these buggers. They reckon they might (might, forsooth!) be able to hand over a small portion of it. Over time. If you’re prepared to wait..

      You can safely infer from this, that those reserves, deposited for safe keeping by foreign governments, have been embezzled to prop up the ailing economies of the USA and the UK.

    • …For the rest: yep, you’re right: there are several bubbles boiling away in the pigs’ breakfast called the global economy. But I do believe you may be casting your net too wide. To say that ‘South East Asia’ (for instance) is a bubble, doesn’t really look far enough into the nature of the bubble.

      The US dollar is a bubble, staggering along still as the world’s ‘reserve currency’, which, by the way, is the only reason why the US and its dollar remains afloat. For some reason, the UK, US and even the dear old Kiwi government has touted the renascent property boom as signalling a recovering economy. God, spare me days! Basically, they are refuelling the very bubble that led to the global meltdown 6 years ago. When it busts – and bust it will – it will be a whole lot worse than last time.

      I do wonder whether that is why Labour has been busy sleepwalking to defeat. Maybe they reckon this years’ election is going to be a good one to lose…

  5. There can be little doubt in Auckland at least that housing prices are now supported only by a combination of cheap finance, foreign and multiple home buyers, clever real estate marketing especially by using auctions leaving prices uncertain and the ultimate lure of speculative gain. They are not supported by real income and insofar as rent is concerned, that can only go upward so far before the reality of income cuts off the demand and that’s already happening.

    There are quite a few people out there with some very worrying mortgages held together by speculative sellotape from the current bubble and if one of the cards in this house of cards let’s go, are in the shit, deluxe!

    Like Wile E Coyote in Road Runner house prices have walked off the cliff, its legs are spinning in mid-air awaiting the fall to who knows where.

    But in 2014 bullshit reigns supreme from our government, hollow housing accords, Nick Smith pretending he’s doing everything in his power when he’s clearly not and on it goes.

    It will probably take a horrible implosion of house prices like the 1987/2008 stock market failures that put many off the stock market for many kiwi’s to kick the real estate addiction, that or a very pro active government and with the current vested interests in National it’s not going to happen that way anytime soon.

    • Most these real estate spokespersons repeatedly tell us that there is no bubble, there is no excessive overseas buying, there is no problem at all, but would anybody listen to them, being in to gain the most from growing house prices?

      They are having many of their staff and contracting members gain hugely out of more expensive sales, so they will never tell us the truth. They have damned vested interests and will not want any government putting in policies that may stop their gold rush profiteering.

    • I thought the house prices were driven by the large demand created by Auckland’s expanding population. Simple supply and demand.

      • The shortage of supply component has been plucked out of the many drivers behind our housing bubble and conveniently used as the one reason to justify leaving everything just the way it is. Because at the moment when an individual can score a tidy capital gain tax free just by speculating on houses you don’t want the full reality, the ugly truth, to change anything.

        The thing is with supply and demand is its also driven by affordability and our houses simply aren’t affordable. At this very moment prices might just be able to be justified but only because the buyer expects capital gain to cover off the huge debt. Otherwise few could pay off these massive mortgages in their natural lifetimes let alone their productive earning lifetime without substantial house price inflation. It could so easily change to negative equity when cheap money ends and punters aren’t willing to punt.

        When prices outstrip ability to pay a house off in a reasonable time without inflation and so for the borrower there is no end in sight, its dangerous territory to be in as a county.

  6. The overvalued house prices and the high Natioanl debt scare the shit out of me quite frankly. Also the high reliance on trade with China – what happens when their economic bubble bursts? – we put all our eggs in one basket in the early 70s with trade to the UK – look what happened when they joined the EEC?

    • …what happens when their economic bubble bursts?

      It’s obvious, Wayne. The Nats and their witless sycophants will blame Labour.

      Voters will blame “politicians in general”.

      But really, until the public start taking an interest in economic and political issues, this country will continue to limp along, in a regular-as-clockwork boom and bust cycle.

      The greatest irony is that the Nats – who brand themselves as the “best fiscal managers”, are utterly hopeless when it come to the economy.

      This is the party that abandoned the compulsory super scheme, that, had we retained it, would be worth an estimated $278 billion by now (http://www.stuff.co.nz/business/money/9916584/Compulsory-super-would-be-worth-278b)

      Instead, a sizeable chunk of voters opted for “voodoo” economics, a-la the populist Muldoon.

      People are still voting for a populist National Prime Minister, and the new “voodoo” economics, aka neo-liberalism.

      Things never change.

      • I totally agree Frank, it seems that anything John Key says people believe, as in the days of Muldoon (from what i can remember)

        • Indeed, Wayne. I remember several issues at the time which got me drawn to politics. One of which was compulsory savings.

          It seemed contradictory that we were encouraged to save at school using the old Post Office Savings programme. We were told that saving for the future was a good thing and necessary.

          Then Labour’s compulsory super schemer was enacted around 1973 by the Norman Kirk government, with the object being that babyboomers save for the day when that massive group retired and made a huge call on the country’s superannuation and health budgets.

          When Muldoon dangled the ‘carrot’ of scrapping it and giving our money back, enough people were suckered in to vote for him and, after being elected, he duly cancelled the fund. I think I got $20 back or somesuch?

          It was my first lesson in populist politics and how the Right Wing could manipulate voters.

          I think my ‘journey’ from being a right winger to leftist started at about that time. (That, plus the logging of the Pureora Forests.)

  7. I confess I was surprised at how small agriculture actually is in this country (5.1% of GDP according to Forbes). I, like many New Zealanders have unconsciously believed the National Party good-news spin party that farming was the way ahead and it was a river of white gold. Seems like Forbes have exposed that myth for the b..s that it is (no pun intended). The underlying theme of this is that the National government is a short-term policy government that is unable to think ahead more than the next electoral cycle. It gambles with our assets (like its leader gambles with foreign currency prices) hoping it will strike the jackpot and if the jackpot does not come then it is all the oppositions’ fault. They are digging for fool’s gold like the fools they are.

  8. John Key’s tax cutting government has been for the financial elites, in the interests of the financial elites by the financial elites.

    The US is an Oligarchy

    After sifting through nearly 1,800 US policies enacted in that period and comparing them to the expressed preferences of average Americans (50th percentile of income), affluent Americans (90th percentile) and large special interests groups, researchers concluded that the United States is dominated by its economic elite.

    New Zealand has been following in the footsteps of the US and so it’s no doubt that we’re well on the way to being an oligarchy as well. Although, I think the more accurate term would be Plutocracy.

  9. Yep, I read Forbes, the Economist, the Wall Street Journal and those sources too at time, akin the motto, know thy enemy. And it is not all wrong that you read there.

    I have repeatedly raised the issues of the short term economic thinking by this and other governments here. We have one believing selling ever more milk powder, baby formula, logs, raw fish, fruit and now increasingly cheaper wine to the global market is the way to go. To me this is dumb economic policy, same as living off tourism, and off training foreign students with imported foreign tutors, and selling that by offering the students a tour on the sheep farm north of Auckland.

    The country is run like a sheep farm by a non academic shepherd, but a shepherd of the loyal, experienced old stock may actually have more sense than the idiot running the show at present.

    There is no doubt that we are doomed with the short sighted crap policies we are served by this incompetent government, headed by a speculator who cherishes Hollywood contacts more than wise economic advice by the OECD or even Forbes.

    New Zealand must steer well clear of the nonsense we are following, we need value added industries, more sustainable and local development, we need a new investment system and approach, also have the retirement savings and other available finances put into long term economic planning and growth for getting NZ Corp ahead.

    The currency speculation must be stopped, and a new set of rules and board overseeing the Reserve Bank is needed, so we have a stop to Japanese house wives investing in Kiwi dollars to gain a bit here and there, like playing Mahjong.

    Housing must be affordable, so stop overseas buyers coming in, to buy up large, bring in investment policies, for affordable homes, on a rent to buy scheme, and bring in better social housing. Stop importing cheap labour to work on farms, train local workers to work in agriculture, hospitals and other places, and that at fair wages, and those will also pay more tax and make the economy move forward, become active and function again, not live of residual speculative investments and returns for just the elite.

    I would have more ideas, and will stop here, but this country is one of the best resourced, just under used, under developed, partly underskilled and underpaid, it could do heaps better without Australian banks and others over charging interest and ripping us off. I wish a few more would get it.

    Over dependence on China and a few other economies will not make us succeed.

    Best wishes, Marc

  10. This NACT Government does not have a clue where it is taking the country, our almighty leader Hone Shon Key is more interested in his own personal ratings and winning the next election.

    It is all a game of charades and keeping up appearances. Who gives a rats arse about the economy and the have nots when there are photo opportunities to be had.

    • This NACT Government does not have a clue where it is taking the country

      Yeah they do – they’re taking us back to feudalism.

  11. Just a correction to the basic premise of your article. Forbes don’t endorse the bubble theory and they have not published it in their magazine. These are the are the views of a 28 year old called Jesse Colombo who predicts everyone’s economy is about to burst.

    • @ Anonymous User “Reality” – If Forbes published it on their website, they must endorse it to a certain extent.

      Otherwise if they publish anything and everything, would that include left-wing analysis? Somehow, I doubt it.

  12. “I thought the house prices were driven by the large demand created by Auckland’s expanding population. Simple supply and demand.”

    REALITY – That’s an ironic pseudonym!

    Have you been to an Auckland house auction lately (I’d be VERY surprised if you haven’t)?

    You are correct about “supply and demand”, however the important point is that, while the supply is limited, the heavy demand is predominantly from overseas buyers.

    Thanks to National, NZ is up for sale, and it’s a bloody bargain!

  13. Couple of questions and fewer answers:
    Why are Forbes even interested in NZ?
    Who else is involved behind the scenes of this
    Sounds like a Tory leak form a certain Prime Minister’s ‘top drawer’. Next thing you know Forbes (and Key’s cronies) will be telling everyone who wants to listen, that the only way to prevent the scheiss hitting the economic fan, would be to continue with a Republican government. GOP trying to influence New Zealand politics, in the same way that Palino and Wewege tried to influence a mayoralty.

    When things stink, you can tell that there are nasty Tories and croney capitalists scheming away somewhere close at hand.

  14. Governing parties traditionally have seldom given out much policy early in election years. The idea is that if you give out your policies too soon then it gives the opposition more time to pick holes in them. However I suspect we won’t see any substantive policies at all this time, National will figure that they don’t need any – their election campaign will be a US presidential style ra-ra-ra affair which will spend 99% of the time showing John Key visiting schools, visiting factories which he never knew existed until the day, visiting old people’s homes, visiting hospitals, visiting kindergartens as if he is Prince William’s shadow that has hung around after the Prince has left. He will smile and wave and when asked questions will say nice things to make us all feel comfortable and warm inside. We won’t get a lick of anything sensible out him but it doesn’t matter, he’s already got the election sown up hasn’t he? Who needs policy when you have won already? And if things unexpectedly start to go a bit sour he has his chief advisors – Cameron Slater, David Farrar, Paul Henry and Mike Hosking who can be relied upon to engineer some more dirty tricks and lies to save his bacon.

    • Well now that the eggs are starting to fly the Gnats may find the vaunted Key popularity is not as ironclad as they thought.

      And they have nothing else to offer.

  15. The thing about government debt and its level, is that that is not the significant factor in this country’s economic woes. In fact Government owned debt is still just a small fraction of this country’s overall debt position. Much the higher proportion of it is privately owned (i.e. incurred). This contrasts with the position that prevailed at the end of Muldoon’s tenure of office, when the ratio was roughly 50-50.

    In any case, when the national economy (the legitimate and ‘routine’ economy – I’m not talking the underground, mauve and disaster capitalist components) is tanking, that’s when governments ought to increase spending, to keep people in employments and hence earning an income, and therefore in a position to spend money. They can always recoup when the economy is buoyant. Instead, Governments and right-wing neo-con artists wring their hands over government spending and the levels of government debt, whilst private debt skyrockets. And the incompetent and illiterate press goes along because real investigative and independent journalism is too hard for them.

    But I haven’t got to the really stupid part yet (bad enough what I’ve described so far!). The fact is that world wide, governments have tacitly underwritten all private finance sector debt with the exception of student loans and household mortgagees. Recall several years ago when the BNZ threatened to fall on its arse? Recall the $600,000,000 bail-out? That was the signal to the banks that they could do anything they pleased even unto rendering themselves insolvent, and the dear old taxpayer, dragged kicking and screaming along by a complaisant government, would arrive to the rescue.

    I’ve long known that Finance (Fraud) Capitalism is utterly risk free. There is not even the slightest risk that the perpetrators lose money nor will they be brought before a criminal court as they deserve, let alone face any kind of custodial or monetary penalty. The only reason why most of us aren’t in the game to gain, is that you need two things to participate successfully: money, and lots of it; and the ear of the government.

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