Dear NZ – the economic carnage from Covid, China and Ukraine war is coming

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As TDB has been pointing out from the beginning, the 3 Tsunami waves of Covid are:

1 – The immediate cost in human life and sickness from the virus.

2 – The economic carnage from the virus.

3 – The psychological impact of a unique universal event and the isolation and alienation and mental stress that has created.

We have passed the first peak with global deaths and sickness, we have just started the second wave of economic carnage and the psychological impact of all of this is barely beginning to be recognised. 

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To date Grant Robertson and Labour have told everyone listening that the inflation spike is but a blip and life will return to normal in the 3rd or 4th quarter of this year.

Really?

Inflation is but a spike and the economy will get back up on its feet with hyper tourism, exploitation of migrant labour and more international student language school scams.

That’s what will save us hu?

Y-e-a-h.

Bout that.

Look at China right now...

Nearly 400 million people across 45 cities in China are now under full or partial lockdown as part of China’s strict zero-Covid policy. Together they represent 40%, or $7.2 trillion, of annual gross domestic product for the world’s second-largest economy

…add the Ukrainian war and the instability to wheat and base line manufacturing in metals prices alongside the impact on developing economies

Smaller countries are also struggling. Many borrowed heavily over the past decade to deal with the effects of the 2008 financial crisis and the pandemic. Now, interest rates are starting to rise, just as the prices of essentials like food and fuel leap.

…and you have geopolitical shockwave after geopolitical shockwave hitting us and snapping neoliberal free market global supply chains.

Don’t believe me? Well ask the World Bank and IMF then...

The World Bank has slashed its forecast for global growth in 2022 to 3.2% from 4.1%, anticipating a sharp deceleration from estimated growth of 5.5% in 2021. The IMF’s latest outlook arrives later Tuesday.

World Bank President David Malpass told journalists that “severe overlapping crises” are weighing on the recovery.

“There’s Covid-19, inflation and Russia’s invasion of Ukraine,” he said on Monday.
Developing countries, many of which are facing high levels of debt and a plunge in the value of their currencies, as well as soaring food prices, are of particular concern, he added.

Breaking it down: Around the world, engines of growth are sputtering as prices rise and the war in Ukraine wreaks havoc on strained supply chains.

…the ramifications of this can’t be underestimated…

Europe, which relies heavily on Russia to meet its energy needs, is especially exposed. There, much could depend on Russian President Vladimir Putin’s next move. If supplies of Russian natural gas to Germany were suddenly cut off, Europe’s biggest economy would lose a shocking $238 billion in economic output over the next two years, the country’s forecasters have said.

…these pressures are impacting America as well…

In the United States, inflation has hit a level not seen in four decades. That’s forced the Federal Reserve to consider an aggressive pullback of its pandemic-era support for the economy, boosting fears that it could hike interest rates so much that it causes a recession.

…all of this is screaming inflation and economic stagnation and recession, so Grant’s optimism that Treasury are right and that inflation is just a temporary spike that will be fixed by hyper tourism, migrant worker exploitation and international student language school scams seems less glass half full and more shards of glass half in your mouth.

I don’t think we are ready for this jelly.

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17 COMMENTS

  1. the coming economic meltdown is triggered by current events but the root cause is systematic and inevitable…blaming it on this or that trigger instead of general ‘market failure’ misses the point.

    • Systemic insofar as the welfare state model that we’ve all blindly staggering through pretending not to notice that for the past 50 or so years has been slowly eroding and is now almost unaffordable and starting to collapse?

      NZ is very nearly broke, we can’t afford half of the things we want but potentially don’t need and it’s going to get far far worse if inflation really does take off as all those billions Grant just let melt away will need so much more of our national income to pay down as interest rates on that debt will be going up.

      I believe G that you’re not the biggest fan of neoliberalism and to be fair I think it’s time is coming up. Where we may differ though is around what replaces it as I don’t think a return to the cradle to grave social democracy that existed prior to 1984 in NZ will be accepted by the people nor can we afford it.

      As other parts of our respective lives have been disrupted, changed and occasionally enhanced by the explosion of social media, limitless information and all other things that have come with the internet age society has fractured and the sense of solidarity and community has gone. It’s this aspect that makes me question whether a social democracy type model would ever work as people are no longer willing to interact at a community level let alone be happy with a high tax welfare state if it means many do not work or contribute

      • A great analysis of the situation we face today . I do not profess to have answers but when 177000 are drawing an unemployment benefit while shelves in the supermarkets remain empty due to no workers apples rot on the trees due to no pickers something is wrong .
        A start has to be with someone telling the truth and say it is not right. Paying tax is acceptable by most but seeing it wasted is what upsets people eg $50 million on a bike bridge that was just a wet dream .
        There are some on the benefit who just cannot work due to mental,or physical reasons .They should be re classified and given more help to make them feel they are worthwhile . Those that simply chose not to work need to be sent to some sort of work camp doing some sort of clean up jobs .

        • our addiction to low skill, low paid jobs, the gig economy in general and NZ employers chronic lack of investment in THEIR OWN businesses perchance trev?

        • Correction. 11.1% or 348,000 are in receipt of financial support.

          These so called ‘jobs’ are ghost jobs.

          When numerous recruitment companies post the same jobs over and over again. They compete for the casual jobs as there is more money to be made per hour as a charge out rate.

          As far as the 177,000 number. I wonder how many are really employed when all you need to qualify as employed is 1 hour of work per week.

          These numbers Carmel puts out are massaged.

      • “what replaces it as I don’t think a return to the cradle to grave social democracy that existed prior to 1984 in NZ will be accepted by the people nor can we afford it.”

        How about feudalism? I’m sure we can afford that.
        It is funny how we could afford the welfare state when our per capita GDP was much lower. Now you see a lot more flash buildings and cars around, but we can’t afford to feed and house our people.

        A lot of people like Trevor Sennitt above now seem to accept the neo liberal suggestion that we just need to send all the dole bludgers off to labour camp. A lot of people have had their noodles well rinsed if you ask me.

        By the way Trev, I live in the heart of an apple growing area and the apples are getting picked just fine by brown people on very low wages as per usual. No worries Eh! But nice that you are prepared to “re classify” the sick to “make them feel that they are worthwhile” Not their fault that they are useless eh?

        We might have to create a few boarding pre-schools and the like, though, when we send kids’ parents off to work itinerantly doing back breaking work for minimum wage, wherever it happens to be.

        • I think the issue with welfare working back in the day was that NZ was wealthier off the sheeps back plus most people died well before 65 so health and pensions cost way way less.

          Also, the modern and incredibly expensive healthcare systems and drugs didn’t exist so when people got sick, they died. We now spend obscene amounts of money keeping granny alive for a few more months.

          I know that’s brutal but it’s also true.

      • systemic in the sense that the market led capitalist neo-lib dream has failed as badly as state capitalism did.

        the welfare state isn’t about fairness or ‘what it costs’ it’s about how much pollies don’t want to be hanging from lamp posts…so they dish out some crumbs, usually the minimum they can get away with…

        the welfare state didn’t usher in socialism it saved capitalism in the crisis no regulation created back then..

        now if you have better solution not to ‘spread kindness’ but to actually keep society in a functioning state.

      • technology is meaningless if you don’t have a pot to piss in….the real economy needs people buying stuff…if we impoverish them, they can’t spend = NZ business dies.

        helping the poor isn’t a ‘cost’ it’s a subsidy to NZ business, the poor spend HERE , the rich invest overseas

    • Look at these dumb shits waste men and material on another useless fucken war instead of giving Putin access to the Black Sea. How much safer would we all be right now if Washington hadnt have sent Ukraine an invitation to join NATO.

      So Biden, Trump, Obama then G.W. Bush all ruined it. Like seriously it’s go time.

  2. Nearly 400 million people across 45 cities in China are now under full or partial lockdown

    Those are mind-boggling numbers. We’re a tiny 5 million. Aus 25+ million.

    • Yep shanghai city China’s largestcity and port and province alone is bigger than Beijing itself and it is all in lock down one way or another. The citizens of china are starting to rebel against lock downs so If you ask me this virus’s peak is far from over.

  3. Gee why are these stats treated with such hype? So growth might go down to 3.2%? My God slowing down and keeping our manic exploitation of resources in check?

    Inflation the highest for 40 years….well many of us can remember those high rates and we are still here!

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