Kiwi’s have an extra ordinary capacity for delusional thinking. For most the USA is stil the richest country on earth, the wars are helping those poor Arabs and Afghans to rebuild their country and this dip we’re going through will pass just like the ones we’ve had in the last decennia.
I’m sorry to have to break it to you but the news is bad.
This Thursday the Dow Jones had its worst stock market crash since 1930.
Last month over 8000 houses were foreclosed on in the USA. That’s right 8000 families per day lost their home in the richest country in the world and the number is only going up.
The housing market which sustained the USA economy for the last 7 years is coming crashing down and already 2.000.000, that is 2 million houses are empty and unsaleable. The group of home owners now at risk is almost 3.000.000 which is to say some three million families might end up on the streets with any form of support from the state or a community. It doesn’t end there. The value of the house around foreclosed houses immediately drops 10-20% so if people have bought their houses in the last two years at premium prices those house will not be worth what they still have to pay for it. With the housing market the house building market is folding, leaving thousands of people out of jobs causing more people to default on their mortgages. With almost all production jobs exported to China and other low wage countries the only jobs available for Americans are service jobs: Nursing, cleaning, waiting tables, etc. etc. But with the real paying jobs gone people can’t afford hospitals, dining out or cleaners. You get my point?
And then there is the next bubble to burst: the credit card debt is about to explode.
Already 7.7 trillion of value is lost due to the subprime crisis the collapsing housing market and world wide there is som 2.3 trillion dollars of credit cards debt due.
What does it have to do with the New Zealand economy?
Well as you may have noticed the local housing and house building market has slowed down if not actually collapsed.
The artificially created housing market in the US was also created here. Which means we will be seeing some of what happens in the States happening here. Many jobs have been outsourced to China and other low wage countries from New Zealand as well and as inflation will cause the US dollar to collapse (Fortis onw of the biggest world banks announced that it was preparing for a total meltdown of the US dollar in a few days or a few weeks and that is scary stuff) and with it global trade will slow down to a trickle.
Due to deregulated banking regulations Financial institutions have been able to speculate to destruction with food and oil prices and this means that access to these two basic nessesities will get harder and harder.
Causing our economic collapse. You think we can trade with China and India? Think again. The predictions speak of some 9000 banks in the US alone that will collapse in the next few months. General motors and City group are on the verge of collapse. China’s growth is directly related to the level of consumerism in the states and will collapse with the USA. The same will happen with India.
What we have left: the Dairy industry will become unsustainable because it relies on Fossil fuel to fertilise its paddocks every year for their cows. I spoke to a farmer the other week and he saw the price for fertiliser double in price within a week. This will drive up the price for Milk, Cheese and Butter to prices this world has never seen and that is only just the beginning.
If the USA in its mad dash for selfdestruction attacks Iran, there will simply be no more oil of fertiliser or other oil based products for years to come. Iran has already threatened to close the street of Hormuz if attacked and that means no more oil.