Investors checking the returns of their KiwiSaver fund in the last month may have done so with a wince of pain.
The combination of global interest rate hikes, the Russian invasion of Ukraine, and supply chain disruptions mean the global financial markets have had a volatile start to the year.
Back home this caused the NZX sharemarket to drop to its lowest level in two years on Monday, dropping to 11,381.70, the lowest level since June 2020.
All of this has not been good reading for anyone checking the balance of their KiwiSaver fund. So we asked the experts to explain what is going on, and what investors can do about it.
It seems some in the mainstream media are realising that economic carnage is looming.
With 60% of NZers with a mortgage refining this year coming off historically low interest rates to rapidly rising ones with the gravity of debt we now have is reaching the event horizon of a debt black hole.
Most commentators didn’t understand the magnitude of Grant Robertson lifting the debt ceiling earlier this month.
By taking Crown assets like the NZ Super Fund, and liabilities like the debt held by Kainga Ora, Grant has managed to leverage our debt ceiling up.
By simply allowing our debt ceiling to grow, Grant manages to continue Government spending without raising taxes while keeping the rainy day money at the ready.
And that is what most commentators are missing.
Robertson is one of the most cautious Minister’s of Finance Labour have ever had, who is always shooting left wing ideas to stop populist left economics from ever spooking Treasury.
His pact with the Wellington Bureaucracy is that he is the trusted pair of hands who won’t ever allow neoliberalism to be challenged beyond the most broad of measurements (the well being budget).
Grant’s solemn promise to the Nazgul in Treasury is that no Bernie Sander’s Left wing populism will ever be allowed to bubble up from the angry people.
Grant looks like he’s loosening up the purse strings but has zero intention of spending that purse and this is what should be making everyone nervous.
Grant is prepping a higher debt ceiling because he is smart enough to see the looming dangers on the horizon.
Putin is just starting.
The recession in America and Europe is just beginning.
China is becoming more unstable by the passing week.
Geopolitical crisis + economic meltdown + catastrophic climate change = looming meltdown.
Grant is raising the debt ceiling not to spend more, he is raising it because he knows what’s coming next.
When a politicians as cautious as Grant is opening the cheque book, we should all be very concerned.
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.
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.
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?
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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