Gotta say, I do agree with the writer of this piece. The West has indeed lived for far too long on borrowed capital, and it was only time before the debtors come knocking. It is a law of the universe — equations need to be balanced, or did we forget about math?
By Ian Purdy
By now you are probably fed up with the constant stream of negative financial news that is dominating our news media. Every day some new statistic is paraded as further evidence that the ‘end is nigh’. The western world has enjoyed a rather large debt-fuelled party over the past few years and the ‘morning after’ has finally arrived. The bad news is that the hang-over is likely to persist for some time.
While global sharemarkets have experienced significant falls over the past year, many New Zealanders are yet to feel the impact of the global financial crisis. However, it won’t be long. Retail sales were down over the pre-Christmas period, prices of imported goods will rise as retailers sell the goods that they purchased from overseas when exchange rates were higher, and unemployment will rise as firms struggle to remain profitable. While some may be celebrating the fall in interest rates and racing out to buy a house – it is important to remember that interest rates are at record lows for a reason – the Reserve Bank expects the economy to get much worse.