Will their be a World Economic Crunch by Easter 2008?

No - stop stirring the scheisse you naughty man
6
10%
No - we've been through worse in recent history
1
2%
Not a crunch, but more like a significant slow-down
9
15%
Not a slow-down, but more like stagnation
3
5%
It's going to get a bit ugly, but NZ will be pretty insulated
7
12%
It'll be raining sharebrokers for a few days, but no worse than 1987
10
17%
I'm calling the second Great Depression... buttcakes
9
15%
Apocalypse Now! Stock up on canned food and get in your bunker!
15
25%
 
Total voters : 60

Who Wants To Call A World Economic Crunch By Easter 2008?

Postby Tama on Mon 12/Nov/07 12:06pm

The boom that the world economy has been going through over the past 5 years seems to have been built on loaning funny money to people who can't necessarily afford the debt: http://www.vorb.org.nz/ftopict-57194.html

As HDC has described here:
http://www.vorb.org.nz/ftopicp-1529898.html#1529898 wrote:the subprime thing is a bit of a misnomer. My understanding is it works like this:

Punter A goes into mortgage broker and says "sign me up". People in the US live and die by their credit rating (its something along the lines of points out of a thousand.. bill gates presumably being onethousand, and me being one).

Lender lends to Punter A and then hives off the debt (along with a bunch of others) to Lender B: Lender A takes a face value discount but gets money up front, plus the fees... this is a standard commercial transaction, and exactly what happens with your HP at Norman Harvey or whatever).

Here's where the subprime thing gets in: The various loans are split into different tranches: so all the "Good" ones go in one basket and that's sold on: so people with good credit history, lots of equity, and such (the easy ones from a lender perspective) go to one lender and they cause no problem.

The problem ones (no equity, bad credit history) get bundled and put into a basket with high risk high return type investors: and they're the ones that are falling over willy nilly.

Add to that mix some derivatives trading in these ones (basically lenders trying to lay off risk) and it gets very volatile, and very fragile. And lo, they fall over. Taking the whole easy credit arena with them.

There are a bunch of knock on effects also which are now affecting the "good" borrowers.

The problem goes a bit further than the mongs who borrowed to much to buy their WRXs/ Plasma TVs and the reet-companies who lended them the cash in the first place. From my reading there seems to be a nice ripple effect in place as the financial markets discover good debt mixed with bad. I should also note that oil is about to hit it's highest price ever and this time it's not because OPEC are giving the West wedgies (as it was in the 70s.)

The question seems to be can the world financial institutions manage this into a graceful stagnation/ slow burn or are we heading towards something more like 1987 or (Jebus help us) 1929?

Your thoughts viewers?
Tama
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Postby pissface on Mon 12/Nov/07 12:09pm

its about time to sell off shares and pay your mortgages clear :)
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Postby Tama on Mon 12/Nov/07 12:10pm

pissface wrote: its about time to sell off shares and pay your mortgages clear :)
Which leads to the problem if everyone sells off their shares :D
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Postby pissface on Mon 12/Nov/07 12:11pm

stop being a communist!
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Postby phunk on Mon 12/Nov/07 12:12pm

:pmob: Certainly wont be another great depression, that was govt induced.
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Postby Tama on Mon 12/Nov/07 12:18pm

If there is going to be a crunch...

Good:
Wiki wrote:In the year to June 2007, dairy products accounted for 21% ($7.5 billion) of total merchandise exports. Other agricultural items were meat 13.2%, wood 6.3%, fruit 3.5% and fishing 3.3%.



Bad:
Wiki wrote:Tourism plays a significant role in New Zealand's economy. Tourism contributes $12.8 billion (or 8.9%) to New Zealand’s total GDP and supports nearly 200,000 full-time equivalent jobs (9.9% of the total workforce in New Zealand).[35] Tourists to New Zealand are expected to increase at a rate of 4% annually over the next 6 years
Tama
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Postby phunk on Mon 12/Nov/07 12:19pm

:pmob: Lets just call it a significant 'correction'
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Postby michael on Mon 12/Nov/07 12:23pm

Government bailouts a-plenty this christmas...
michael
Member for: 15 years 6 months

Postby propster on Mon 12/Nov/07 12:49pm

All this doom is making me feel awful.


Anyone with knowledge care to say what happens to money in the bank?? Does it stay safe (providing the bank is safe) and just lose it's value with respect to the value of the nation's currency?
Last edited by propster on Mon 12/Nov/07 12:53pm, edited 1 time in total.
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Member for: 13 years 2 months

Postby michael on Mon 12/Nov/07 12:52pm

propster wrote: All this doom is making me feel awful.


Thats excactly the point, now go and drown your sorrows with some excessive consumption (not the alcoholic type)
michael
Member for: 15 years 6 months

Postby Tama on Mon 12/Nov/07 12:56pm

propster wrote: All this doom is making me feel awful.
Go and buy yourself a Plasma TV to make yourself feel better - I'm sure some nice company will lend you the money :thumbsup:

On a more serious note: As P-hunk-a-hunk-a-burning-love said this can be viewed as a "correction" - the past 5 years have seem some truly retarded price hikes in housing coupled with consumer-debt-as-a-lifestyle-choice. The gravy train had to stop at some point and we don't know if we're looking at it easing into the station or derailing off a precipice.

I reckon that amongst the pooze there's going to be some positives - house prices should return to earth and global oil consumption should drop, which has many benefits. It's not all doom and gloom :)
Tama
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Postby propster on Mon 12/Nov/07 1:00pm

Tama wrote:
propster wrote: All this doom is making me feel awful.
Go and buy yourself a Plasma TV to make yourself feel better - I'm sure some nice company will lend you the money :thumbsup:

On a more serious note: As P-hunk-a-hunk-a-burning-love said this can be viewed as a "correction" - the past 5 years have seem some truly retarded price hikes in housing coupled with consumer-debt-as-a-lifestyle-choice. The gravy train had to stop at some point and we don't know if we're looking at it easing into the station or derailing off a precipice.

I reckon that amongst the pooze there's going to be some positives - house prices should return to earth and global oil consumption should drop, which has many benefits. It's not all doom and gloom :)


Yes it is, if my parents hear about that, i'm out of home and they'll be selling the house FAST for half a mill while it lasts.
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Postby CrustyMTB on Mon 12/Nov/07 1:03pm

In the US the problem was they were giving out mortagages in the same way we give out car loans. No assets, discharged bankrupt, doing two 7/11 jobs? Want to borrow $1 million with no deposit to buy a McMansion? For a credit card rate of interest the American dream can be yours!

Now when you and half the people in your burb can't pay your mortgage and the bank forecloses, no-one is lending so the vultures sweep in and asset strip the house, bears move in to your yard and the swimming pool become a breeding ground for malarial mosquitos. Oddly enough this affects the market value of the half of the burb who could afford the vast loans they now have over their rapidly devaluing McMansions.

Luckily for NZ as the US stagnates, China is buying our butter...
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Postby Tama on Mon 12/Nov/07 1:04pm

propster wrote:Yes it is, if my parents hear about that, i'm out of home and they'll be selling the house FAST for half a mill while it lasts.
You don't have anything to worry about - they're too late: http://www.nzherald.co.nz/metro/story.c ... d=10475418 :)
Tama
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Postby CrustyMTB on Mon 12/Nov/07 1:05pm

Tama wrote: I reckon that amongst the pooze there's going to be some positives - house prices should return to earth


Those of us who were quite enjoying the god-like feeling of sky-high house prices may disagree :huh:
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