Wednesday, January 23, 2008

Recession ahoy?

The papers and the tv are full of stories about the sharemarket crash on Monday.
There are fears of a global recession, or at least an economic slowdown.
The US situation looks pretty gloomy, despite George Bush announcing some taxcutting policy to keep the spenders spending.
In the UK, the state of the housing market, the government intervention into the Northern Rock finance house is causing jitters.
But i saw somewhere that Australia looks set to be safe as it's economy is strong.
I haven't seen much about New Zealand but the Kiwi dollar seems jumpy.
What about New Zealand? Will New Zealand survive a global downturn or recession?
And if 2008 is tough, what will the impact be politically?
Even in the best economic circumstances in a generation, which we have seen in recent years, Kiwi living standards have barely changed.
Now, we also face higher fuel costs and food prices are rocketing thanks to the Indians and Chinese having the means to eat better and biofuels production taking land out of food production.
It all points to tough times ahead.
How will New Zealand fare and how much will Liarbour get the blame.
For Gordon Brown at least, the omens in Britain are not good.
He has had seven fat years but did not put anything aside for the lean years to come.
At least Michael Cullen can say he has.

1 comment:

reid said...

This is the beginning of a re-orientation in world markets. At the end, European and Asian consumers will have supplanted the US consumer.

What does that mean for us? It depends on our relationships with Asia, of course particularly China, but also ASEAN.

At some point I expect to see if not a hot war at least a cold conflict between China and the US, as China flexes its economic and diplomatic power. We are going to have to make a choice as to whether we stand with the old or run with the new. And if we decide the latter, how do we then relate to Australia, and deal with the unpalatable sides that Asia sometimes displays?

Both options have significant downside, but I don't believe we will be able to avoid the choice by sitting on the fence, and we all know that Asians have very long memories.