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Back into recession

Written By: - Date published: 7:15 am, October 6th, 2010 - 78 comments
Categories: Economy - Tags: , , ,

NZIER has released its quarterly survey of Business Opinion and it’s bad, bad news. The survey is a very accurate forward indicator of GDP growth. For the September quarter, it shows growth of -0.2% (vs +0.2% predicted by NZIER just a month ago). That doesn’t include the impact of the Christchurch earthquake – that’s predicted to knock 0.5% off December quarter growth, which NZIER was already forecasting to be -0.2%.

Economists BERL are warning of a double-dip recession. I would say it’s past the point of warning. the ship has hit the iceberg, we’re just waiting for the damage assessment teams to come back and tell us exactly how bad it is.

It’s interesting to note the confusion in economic circles over just why the recovery here and abroad has been so weak, and why another recession is already looming. Usually, after recessions the bounce-back is nearly as fast as the fall. Not this time. Why not?

I just keep looking at the oil price. Over $80 a barrel again. Doubled in two years. Near the crucial $100 a barrel mark that causes recessions. That’s the stuff the world economy runs on, yet the effect of its price is virtually ignored by mainstream economists. No wonder they can’t work out what the problem is when their economic ideology ignores the importance of energy and assumes that there will always be plenty of resources or substitutes to fuel growth.

For the Government, this should be the final clue that you can’t just govern by smiling and waving. The economy needs leadership. We need a government focused on building a green economy now.

While we’re at it, let’s look at how Treasury has done with its GDP forecasts. Remember, the Budget came out in late May, most of the way through the second quarter of the year.

Treasury prediction Actual result/new forecast
Q1 0.80% 0.50%
Q2 0.80% 0.20%
Q3 1.60% -0.2% (NZIER)
Q4 -0.10% -0.2% (NZIER, not counting quake impact)

Considering how wildly over-optimistic Treasury’s forecasts have been so far this year and that they predicted negative growth in the December quarter, I wouldn’t be surprised if we’re actually attacked by hyper-intelligent shark people.

Already, the economy is 0.9% smaller than they were predicting just four months ago and it’s likely to end the year as much as 3.1% smaller than they thought it would be. This has serious implications. Treasury’s growth predictions underpin their fiscal projections. The economy’s going to be a hell of a lot smaller than they thought and companies are going to be less profitable – that means lower tax revenue and higher benefit costs, which equals higher debt.

Once again, you’ve got to ask yourself if borrowing a billion dollars to fund tax cuts for the rich was really the smartest decision the Key government could have made.

PS. I wonder if John Key, economic wizz-kid, still believes that we’re “coming out of the recession strongly”?

78 comments on “Back into recession ”

  1. Cnr Joe 1

    economic whizz kid?
    money trader i thought. smiling assassin, i heard, but economic whizz? gee
    I haven\’t given the key enough credit..

    • Marty G 1.1

      I should have used ‘irony’ marks 🙂

      • Zorr 1.1.1

        There was an article on Stuff yesterday (don’t have the time to dig through and find it now) with John Key specifically addressing these forecast figures and basically trying to hold back the tide by the power of will alone (and some snazzy PR)

        • Marty G 1.1.1.1

          thanks Zorr. Here’s the article: http://www.stuff.co.nz/business/industries/4198050/NZIER-confirms-double-dip-recession-fears

          god, he predicts that the economy will surge in summer.

          “My sense is we are making progress and I think there is very little chance of a double dip global recession which will help New Zealand,” Mr Key said.

          “I don’t think we should argue we are in a recession yet, we’ve had five quarters in a row of growth. But it has always going to be a fragile international environment.”

          The economic environment had been tough with the past winter.

          “My sense is that they are feeling a bit better now that summer has come, economic activity is starting to pick up.”

          Even Treasury’s Budget numbers have the December Quarter negative (-0.1%) and the NZIER September Quarterly predictions have it at -0.2% – both of those before the impact of the quake.

          .. and summer hasn’t come yet. you can’t take a word he says at face value. I guess in Hawaii it seems like summer every day 🙂

          • ghostwhowalksnz 1.1.1.1.1

            Funny how while hes out of the country he makes it seem like hes in NZ.

          • Bored 1.1.1.1.2

            Marty, how I love the figures of prediction ersus reality…I think we need to ask for a refund of all the treasury economists wages immediately, followed by firing for non performance. It all backs up what I say a lot, we would be better off with chicken entrail readers, tarot card readers and tea leaf inspectors. More accurate and would cost us less.

            Interestingly, as a child I listened to the vicar and his sermons before I discounted it all as a good construct based on foundations of sand. And that is precisely the problem with our current High Priests, the economists. They propose a faith based upon their perceptions of reality, which of course are viewed only to suit their constructs, so naturally they will always be wrong. Sad individuals that they can commit their whole being and lifes work to unreality.

        • ghostwhowalksnz 1.1.1.2

          Is this it
          http://www.stuff.co.nz/business/industries/4198050/Recession-not-returning-Key

          But of course he needs to lie while doing it.

          The tax cuts on October 1 had put $4 billion into the economy which was a big stimulus.

          But of course the GST increase has taken even more out. But since when did Key know anything about finance

      • roger nome 1.1.2

        Yeah – currency trading is the bum job at Merryl Lynch. Now raising capital for vulture aquisition and restructuring – that’s where the bright people go in that organisation.

  2. Pascal's bookie 2

    The economy’s going to be a hell of a lot smaller than they thought and companies are going to be less profitable – that means lower tax revenue and higher benefit costs, which equals higher debt.

    Also, that ‘revenue neutral’ tax package is about to have it’s assumptions tested, hard. I wouldn’t have the first clue as to how to go about compiling it, but will there be an official stat somewhere about the effects of the tax changes on the deficit in the budget?

  3. BLiP 3

    Treasury prediction Actual result/new forecast

    Q1 0.80% 0.50%
    Q2 0.80% 0.20%
    Q3 1.60% -0.2% (NZIER)
    Q4 -0.10% -0.2% (NZIER, not counting quake impact)

    The differences between the actual numbers is one thing, but consider the percentage difference between the estimated and actual. Although small fry in comparison and certainly not as complex, if I got my estimates that wrong, I’d be looking for a new job. Not so if you’re an economist, eh?

    • Draco T Bastard 3.1

      From what I’ve seen, economists get paid extra for being wrong. They haven’t been right in the last 30+ years and yet they’re still employed and they’ve been getting higher than inflation wage increases. The most successful (read “richer”) work for right-wing think tanks. Apparently, telling people what the capitalists want is good for your pocket book.

  4. Choice..my rent just went up 30 bucks. Taxcut wipeout in one fell swoop

    I sure do feel no worse off….NOT !!!

    …can’t wait til summer

  5. burt 5

    Should have killed off WFF and introduced work for dole afterall. Still the lefties will be all excited as their constant voting for govt that always ends in recession shows they clearly like it when the people are poor and dependent on the state.

    • Pascal's bookie 5.1

      Because obviously what the govt needs to do is reduce all that excess demand in the economy.

    • Blighty 5.2

      yeah that’s why the number of beneficiaries went down by 120,000 under labour and the nation’s wage packet increased by 30%

    • roger nome 5.3

      Burt – when are you going to learn? Determination is no replacement for intelligence, wisdom and knowledge. You should just accept that you’re not cut out for this blogging caper. Why not focus on growing your business instead? In that area determination counts for much more than the other things i list.

    • Vicky32 5.4

      “and introduced work for dole afteral”
      And how is that supposed to have helped?
      Deb

  6. Craig Glen Eden 6

    Burt slight problem the left are not in power. Your man Key is the Prime Minister remember, I didn’t vote for this conservative approach to managing the economy.

    Most people on this sight have been saying this Government are not doing enough and if they don’t do something soon we could end up in recession again.I guess they where right.

    Is punishing the people who are already the less well off the only mantra that you can come up with? For Pete sack man your comment is irrelevant as a smile and wave PM.

    • Rob 6.1

      Still fixated on stimulus, you think you can get out of this mess by just dumping money all over the place. Imagine if the Govt had done it when you guys were demanding; we would be in a much worse state. The US is a shambles; the $750B they poured in has done nothing. I think you guys need to open your eyes and realise that dumb blind political ideology is not going to have any impact on this situation.

      Obama came on the promise of funding “shovel ready” projects. None of this happened, unemployment is over 10%, people are still leaving their homes, and manufacturing is perilous. Why don’t you front and explain exactly how you want to see how our country can recover from this mess.

      • Pascal's bookie 6.1.1

        The US is a shambles; the $750B they poured in has done nothing.

        http://cboblog.cbo.gov/?p=967

        That’s on the effect of the stimulus bill, from the Congressional Budget Office. So why aren’t things better?

        http://yglesias.thinkprogress.org/2010/06/the-no-stimulus-economy/

        Net stimulus has been near nil once you take state level government contraction into account.

        Explain how the economy would be faring better absent federal stimulus.

        • KJT 6.1.1.1

          What would have happened if the stimulus had been to real spending instead of too the banks so they could waste it?

          • Rob 6.1.1.1.1

            It wasn’t to banks, it was presented as subsidies on a range of manufactured items, in effect they discounted prices on locally produced consumer items. The aim was to stimulate the economy.

            • KJT 6.1.1.1.1.1

              Are you saying most of the money the US Government put into the economy was not put into the finance sector?

            • Pascal's bookie 6.1.1.1.1.2

              It wasn’t to banks, it was presented as subsidies on a range of manufactured items, in effect they discounted prices on locally produced consumer items. The aim was to stimulate the economy.

              I’m not really sure what you mean by this, but the stimpak was multifaceted, a large chunk of it was in the form of tax cuts, there was also funding made available to states for infrastructure spending and payroll subsidies, research funding, all sorts of things.

              • Colonial Viper

                Well tax cuts are great if you still have a job. Roughly 20% of Americans are either unemployed or underemployed right now. 30% in some States.

                And even if you still have a job you might decide to spend your tax cuts simply by paying your credit card debt off – guess what, that stimulus aint going nowhere near the corner shops, its going straight back to the banks.

                As for State spending, Congress did not agree to get recently needed money to support State budgets. Result: lots of laid off teachers, policemen, municipal workers. Congress also failed to extend expiring unemployment benefits. Result: even less money flowing into local shops and businesses, and a sharp increase in foreclosures (dragging asset prices down further)/poverty.

                Also, best not to mix the US stimulus package with the US TARP (Troubled Asset Relief Program). The latter was the ‘Wall St bail out’ that everyone talks about.

                • Pascal's bookie

                  Don’t disagree with any of that, I’ve said all along that the package was poorly constructed and probably too small. That’s different from saying it had no effect and was therefore a bad idea though, which is what I was responding to…

        • Rob 6.1.1.2

          “Explain how the economy would be faring better absent federal stimulus.”

          Who would know, I am not a futurist, however I was there last week on business for 10 days across Ohio, PA and CO. When you talk to people and see levels of activity you get a sharp realisation that the spend hasn’t worked and they are now left with having to pay for it. This has really resulted in few options left to get things going. Auto is very sad, new home building is down below 1M PA, and the value of current housing stock is through the floor. Do you honestly think that the people of the US are looking at the stimulous as being successful.

          • Pascal's bookie 6.1.1.2.1

            No one disputes that the US is in a hole. You however said that stimulus is a dead end and that the US package did nothing. I simply pointed out that, in fact, there has been very little if any stimulus in the US economy because the federal package just made up for the retrenchment by state level governments. I also pointed to CBO estimates that the federal package did have quite sizable effects. ie that without the stimpak they would be even worse off.

            If you don’t have any evidence that they would not be worse off without the simpak, then you don’t have any evidence that it did nothing.

            If your only argument is that the people of America think it didn’t work, then you haven’t got much of an argument.

  7. ianmac 7

    Funny that Treasury seems unable to predict given the tripling of their staff/consultants? Perhaps that should be crippling by tripling?

  8. KJT 8

    Time to reassess how the economy works.

    Past time for us to have control over our own economy.

    North Dakota, One of the best places to live in the States right now, Has democratic control of local banking.

    • Bored 8.1

      Interesting concept KJT, the real issue I believe in todays economy is the total disconnect between money and transactions…..I posted yesterday on Open Mike about the level of debt (extended by credit or paper manipulation of derivatives etc) worldwide that was not backed by money supply. Going local can only actually reflect transactions based upon real goods and services changing hands. The biggest single benefit of this is that bankers dont get into the act in order to do fractional acts or ticket clipping.

    • Draco T Bastard 8.2

      We definitely need to reign in banking. There’s no way that the GFC would have happened if the banks couldn’t print money with little or no limits. The ability to create money must be government only. Leaving it to the private sector invariably results in economic collapse and mass bailouts by the government of “too big to fail” private companies. Great for the rich, who get rewarded for breaking the economy, not so great for everyone else.

      • KJT 8.2.1

        Money is eventually a token of work/energy. The derivatives and finance markets have managed to expand the money supply and velocity way beyound the amount of production that is possible for a long time in the future. Without a realignment their will be a lot of pain.
        We are expected to pay for this expansion by working for less so the money supply boosted by the finance sector is sustainable. Austerity by workers so that the finance sector can keep the wealth.
        The best thing that could happen is all countries refuse to pay the debt and go back to trade with money simply as a token of exchange rather than a commodity in itself.

      • Colonial Viper 8.2.2

        Limit financial sector profits to <5% of GDP.

        That's a fair margin to make on providing basic necessary transactional and credit services to the economy.

        • burt 8.2.2.1

          And make a few very privileged operators filthy rich. Oh no that’s offensive to the ideology that decided it should 5% so lets make consumer finance a state monopoly situation and fund it from income earners to stop the race to the bottom supporting loan sharks and the like. Bloody socialists, can’t help yourself playing god with the economy can you.

          • Billy Fish 8.2.2.1.1

            Burt I am fed up with you spouting your Politically Correct drivel. It’s lefties like you that are ruining this country.
            Political Correctness gone mad!

        • Draco T Bastard 8.2.2.2

          The financial sector profits for the last few decades has been due to speculation fuelled by the fractional reserve banking system (Banks can effectively print unlimited amounts of money). Stop that and you stop speculation. The financial sector will, most likely, then drop back down into the minimal (Near zero) amount of profit that it should be getting.

          • burt 8.2.2.2.1

            And the recent collapse was also influenced by the failure of the giant state US lenders Fanny-May’s and Freddy-Mac’s. Driven by political pressure to better social indicators these institutions were driven to enabled to lend to sub prime borrowers by loosening lending requirements to improve low income home ownership rates. Speculative lending by the state results in corp bailouts, who would have figured intervention would hit the tax payer twice.

  9. john 9

    Oil is Black Gold: the fuel we obtain from it is vital for all modern economies. Oil price spikes are historically correlated with recessions. Let’s say NZ uses 250,000 barrels a day, the doubling of price to $80 means we are paying out to overseas suppliers an extra $10,000,000 a day or $3,650,000,000 a year is going out of the economy.That’s equivalent to a Canterbury Earthquake of extra cash going out of our economy : This must obviously have a depressing effect, meaning we have less money as a society to play with. Also the fuel price of exporting our produce goes up increasing sale price and coupled with depressed economies overseas due to higher fuel costs can lead to reduced demand for our products.
    Higher operating fuel costs certainly does make countries poorer. If we are getting poorer and likely to further as Oil Prices continue upwards which they will as we are past peak then borrowing money overseas at interest rates in anticipation of a recovery which will never happen is living beyond our means and channeling that money to the already well off is irresponsible “Let’s keep the Party going at all costs” and at the expense of poorer NZers as well with the regressive GST increase as well.
    I think we should be battening down the hatches for the continuing economic storm which has a long time to go yet(And with Peak Oil may not ever end but just get worse and worse) and affirming “We are all in this together” meaning we should be financially assisting poorer kiwis rather than throwing money away to rich kiwis who will take more foreign holidays exporting more and more of our hard earned wealth,not to mention consuming foreign manufactured goods such as expensive cars.

    • john 9.1

      The UK’s Oil Fiesta has come to an end. In the next 30 years they will be dismantling some 260 platforms in the North Sea which are non producers. Now the Party’s over they are in deep economic trouble. They have to import increasing amounts meaning their wealth is bleeding out to overseas suppliers.

      http://www.bbc.co.uk/news/uk-scotland-11472352

      • john 9.1.1

        Like here. The UK Government are making the poorer people pay with austerity measures while bailing out their paper finance sector and not touching the rich at all! The UK since Thatcher has embraced the Winners and Losers American style society:If you are a loser you deserve to lose some more that’s what losers do! They don’t go for the social cohesion we are all in this together model.

        • Bored 9.1.1.1

          Interesting thing here John, for stating the issues as they really are as opposed to the miasmic construct of popular wisdom you will I predict get slagged off, by both sides (left and right). What you have pointed out is the collective failure of the current materialist construct of reality, which encompasses the same basic system of wealth creation and finance regardless of who is running it (left or right). It is time to reassess the entire living arrangements.

    • Bored 9.2

      You are spot of john, you might have mentioned the asset values in our economy will crash as the real price of energy becomes apparent (based upon scarce money and scarce oil). The lack of real hard currency to back up the debts incurred by derivatives (in our case mortgages taken out against future asset value) will crash as energy costs take the money away from people who need to also pay interst on debt. Mass foreclosure territory.

      The nouveau riche and bloated middle classes who have had their holidays and new 4WDs on the tick via credit paid for by increasing asset values (such as the second house paid for by rent) will soon find that they become very proletarian as the receivers and repossession agents take the place of credit advancers. The future scenario is that both credit and cash will be too scarce for the sale of assets such as real estate at todays rates so asset prices will crash, expect to see a lot of negative equity.

      I suppose the above is where the rubber (of energy decline) hits the road (of the credit bubble and consequent debt obligations).

    • Draco T Bastard 9.3

      Prediction: Things Will Unravel Faster Than You Think

      We happen to live in a non-linear world; a core concept of the Crash Course. But far too many people expect events to unfold in a more or less orderly manner, with plenty of time to adjust along the way. In other words, linearly. The world does not always cooperate, and my concern rests on the observation that we still face the convergence of multiple trends, each of which alone has the power to permanently transform our economic landscape and standards of living.

      Three such trends (out of the many I track) that will shape our immediate future are:

      * Peak Oil
      * Sovereign insolvency
      * Currency debasement

      Individually, these worry me quite a bit; collectively, they have my full attention.

      Need to subscribe to read Part II but Part I lays out the data.

      The simple reality is that the extended boom of the last 150 years was due solely to oil and we’ve now hit the limits of oil supply. It won’t get any better from here on out but it can, and most likely will, get a lot worse. We need to stop borrowing from overseas lenders now. We also need to get all our businesses and land back into NZ ownership. If we don’t then we will be even worse off.

      • Bored 9.3.1

        tTherin lies the issue, we have squandered the time and resources we need to transition smoothly, we now are hitting the speed bumps faster than the suspension can cope, its going to happen in short sharp jolts, faster and faster until we think they are the norm.

  10. terence 10

    Marty,

    I wouldn’t race to blame oil prices just yet. After all it wasn’t oil prices that caused the great recession nor Japan’s lost decade. Paul Krugman has a pretty convincing argument, I think, that we (meaning the developed world although obviously not NZ) are used to relatively quick recoveries from recessions because many of the recessions that form our frame of reference were the products of central banks trying to squeeze inflation out of the economy. Once the inflation abated, interest rates were eased and the economy took off again. On the other hand, recessions in the wake of financial crises and the bursting of bubbles, are much more likely to linger in the absence of concerted attempts to stimulate the economy.

    None of which is to say that we shouldn’t be trying to wean off oil, of course.

    • Bored 10.1

      terence, the credit expansion was based upon an economy that could reach for the sky and prop up a bubble with real growth based upon cheap and (key point) available energy in the form of mainly oil. This made growth in production and consumption possible.

      Todays scenario is that oil supply and oil demand are diverging, we cannot as we did in 2005 pump enough oil to match demand, we now have falling supply and flat demand. Consequently any growth in production will have to cope with both more expensive energy and less of it…a scenario which will make real growth impossible, and real decline the norm. So no growth, lower consumption, deflationary times, depressed economy. In short we have not got the energy to prime the pumps.

    • Bright Red 10.2

      looks to me like the 2004-2008 oil spike caused the great recession.

      What do you think triggered the sub-prime crisis?

      • Bored 10.2.1

        Credit (promisary notes based upon repayment sometime in the future) being leveraged to create more credit being leveraged to create more credit. meanwhile the expectation is that prices will go up continuously which encourages more “investors” to take advantage of credit.Its a Ponzi scheme, eventually it must burst as the numbers able to enter the market peaks and the ability to pay enough “interest” to further extend credit dries up. Next thing, prices drop, people panic and sell low, prices drop even further, nobody buys…eeeeeeaaakkkkk!!!!!!! Thats the South Sea Bubble, Tulip Mania, Louisiana Scheme, Great Depression etc etc, theres a whole pile of bubbles gone by.

        • Bright Red 10.2.1.1

          but what was the pin that burst the bubble?

          You’ve got all these subprime mortgages being used to buy mcmansions in exurbs – dormitory communities located hours away from their main city. The people living there are dependent on car travel for everything and a lot of it – drive for hours to and from work, drive to get food, drive to go anywhere.

          These people already can’t really afford their mortgages – they’re relying on capital gain. Then the rising oil price eats into their ability to pay their bills. they can’t reduce their oil dependency, some default. housee prices start to fall, they go underwater and realise that there’s no capital gains coming. more defaults.

          investors put their money in oil because it’s rising and everything else is teetering. more sub-prime mortgage holders go under – bang, subprime crisis, soon global financial crisis.

          • Bored 10.2.1.1.1

            The pin is when enough people default on mortgages in a single institution and they report trouble (i.e bankruptcy, cash flow issues, etc). The stock market or similar notices, it happens to a few too many banks etc and panic ensues. If I remember rightly in the latest case it may have been Fanny Mae and Freddie asking to be bailed out of obligations…cant remember the details.

          • Colonial Viper 10.2.1.1.2

            but what was the pin that burst the bubble?

            Really simple. When the asset bubble was at its maximum height, and one buyer looking at a way overvalued house said “thanks but no thanks” instead of “whatever debt I need to get into to buy this I will”.

            At that point, house prices started collapsing, highly leveraged derivative positions based on that asset bubble became over leveraged, losses accumulated at an astounding rate and voila!

            Bubble burst.

      • Rharn 10.2.2

        Too much credit. Sooner or later someone is going to ask for their ‘payback.’ Oil plays a part but the reality is if you keep printing money it eventually becomes near worthless

    • terence 10.3

      By the way, Paul Krugman and Robin Wells have a series of two great articles in the NYROB explaining the competing explanations for the bubble and it’s burst, and discussing what to do:

      http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/
      http://www.nybooks.com/articles/archives/2010/oct/14/way-out-slump/

      and Bored, if global oil prices oil were the issue, why are some countries recovering from the GFC so much better than others?

  11. randal 11

    maybe it is the insatiable greed of humnaity being given an enforced holiday.
    a suspension if you will.
    if peak oil is real and I believe it is so then it is going to take some more time before it bites.
    since world war one all recessions have been engineered by monetary authorities and it would be foolish to think otherwise.
    at the moment it is just paying for everything we bought on credit.
    when peak oil bites then the shite is really going to hit the fan and who knows what the outcome of that will be ?

  12. alloverrover 12

    excellent to see some discussion joining the dots between a diminishing supply of oil and the failing economy. 4 of the last 5 recessions have been due to oil shocks. Jeff Rubin former chief economist for CIBC World Markets argues persuasively that the 2008 recession was caused by peak oil not sub prime mortgages … http://www.jeffrubinssmallerworld.com/

    Meanwhile here in godzone we live in this complacent bubble thinking we are some how immune to the next oil shock. Even when two Canterbury University academics report on the impact of fuel restraint (peak oil) on New Zealand’s economy, http://oilshockhorrorprobe.blogspot.com/2010/09/peak-oil-could-halve-nzs-economy-says.html

    and project that our economy will be halved in 20 years we ignore it in the mainstream media .

    Their alarming conclusion is that with just 10% less fuel available, New Zealand’s economy would shrink by around $115 billion in just five years. If a 10% fuel restraint continued for 20 years, New Zealand economy would shrink by $412 billion compared to a business as usual scenario. Even if there modeling is out by a factor of 10 we are still in deep do doos

    there is plenty of evidence that a peak oil, and the coming oil shock will (is already ?) taking us back into recession and we have seen the end of growth . More here ..
    http://oilshockhorrorprobe.blogspot.com/p/reportsresources.html

    • Bored 12.1

      Great links thanks alloverrover. On a less pessimistic note NZ has the capacity to grow grass based protein and other crops that currently have huge energy related costs inherant for fuel, fertilisers etc. We also have a huge body of practical and scientific knowledge in the above agriculture. We can actually produce at a far lesser impact and cost what we do today on farms, simply by going to a semi “organic” methodology, i.e how we farmed before agribusiness and wonder fertilisers.

      As agribusiness worldwide collapses, and demand for food increases NZ will (if we change how we do things) again have the huge competitive advantage that made us comparatively wealthy before the 70s. Its not all down side, we have to treat it as an opportunity.

      • KJT 12.1.1

        It is not all down side. New Zealand has reserves of renewable energy and food production capacity that would make many countries envious. We have to retain ownership though.

        • alloverrover 12.1.1.1

          yes we are lucky to have renewable energy. While that may heat or light your house it’s not going to power your car or any of the other transport options that rely on oil. Peak oil is mostly about liquid fuels for transport, and 95% of NZ’s transport fleet uses liquid fuels.

          Electric cars I hear you say ? … “Even if we were to build 50,000,000 electric cars per year starting right now, it would be ten years before half the cars in the world had been replaced. And this does not even factor in the implied massive upgrades to the electrical grid and power stations, or the lithium needed for car batteries”. see Chris Martenson’s excellent blog on “Peak Oil = Peak Economy …. http://www.chrismartenson.com/blog/peak-oil-peak-economy/45229

          we don’t have ten years.. the consensus is that we have 2 -5 years before the next – possibly permanent – oil crunch occurs. Not convinced ? check out the reports from credible sources here – http://oilshockhorrorprobe.blogspot.com/p/reportsresources.html

    • Draco T Bastard 12.2

      and project that our economy will be halved in 20 years we ignore it in the mainstream media.

      No it doesn’t. It shows a decline from present activity, yes (from ~$500b to ~$430b), but it most notably shows that it won’t grow as expected under the business as usual scenario. i.e. it won’t double in size over the next 20 years.

      • KJT 12.2.1

        The economy as we know it has to shrink as the present consumption is unsustainable. However with renewable energy and a more equitable distribution of NZ resources it does not mean that quality of life for individuals needs to drop overall.

        For example: If we go back to whiteware engineered for a 25 year life then we do not need to earn the cost of a new fridge every 5 years. If power is coming from tidal or hydro generation for all our energy we do not have to pay 7000 million dollars per year for fossil fuels as we do at present.

  13. M 13

    If you want to scare the crap outta yourself subscribe to Collapsenet for a month with Mike Ruppert.

    If his straight talking can’t convince you we’re about to dive off the cliff, nothing will.

    http://www.collapsenet.com/

    • Bill 13.1

      Mike Ruppert is not a well man.

      There is a documentary called ‘Collapse’ that was initially meant to be an interview with Ruppert on police corruption and drugs (from memory) but that became an hour and a half study of his psychological unravelling. It’s a shame. Because a lot of what he says is basically correct. But then, a lot of what he says is just plain wrong too.

      The main problem appears to be that he is driven by fairly obvious/identifiable levels of delusion.

      Find the film. Download it or whatever and watch it.

      • I think the movie Blind Spot is the best at explaining why most people just can not or will not accept what is happening specifically with regards to peak oil.
        I am happy to supply a copy to anyone, just email me with – DVD Standard – in the subject line .
        robert at oilcrash dot com

  14. So I guess Kiwi Saver will be a dead duck )
    The ‘I told you so’s’ are coming thick and fast these days
    Robert
    http://www.oilcrash.com

  15. Fisiani 15

    If there is a double dip recession then the kneecapping of the economy committed by the scorched earth policy of Labour in 2008 was truly economic treason.

    • Armchair Critic 15.1

      Is this the same scorched earth policy that left NZ with a lot less debt than there would otherwise have been if National had got in back in 2005 and borrowed to fund their taxcuts? Or is that sentence too complex for you to comprehend?
      Would it be simpler if I found a quote from Bill English saying Labour left NZ in a good position to weather the GFC?

    • Colonial Viper 15.2

      National know how to game the economy and siphon off riches, but they really don’t know how to run anything productively much bigger than a corner store.

  16. john 16

    Short video report showing European workers are protesting in the streets against cuts to their living standards,why should they the wealth producers having to accept austerity cuts: they think the rich should pay. They don’t buy the NeoLiberal garbage,that the rich should pay less and less tax never more. This contrasted to the wimpish American reaction who are too scared to protest due to their police state and you can get locked up for next to nothing-US is a fascist state.Has this historical action been reported here? Just briefly,”News is entertainment” says Bill Ralston
    http://www.zcommunications.org/european-workers-distance-from-us-through-action-by-richard-d-wolff

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