Global Economy

How many are treating this seriously and taking precautions against a worsening economic situation?

I do take it seriously as I don't think for one minute that what happens in the rest of the world isn't going to impact, eventually, on NZ and is already starting to do so. What are people doing to minimise that impact should things get really tough and business slows or employment ceases.

I've been giving it a great deal of thought. It would be helpful to be mortgage free but I doubt that few can aspire to that:(. I want to get rid of excess debt - hire purchase, bank cards etc. Pay as much off the mortgage as is possible to do so in the short term. Deal in cash. Get the farm into as good a working order as money will allow - this could well end up being the source of food and income.

More ideas?

Cheers,
Ronnie

House cow. []
We didn't buy a big TV before and we won't now.

Yes I do believe this past 6 mths is only the tip of the iceberg.. Well Ive resgined from my job....and managed to get one closer, so one days travel will now do 3 days... I hope to spend money [as you say] and make my land easier to work..get a barn built.. this living with no decent buildings has been difficult. then hopefullty, I can store more things and grow more thing.. wot dem things are.. have yet to be decided... To get down to 1,000k per month instead of a week would be marvellous.. Batts in the belfry also woud be nice..
AND to carry on the wombling and share my assets from that..otherwise since Ive always been allergic to money or maybe it is to me, I cant see anything changing much

Plant lots of vegies NOW

I, too, believe that we've only seen the tip of the iceberg so far. The 700 Billion US bailout was less than half of what the experts on TV expect was lent to people who have no chance of paying it back. Once the US election is over it will all come out. I think big businesses kept things under wrap - and still are - because they don't want the Republicans to be blamed for the mess before the election. It might lessen the chance of McCain winning.

I take it very seriously. It will impact in NZ. There will be job losses. Those my age (41) and older have already lived through a recession and will remember how people stop spending money, jobs dry up and the unemployment rate rises - it's a vicious cycle. Remember UB40's "I am the 1 in 10". That was about the 10% unemployment rate in the UK, and UB40 was the name of the form you had to fill out to go on the dole. These things usually last a decade before things start to ease up.

What to do? Well I'm going to abandon any ideas of giving up a secure job to freelance. Spend less. Pay off the credit card asap. Work out what we could sell if push came to shove.

On the plus side, the price of petrol has gone down, there are bargains galore if there's anything that you HAVE to buy, and the interest rates are going down. We will wait until the interest rates are as low as possible before renewing our fixed-rate mortage (comes up next August). The interest rate in the US is something ridiculous, like 1%, a low interest rate would make a huge difference to how fast you can pay off the mortgage.

Seaside;209353 wrote: ... a low interest rate would make a huge difference to how fast you can pay off the mortgage.

Yes, but why will it make a difference to people's actual behaviour? It didn't before; rising property values and relatively low interest rates led people to raise more and more against their houses and hence the mess we're in.

Exactly Isla. Interest rates go down, inflation rises. Inflation rises, interest rates go up until, so theory has it, inflation goes down. It's cyclic, it always had been.

But by all accounts, this is the messes of all messes. There hasn't been a time in my life where savings in a bank weren't safe. In the UK they are underwritten, so in theory they are 'safe' unless the company underwriting them (a form of insurance) go belly up.

Will lower interest rates change people's behaviour? Probably not for a lot of people, if I'm being realistic. But for people like myself who have finally woken up to how it all works, and whose greatest fear is losing our home, we will (and do already) put as much as we can spare on the mortgage. Once the mortgage is paid off, the world is your oyster. I have learnt a lot from my mother who has been though decades of booms and busts, and I have to thank her for sharing her wisdom.

For people on fixed mortgages the lower interest rates have no impact anyway.

And this here is a true story: An ex-colleague of mine went to the bank, asking for a 50K mortgage for a 90 000 Dollar first home in Woolston (one of the not-so-well-off areas of Christchurch). They had a deposit of 40K and two good incomes. The bank manager tried to convince them that it was much better to get a 150K mortgage and a much better house in an area where prices were expected to rise more rapidly - with this kind of deposit and their income a 50K morgage was ridiculous. My ex-colleague started to argue that they would rather pay off their house quickly and the poorer area didn't bother them as they had no children yet etc etc. It ended with them threatening to go to a different bank for the mortgage they were asking for. That's when the bank manager gave in.
I'm sure by now they have paid it off, had a 120K deposit for their next home and are close to paying off their second home. Had they taken on the 150K mortgage they'd be maybe 15% into paying off that home, having paid 100K in interest already.

Yep I've been trying to follow the news reports, especially the international media, and get my head around what's happening. Not sure what to do about it exactly, except continue chewing through the mortgage as quickly as is reasonably possible. Would also like to spend on some of the things that would make this place appear finished(ish) and saleable, just in case. On the plus side, I imagine there will be good investment opportunities over the next year or two, though dunno that I'll be in a position to take advantage of them.

And of course, falling interest rates notwithstanding, I'm still very happy to have paid off the #$!!*#* overdraft!

Be prepared for the next 10 to 15 years of recession...because thats how long its going to take to get out of the mess. I know that those 'experts' asked in the media about it don't want to make any linkage to the Great Depression, but that is exactly whats going to happen. The best thing is to be as debt free as you can...and have a good vege garden and meat on the hoof (in fact start protecting that meat on the hoof as cattle/sheep rustling has gone up dramatically around NZ).

I think the best advice I can give someone (having lived through the '87 crash) is to be prepared to walk away...don't hang in there and try to keep going hoping things will get better. Knock the emoitional side of your brain with a sledgehammer and rationally ask yourself if you like the look of the hole you are digging for yourself. Basically really think logically and calmly about any decisions, and don't make a decision based on what your emotions are advocating.

Kilmoon;209377 wrote: I know that those 'experts' asked in the media about it don't want to make any linkage to the Great Depression, but that is exactly whats going to happen.

I'd be surprised if that's the case. The world is a different place these days. Governments and individuals have vastly better information and central banks have acted quickly and aggressively to ensure that things keep ticking over. That just wasn't possible back then.

The scariest thing I have read recently as I didn't realise it was quite so airy-fairy:

"Since the Nixon administration took the US off the gold standard in the early 1970s, money is no longer backed by anything of intrinsic worth; its value rests merely on the shared confidence of its users in the system that produces it."
Deep Economy, Bill McKibben

I never really understood how the finance system really works, but from what I am reading, the more it all seems to be based on smoke and mirrors. No wonder people prefer investing in bricks and mortar (as long as they are not overvalued)...

I too think we are in for a very rocky road. China is faltering now, and that was the last real hope to keep the world economy going. If the US public don't start spending (go figure the odds that they'll want to or have the money to after all that has happened) then China will also be in trouble.

These governments have put billions into rescue schemes but everything seems to indicate this is just a bandaid rather than a fix. Where does the next lot of bailout money come from?

For us, we have our mortgage down as low as we can, and will get our house to the level we can live in it basically and then take stock again; if things are even worse, we will stop at that stage and leave it a bit. We'll also be keeping an eye on the lowest rate possible to refix at.

Lots of veges and meat grown here, minimising driving around (which we are already doing, one day a week into town, hubby has a pushbike if needed for his job, we are within cycling distance of town if needed), we spend stuff all anyway so not much to cut there.

I think that the effects will start hitting here in the next few months and you'd be silly not to have a personal household plan to decrease your outgoings if you can and make sure you can weather the coming storm...

Some people I talk to seem to think I'm being overly pessimistic, but I'd rather plan for the worst and hope for the best rather than be a Pollyanna who thinks that everything is going to be hunky dory in the face of all evidence to the contrary...

We'll keep milking the cow then.

Very good idea, Isla

I guess it all depends on how you're used to living. We made ourselves mortgage free a few years ago and because we weren't earning a lot of steady income, couldn't borrow to do things beyond the level of actual incomings. Fertilizer took precedence over house insulation, fencing over new household appliances and so on. After a while you get used to low consumption and can't see the point of buying for the sake of buying. I now buy and enjoy damned good wine, but I watch a recycled 14" TV with crappy reception because I can't see the point of spending money on something which I don't use very much. If we'd chosen to have children, our choices would by necessity have been different and our income-earning potential now would have been less. I feel exceptionally fortunate to be where and as we are right now, in light of recent developments! We may end up being a haven for members of our extended family/community who have made different choices and/or been less fortunate, or less sensible in some of their consumption decisions! Smug? Perhaps. We've lived through a lot of down-their-noses looks from a lot of people who thought we were making odd decisions when they were buying bigger cars, bigger TVs, bigger mortgages and credit card balances...