Will there be a banking sector collapse in 2019?


When I was a kid I was taught two basic things about economics and money. One was to be prudent and save what one can for rainy days. The other was to keep debt to a minimum.

As a result, I am trying to put away a consistent sum of money each week as emergency funds. I pay my credit card in full and on time. I wonder if all New Zealanders tried to do the same, what the outstanding private debt would be.

So the suggestions of a collapse grow from one year to the next. One of the more alarming suggestions in 2018 suggested a U.S.$10 trillion crash in household assets. The whole of the New Zealand GDP per annum is N.Z.$210 billion

But how likely is one to actually happen?

It depends on who one talks to. Sure it sounds radical but if one takes an honest look at what was – and was not – learned from the Global Financial Crisis, I think the Nots are the clear cut winners. The G.F.C. was caused by the spectacular mismanagement of toxic mortgages, a highly dangerous mix of Wall Street and household borrowing well beyond their means as well as regulatory break downs and systemic ethical malpractice at all levels.

In New Zealand banls

Sure the banking sector here is not the same as the United States, but in the 2007-2009 crisis 30+ financial companies here imploded. Between them they took over N.Z.$2 billion worth of individuals finances to the bottom. Anyone who wants to know about investing is right to be a bit alarmed. A decade later with some economists warning of another meltdown, has New Zealand learned anything?

Last time it was China’s insatiable appetite for raw material that helped Australia and New Zealand. Coal in particular was in high demand. With a slowing Chinese economy are our products in such hot demand anymore? I do not know the answer to that.

The Lehman Bros, Fanny Mae and others in the United States were meant to be indestructible institutions, worth hundreds of billions of dollars. In New Zealand Capital Merchant Finance, South Canterbury Finance, among others were our equivalents. A few executives in the most damaging cases were implicated.

Instead of running down debt by paying it back, the key countries have all run up new mountains of debt. So huge are these that I think a number of countries will be wishing they had been like Iceland, which bravely jailed its bankers and was the first country to declare an end to the 2007-2009 Global Financial Crisis.

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