Monday, March 31, 2008

'The only really safe bank is Kiwibank'

As a person who receives the state pension, a private pension and a weekly wage, I have money to invest. Since December 2005, I have been putting my money, in sums of $20,000, into six-month term deposits at the ANZ Bank. My original aim was to have six such deposits, so that I would receive a payment of interest every month of the year. These payments would then augment my retirement income from the two pensions.

Although this scheme was basically sound, I now have doubts about the wisdom of putting all my money into the ANZ - one of the Australian-owned banks that are, in the opinion of some analysts, most likely to be caught in the looming credit squeeze. In these uncertain times, says Oliver Saint of the Shareholders' Association, "the only really safe bank is the [New Zealand-owned] Kiwibank".

Bruce Sheppard, chairman of the Shareholders Association, warns that "we have four converging events which tends to indicate to me that whatever is going to happen over the next 18 months is going to be way uglier than anything we have ever experienced in our lifetimes. And it's already happening."

The four events, he says, are a balloon in credit, a balloon in property, household spending exceeding income, and a commodity-oil shock.

"So you [will] have inflation taking off, unemployment taking off, double deficit, collapsing dollar, and a big, ugly, road-kill-through-the-windscreen-type hard landing.

"Then at that point New Zealanders will be forced to live within their means because there will be a credit crunch here with capital flying out of New Zealand at the rate of knots."

Mr Sheppard predicts that banks caught in the credit squeeze will pressure people to repay loans - particularly those who are over-extended.

"You will get forced property realizations, and the property market will sink further."

Economist and fund manager Gareth Morgan agrees, and points out that New Zealand and the United States are similar in that both run on other people's money.


4 comments:

Julia Ward said...

GREAT blog! You'd have a grand time writing about all the economic plights in the States right now. The housing market is foreclosing on itself.

blessings,
julia

julia ward - a BLINDING heart - a writer's blog - www.ablindingheart.com

Redbeard said...

Great article. Wish I could find a safe US bank. It's a mess up here.

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