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Wednesday, September 17, 2008

Watch the orange glow

Today I skipped my International lecture to stay home and watch, read and listen as the Nightmare on Wall Street unfolds. My rationale for this is the same one that my high school history teacher used on September 12, 2001, for telling the class to put our textbooks away and talk about whatever was in our minds. That was history in the making; this is international economics in the making. Go figure.

The only way the current situation could seriously affect New Zealand is if an Australian bank fails, and that's pretty improbable. The Aussies have bought up a certain value of US subprime mortgages, but it's not likely to be a really big thing for them, and their own home market is large enough to sustain them in a more severe crisis if they're careful. If they retrench strongly then they just might decide to start selling their New Zealand subsidiaries, but we've had our assets sold before and it wouldn't hurt us much. The inevitable chaos in our own financial markets (a direct result of investors being scaredy cats who run for the hills at the first drop of rain) won't touch most of us, beyond a possible acceleration of our existing high rate of finance company failure. It will serve to strengthen the housing market though, so perhaps the papers will stop whinging about house prices at last.

In view of all this, I can safely sit here and ghoulishly pronounce that now is a great time to be an economist.

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