“…with economic problems mounting, the Democrats have said they will move quickly to try to pass a fiscal rescue package.

“They had hoped to have it ready for Mr Obama to sign into law when he takes office but now admit it will not be ready until mid-February.”

The 800 billion rescue packages is pure economic stimulation. A transfer of wealth back into the economic machine to move it along a few more stages more quickly. If it saves people from mortgage foreclosure until the bright sunshine of recover occurs – then that is good for that time and what it prevents rather than it being, in the long term, all that different.

Economic stimulation is a 180 degree reversal from the cold logic of monetary policy. Continued market speculation inflated expectations but the average person could only see property as a path to financial wealth and independence. It would have been but for two immutable facts:

a) in itself property is a fairly static kind of investment, unless you are building on land or developing, but it is a one off exchange (that may support a continuous exchange). The investment in the property development is therefore an action of trade, rather than investment. It is buying and selling, not profit loss but asset accumulation. Some property investment is good for the economy, but when everyone is doing that to the exclusion of other parts of the economy, then the whole thing will fall apart. Private property as investment is the dominant form of investment in New Zealand. It has become a truism that owning property makes you rich. Now it doesn’t?

b) excess property availability leads to a depreciating market.

These two facts are very present in the Auckand property market. It is also more inflated than other markets. Yes, of course it will recover, so if there is no pressing need to sell your property, enjoy the low interest rates and use the new money to buy things to help make you more able to be productive and relaxed. Then work as hard as possible adding new income streams to what you have if possible so you never get into a tough choice.

My old accountant wrote a comprehensive article – real hard hitting common sense about communities. Read it here.

Getting back to the rescue package. As the financial industry has been rescued by tax payer loans; the tax payer will ultimately benefit. In the short term however, they still have to go to their banks and ask for loans to cover their heavy commitments. The economy has been running on consumption (of largely Chinese imports). Obama’s natural instincts will be to say “buy American” (rather than impose tarrifs) on one hand and providing the oil so that the natural urge to sure up the mortgage payments (providing the banking system with capital) is offset by the expectation of the average person who is getting more minimal interest on their mortgage putting more cash into their hands. The excess funds will be absorbed by the pressure of the serious credit card debt problem accumulated during the good times when it was easy to keep the credit cards fed.

Therefore liquidity is still missing from the system. The 800 Billion stimulus package most likely will keep small business alive by allowing a buffer gap for many, and then his tax cuts will keep their spending habit ticking along, at that stage his “buy American” patriotic note will mean that China will no longer control US import/consumption.

Therefore it is the end of economic appeasement for the current Chinese empire. It will have to find another way to put its huge population to work. Cheap technology is so available in China, If Obama is able to continue to support that to some degree then America will continue to benefit from it.

For the South Pacific the future is now filled with a faint glimmer that at least the world will be led in an effort to avert climate change before their homelands are absorbed by rising seas. It may start happening while Obama is in the White House.