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1890s Economic depression

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  • 1890s Economic depression

    About 12-18 months ago I recall posting in a thread an observation that NZ has previously had a property linked down turn. However, not for the want of searching could I recall where I had read about it...........Well Here is the info. Note The 1890s troubles were not just Auckland based but NZ wide there were some interesting parallels with the current situation. Heres the relevant info it is from

    The legal history of money in New Zealand
    Ken Matthews, Financial Stability Department ( reserve bank bulletin)

    The 1890s was a period of economic depression in New
    Zealand and elsewhere. In the early part of this decade, the
    banks operating in New Zealand, particularly the Bank of
    New Zealand, were in financial difficulties. According to
    Sinclair27, the banking crisis was caused by the banks
    supporting speculative ventures in real property, the price of
    which fell. Bedford saw three main causes for the crisis:28
    “1. The Public Works and Immigration Policy
    inaugurated by Sir Julius Vogel.
    2. The pressure unceasingly exerted on the banks
    by the public to depart from legitimate banking in
    order to secure more liberal accommodation.
    3.The competition of the numerous Loan
    Companies.”
    Bedford comments that, from the beginning of settlement,
    the colonists wanted more loans from the banks than the
    banks were prepared to give, such loans being required to
    finance the development of infrastructure. The government
    was borrowing beyond its available means of repayment,
    relying on exploitation of the latent wealth of the colony to
    make future repayments. The banks, taking their lead from
    the government, did the same.29 Unfortunately, the means of repayment did not eventuate as readily as anticipated.
    Last edited by Austrokiwi; 26-11-2008, 07:28 PM. Reason: bad copy paste
    The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

  • #2
    "History dosn't repeat but often rhymes"

    Mark Twain I believe from like the early 1900's...

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    • #3
      Great read (fiction based on fact)

      Originally posted by Austrokiwi View Post
      About 12-18 months ago I recall posting in a thread an observation that NZ has previously had a property linked down turn. However, not for the want of searching could I recall where I had read about it...........Well Here is the info. Note The 1890s troubles were not just Auckland based but NZ wide there were some interesting parallels with the current situation.
      I first heard of the land crash from an early New Zealand novel written (1933 aprox) but only published in 1944 when the possibility of legal action had passed (ie: the real people involved had passed away). Its a great story, but place names etc have been changed. The book is titled Moonshine and was written by Helen Wilson. She dedicates the book "to all New Zealanders who can remember the 'eighties' ". In the first few pages she sets the scene and gives a great understanding of the economics of that time. the following I have typed copying directly from page 12 of the 1956 edition:

      " He had invested his money in land at a time when prices were rocketing in New Zealand, and the unexpected fall, or the inevitable reaction- whichever you like to call it-had left him stranded. Still, though he lost heavily, and had to leave the home which he had built and planted, with the idea of founding a New zealand Family on English lines, he was not the man to be crushed by disaster. Indeed, he had saved the pieces with remarkable acumen,He had cut his losses,sold or relinguished his station early in the slump, put the remnant of his depleted fortune into a suitable house and grounds in a suburb of the capital city and, being a surveyor, had managed to squeeze himself into a Govenment billet in the Lands Department-a modest one to be sure, but it kept the wolf from the door. He was well dug in before most of the other landowners realised the extent and hopelessness of their ruin.
      'How did you pull it off?" the less fortunate would ask my father, meaning the Government billet.
      "You wouldn't have touched it with a burnt stick at the time I accepted it" answered my father very truely. His determination was a byword."

      As you can see it certainly gives a picture of another time that few of us have knowledge of!!!!
      Last edited by Austrokiwi; 27-11-2008, 12:44 AM. Reason: typo
      The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

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      • #4
        Interesting and here we are 118 years later with real estate gone through many cycles - so.... life does go on.
        Nigel Turner

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        • #5
          Remember the lesson's of the great flood, Noah's land values went down the drain. These times could be only a few more thousand years away.

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          • #6
            Originally posted by dandan View Post
            Remember the lesson's of the great flood, Noah's land values went down the drain. These times could be only a few more thousand years away.

            One might say the market was saturated.............Jokes aside do you remember when some people were saying property never goes down!!!!!!
            The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

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            • #7
              Yes, I took that to mean that property never goes down in the long term.

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              • #8
                You're right, it doesn't. With 99.7% certainty.

                In the long term, we're all old, near worthless, then absolutely worthless and ultimately dead. Guaranteed with 100% certainty.

                Screw long term.
                Last edited by 67910241; 27-11-2008, 11:12 AM.

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                • #9
                  Originally posted by Austrokiwi View Post

                  One might say the market was saturated.............Jokes aside do you remember when some people were saying property never goes down!!!!!!
                  Haven't seen any 1890's prices recently!

                  Yes, its a fallacy that house/land prices NEVER go down, but they do have a pretty good record with keeping pace with inflation and being less volatile than shares and commodities as an investment (as opposed to as a speculative vehicle aka gamble).
                  DFTBA

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                  • #10
                    Originally posted by dandan View Post
                    Yes, I took that to mean that property never goes down in the long term.
                    how long a term though? You might be dead and buried by the time they go up.

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                    • #11
                      Usually about two years.
                      5 years at max.
                      If this turns out to be the worse recession in the last 100 years then who knows.

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                      • #12
                        Nah Bob, this one's a 10 year recession. wrt cap gains

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                        • #13
                          Originally posted by Bob Kane View Post
                          Usually about two years.
                          5 years at max.
                          If this turns out to be the worse recession in the last 100 years then who knows.
                          I would have thought that 2-5 yrs was a short term view - particularly if you are a buy and hold type. I suppose if you were into flicking then 2mths is short term and 6mths would be long term.

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                          • #14
                            Its looking more like this recession may turn into a depression. I hope not!!!!
                            The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

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                            • #15
                              I believe its already a depression, the stats will start showing that in six months or so, why are these stats always about six months out of date thats what I don't comprehend.

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