In 2007 there was a World Financial Crisis. (WFC) One of the causes was the Sub Prime Morgage Crisis where banks and financial institutions were approving loans they knew could not be repaid. This created a housing bubble which
eventually burst.
When a Government adopts a similar financial policy the outcome is inevitable.
A significant amount of New Zealands foreign debt are bank loans
that have been taken using outstanding child support and student loan
debt as surety. The problem is that the outstanding debt owed to the
Government cannot be repaid
and is thus also a bubble waiting to burst.
Why can the debt not be repaid? The school teacher who was arrested for his outstanding student loan is a perfect example.
The man rents a home. On average people who rent pay 40% of their weekly
income to rent. Supporting a family in this very expensive country, he
does not have much left over to repay his student loan. When the
Government applied a further $100 000 interest and penalties
it became an impossible amount to repay and he defaulted, but the loan
the Government took using his student loan debt as surety still has
to be repaid.
Where government leads, industry will follow. One of New Zealand's main industries is dairy. One of the biggest co-operatives is Fonterra, who In 2016 paid farmers $3.90 per kg for milk solids, this being below the break even price of $4.60. Many farmers lost everything due to this, some reportedly even took their own lives. At the end of the financial year, Fonterra declared a record profit of 123% awarded the CEO a $6.7 million bonus, and then started an assistance scheme for the affected farmers.