Paul Holmes: Our worst fears are being realised

Finance Minister Bill English. Photo / Mark Mitchell

The economy is tanking.

Let us push away all the pink fluff and the political talk and the fine words and face it.

The economy is heading south very deeply and very sharply. It is happening now. What we all dreaded is happening.

We all have the numbers that show it and, if you are the kind of person who keeps any eye out, you will know it instinctively.

What makes it a really lonely feeling is that we all know - those of us who watch these things and have been round for awhile - that neither the politicians nor their officials have an idea in hell about what to do.

It is a worldwide thing and there is no answer except the economic cycle itself.

But Bill English has not one idea what to do apart from maintaining his innate common sense and thrift and Labour and David Cunliffe have no idea either.

Mr Cunliffe may rage about the economy and the unemployment numbers in the House and that is fine because it is his job to do so. But neither David nor Bill, nor any of them, has any answer to the hopelessness of our economy whatsoever.

This is because, while governments can re-arrange spending and figures and the chairs on Titanic, they cannot invent money. Government in this situation is the Wizard of Oz and may as well not exist. In fact, it doesn't.

Bill and David are not to be blamed. When the shit hits the fan, they can do nothing.

We allow them to play the political game and we participate in it because this is a democracy and, with it, we get relative freedom of action and speech, but we know there ain't no answers when things are falling out the bottom of a money bucket that is already deep down an empty well.

Sorry to tell you this but it is the way it is. Start with the unemployment numbers. Unemployment is now at a 10-year high. It has surged from 6 per cent at the end of March to 6.8 per cent now.

Make that number real. There are now 19,000 more people out of work than at the end of March.

That is 19,000 people now wandering our villages, towns and cities with their CVs having doors close on them. There is nothing as lonely and as powerless as looking for work and getting nowhere.

People can only take "no" for a time, especially if they are young.

Their spirit breaks. Any point to the quest disappears. I see the young unemployed wandering the main streets of Hastings when I go into town for a coffee. Admittedly, some of them look qualified for nothing - so much for the great education system our teachers forbid anyone ever to interfere with.

What I also see is the growing numbers of buildings to lease. Suddenly, they're empty. Until recently, they were occupied; businesses were surviving. Suddenly they are not.

Look at the Maori unemployment figures, up dramatically to 16.4 per cent. Pita Sharples says it all. The figures are shocking and terrible but that, he says, is about all you can say. And, as all well know, those numbers in the Far North and on the East Coast will be stratospheric.

What else did we see this week? New car sales, too, have suddenly, suddenly note, tanked. Between June and July new car sales have fallen - by nearly a quarter.

Nearly a quarter. I read the other day that our wool and lamb industries are facing extinction, prices are so bad. Fonterra is talking its numbers down. The value of a basket of its products dropped more than 14 per cent last month - in one month.

Exactly. Please note something here. This sharp and dark decline has happened within the past six weeks. The Employer and Manufacturers' Association fellow on TV3 news the other night described the situation as volatile.

Volatile? Nonsense. He is using the kind of useless language he and his colleagues use to disguise reality. They do it because people like him and economists generally avoid using the language of reality because their employers, generally the banks and other smart money boys, do not want their books talked down.

Well, let me tell you, Mr EPMA Fat Boy, words like volatile don't wash. The situation is one of lifelines. If we are not exactly dead, this coma is going to last a very long time.

But, before you condemn me as hysterically and morbidly insane, I have my own anecdotal observations as well. Let me tell you about the Auckland Food Show held over four long days last weekend. You may know that I am a producer of very good extra virgin olive oil.

For the past four years, to back the product, I've stood with my business partner behind a stand at the Food Show hawking the oil. Last year, with the world in meltdown, I thought before the show that spending might be slow.

In fact, spending last year was fearless, bold and careless, fizzing with life. I even had a special deal, I told the customers: my Recession Deal.

We all laughed. People thought it a great joke and out came the Eftpos cards and the cash and we were all happy. I never got so many laughs. The joke worked over and over. The bottles poured out.

This year, I believe crowd numbers were up. Pretty sure of it, really. But I noticed some things. Many of the people looked down at heel and upon hard times.

There were times, as people traipsed by, that I felt as if I were watching a movie about the Depression. Even stockbroker types sampled and drifted on. They got drunk earlier.

Last year, they carried promotional carry bags packed with free stuff. This year, they carried little. In fact, you hardly saw a promotional carry bag.

But, most importantly, people were not spending. Believe me, it took a lot of work to get people to do so. And where, last year, people bought gaily on their Eftpos cards, this year more of them wanted to put their purchase on the credit card. Eftpos, after all, is a brutal, cash-out way to buy. People simply did not have the cash.

There was something else. It was a shock. I picked it up quickly because, well, I am attuned to this kind of thing because it is what my job and my life are all about, but suddenly my Recession Deal joke wasn't funny. Suddenly, the very word "recession" was not funny and I stopped using it. It no longer worked and I did not want to humiliate.

Suddenly, last weekend, I came to understand something of how bad things are with us. The figures released this week just confirm it. I don't know what to do about it but in the last six weeks the economy ground to a halt.