Bear Sterns

The Fed’s bailing out of Bear Sterns is a sign of how bad things could get. Bear Sterms is America’s 5th largest bank, and if they had gone under the consequences would have been massive. They still might be.

For now it probably just means higher mortgage rates in NZ.

The real problems will be if the US and Europe go into recession. NZ could be hit with the worse of both worlds – part of a global recession – but still having high interest rates due to inflationary pressures.