New Zealand's vulnerability lies in the easy money which found its way into housing, Eaqub says.

OPINION: Global financial markets had a stumble last week. It could be the beginning of another crash.

Or more likely, a beginning of the end of easy money that has fuelled reckless purchase of almost every asset class.

For New Zealand, forget the impact on long term investments in KiwiSaver, they will be fine. KiwiSaver is much more about regular contributions over a long time.

CHRIS MCKEEN/STUFF Shamubeel Eaqub: ''We have more debt now than before the global financial crisis. Interest rates rising to previous norms would spell disaster.''

The main risk to look at is how much money our banks borrow from overseas and at what price. The credit channel is the most powerful propagator of global shocks to our everyday lives.

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US equity markets fell sharply last week, but seem to be recovering now.

After rising over 50 per cent to a new peak, share prices fell by over 5 per cent in one week. Markets seem to be recovering now.

This kind of volatility has become more commonplace, because prices are really high relative to earnings and valuations, and because of equities trading by algorithm, which can rapidly compound falling markets.

The bloodbath in the US markets quickly spread to major markets around the world.

New Zealand only experienced a modest fall, saved by a public holiday. Nevertheless, the close synchronisation of markets around the world show how hyperconnected the world of finance is.

There is a real globalisation tied to firms' economic fortunes. But the selloff in the past week wasn't about a sudden realisation that global economic conditions had worsened.

If anything, the global economic news remains largely positive, although some worry that after nearly a decade of recovery, we are now due a period of weakness.

Rather, the close movement of share prices, and rapid spread of fear, show how the edifice of finance is built by precariously stacking the same deck of cards in more fanciful structures.

Everything is interconnected and has a much smaller core than the vast size and complexity we see from the outside. It is all built on how how cheap and plentiful money is.

There has been a gradually rising tide of discomfort over the reversal of the long reign of ultra-low interest rates and ultra-easy monetary policy, which was unleashed following the global financial crisis to avert a fate similar to the Great Depression of the 1930s.

It seems likely that interest rates will gradually increase over the years ahead. Economies around the world have recovered from the global financial crisis, albeit much more gradually than past cycles.

There are more jobs, businesses are more profitable, but wage and price increases are modest.

Central banks have continued to nurture this fragile recovery with very easy money, by increasing the supply of money and keeping the price of money low.

This has encouraged investors to pile into anything and everything, sending their prices higher. But that is about to end.

Interest rates are rising, although central banks will be careful to raise interest rates slowly.

We have more debt now than before the global financial crisis. Interest rates rising to previous norms would spell disaster.

Rising markets have swelled KiwiSaver accounts. But long-term retirement savings are not really about timing these market movements.

Rather, it's about contributing regularly over a long period of time to build up a nest egg. On average, financial market returns tend to be more modest than we have seen in recent years.

The big economic implication for New Zealand is more about banks. Some of that cheap global money found its way into mortgages for houses, through the help of friendly banks.

Last week raises the spectre of a stock market crash. It could happen – we are overdue.

But that matters less than what central banks around the world are up to.

As they gradually return money supply and interest rates to more normal levels, expect the pain to be meted out by your previously friendly banker.