It isn't over until its over and it isn't over yet

This is an interesting item but it misses so much. Extremely unbalanced economies resolve by way of painful adjustments. We have dodged nothing but the new methods and tools have transferred risk to the dollar system and our ability to sustain capital inflows. We are not out of the woods yet by any means and even our denial at this point is part of the pattern.

http://www.voxeu.org/index.php?q=node/3421

What would be surprising is the misplaced confidence and complacency when you consider the US and UK are still in the ICU on full life support but this is just as it was then, hope springs eternal.

Market wrap: Leading stocks made further progress on the rally. Bulls encouraged by optimism from steel industry and Farm Board, by more foreign buying, and by market ability to resist bad news. Major industrials including US Steel, American Can, and GE, staged good gains in first 4 hours. Reactionary tendencies developed in late afternoon on profit taking, but sales were well absorbed on moderate price recessions, with the setback appearing technical. Bond market more active; US govts. and high grade corp. strong; speculative corp. irregular; foreign govts. mixed.

Broad Street Gossip: The head of one prominent Exchange firm has been seeking opinions among his 1,200 customers; finds that experienced traders are now optimistic, having “been through numerous panics” in the past only to see the country recover and become “more prosperous than ever before”. On the other hand, the young trader with less than 10 years experience “can see nothing but black clouds ahead ... and just cannot see how industry can get back on its feet again.”

In past few weeks, fire insurance company funds have been increasingly invested in common stocks of leading companies with safe dividends; viewed as significant since these investments “are directed by shrewd and conservative observers.”

S. Strawn, Montgomery Ward chair., says recovery depends on business men not politicians; warns against “drift toward Bolshevism”; says great problem now is gearing production down so that it will “synchronize with consumption”; implies some wage cuts may be needed.

Market ability to resist bad news is in contrast with a short time ago, when it “ignored any favorable development.” In past week, market has dealt with failure of an Exchange house, wheat irregularity, decline in rail car loadings, bank failures, etc., with little more than a hesitation in the upward trend.

See what I mean? The focus is already on why it was all so easy to fix.

http://newsfrom1930.blogspot.com/2009/11/friday-november-21-1930-dow-18709-048.html

The mild recession we've experienced bears no comparison with the much-mentioned Great Depression. But the difference is more the result of hard lessons learnt than better luck.

This week, Dr David Gruen of Treasury gave a lecture about what economists have learnt from the Depression and how the two events compare.

In Australia, the lead-ups to the two crises were quite different. In the present episode, we'd experienced 17 years of uninterrupted growth, falling unemployment and, in the past five years, booming export prices, leading to hugely improved terms of trade.

By contrast, in the lead-up to the Depression we experienced no real growth for five years, with the unemployment rate rising to 7 per cent. After the Depression began, real GDP fell by almost 10 per cent in 1930-31. The unemployment rate peaked at just under 20 per cent in 1930 (but had fallen to 9 per cent by 1937).

This time, of course, the economy hasn't contracted and is forecast to grow reasonably strongly next year, with the total rise in the unemployment rate expected to be just under 3 percentage points.

And this time we have a standard of living five times what it was then (even for the unemployed) and unemployment benefits which, despite their miserliness, are way better than ''the susso'' of the Depression era.

Gruen says the Depression in Australia had three main causes. First, the extremely unfavourable conditions in the world economy, particularly a large and prolonged deterioration in our terms of trade caused by a fall in the price of wool. This deterioration started in the mid-1920s, well before the Depression began.

By contrast, the deterioration in the terms of trade this time has been much smaller, with the latest level still more than 50 per cent above the average of the 1990s.

The second cause of our Depression was our adherence to the ''gold standard''. (Actually, many Depression scholars have concluded that the decision of most countries to return to the gold standard after World War I was the primary cause of the Depression around the world. So much for Wall Street's crash in October 1929.)

The value of the Australian pound was fixed to a certain amount of gold (the same amount as for the British pound) and anyone could demand that their pound note be exchanged for gold.

Without the gold standard, countries have ''fiat money'', where the value of a $5 note comes simply from the issuing government's command that it be accepted as legal tender in payment of five dollars of debt.

For a long time people disapproved of fiat money, fearing that governments could erode the value of money by permitting inflation or by deciding to ''devalue'' their currency against other countries' currencies.

The hyperinflation in Germany's Weimar Republic in the early 1920s convinced central bankers of the need to return to the gold standard. (In those days, the Commonwealth Bank was a government-owned trading bank and the central bank.)

Trouble is, a country that suffers a major fall in the value of its exports - a deterioration in its terms of trade - needs to respond by devaluing its currency. So sticking with the gold standard ensured the avoidance of inflation, but did so by crunching the economy.

Despite pressure from our deteriorating balance of payments to devalue our currency, we held the line until March 1931, when we left the gold standard and devalued by 25 per cent against the British pound. By then, however, our foreign exchange reserves were run down.

Subsequent research has shown that the sooner a country left the gold standard, the sooner it recovered from the Depression. Big Mistake No.1.

By contrast, in the present crisis our dollar was floating. It acted as a shock absorber for our economy, first by depreciating by 25 per cent in the four months to November last year, then by recovering almost as rapidly.

The third cause of our Depression, according to Gruen, was our inability to borrow abroad from early 1929. Australian governments had borrowed heavily from the London capital market during the 1920s to fund a string of large infrastructure investments, rapidly increasing our foreign debt.

London banks pressed Australian governments for repayments. Our banks restricted their loans to businesses, which put pressure on the economy.

By contrast, although the latest crisis would have shut our banks out of world capital markets, our Government used the strength of its own balance sheet to guarantee the banks' overseas borrowings, for a fee.

Turning to monetary (interest-rate) policy, it was ''tragically tight'' in the run up to the Depression because of the defence of the gold standard, and even after the devaluation the banks delayed cutting interest rates for two years. Big Mistake No.2.

By contrast, this time the official interest rate was slashed late last year and early this year, even while our exchange rate was depreciating rapidly. That we got away with this without adverse reaction from the market or fears of high inflation is a testament to the credibility of the inflation-targeting framework we installed in the early 1990s.

Turning to fiscal (budgetary) policy, the low level of foreign exchange reserves caused by the delay in devaluing the pound prevented fiscal policy from being used to stimulate activity and actually forced governments to curtail their spending.

Then, under the Premiers' Plan of 1931, government spending was cut by 20 per cent and federal and state taxes were increased to finance repayments to the British banks. So fiscal policy was managed in a way that made the economy worse rather than better. Big Mistake No.3.

By contrast, this time the Federal Government's financial position was strong and the Rudd Government quickly lashed out with big stimulus spending.

Now, you can conclude that this time we were lucky to have the economy in good shape when the crisis struck. But we weren't in better shape by accident. Economists have been studying the mistakes of the Depression for decades and have been taking steps for just as long to ensure they aren't repeated.

One lesson was to steer clear of the gold standard and (later) to move to floating exchange rates. Another was that fiscal and monetary policies should be used to stimulate private demand during downturns, but also (and more recently) that they should be ''reloaded'' during the good times to be ready for the next recession.

And don't forget that the better shape of our external environment this time is thanks largely to other countries - including China - having learnt the same lessons.

Ross Gittins is the Herald's economics editor.

http://www.smh.com.au/business/learning-from-the-great-depression-20091113-iens.html

What is patriotism?

This is the anchored and nuanced community patriotism that springs from the central paradox of human freedom, which is, according to Durant, that it can arise only out of the rule of law. Civilisation is the contract with fellow citizens that sets us free (within parameters)....

It was the Law that gave us our high estate via the idiosyncratic Brits and complete accident. The Lessons of History suggest that our soceity will thrive only to the extent that we show each other respect, are slow to judge and confine our arguments to the cool terms of our collective common good.

Clearly I related to this peice, then, which you can hear here.

A young Australian academic wants to redefine Australian patriotism and he's approached the subject from the point of view of Australia's most recent arrivals.

Tim Soutphommasane is 26. His parents were Chinese and Laotian, he was born in Paris, and he grew up in Sydney's southwest suburbs. He's just spent three years at Oxford, doing a PhD, and his book, Reclaiming Patriotism: Nation Building for Progressives, is published next week.

TIM SOUTPHOMMASANE: Patriotism doesn't have to be about cultural superiority. It doesn't have to be about racism. It can be a very positive sentiment that binds citizens together and motivates them for improving their community.

MARK COLVIN: So how do you distinguish these two types of patriotism?

TIM SOUTPHOMMASANE: Well that's the challenge I think. I think progressives or liberals in Australia in recent years have been content to sit back and allow conservatives and reactionaries to claim the language of national values and I think progressives and liberals really sold themselves short there.

They never actually tried to articulate and alternative to what I see as the two strands of patriotism that have emerged in recent years and they are 1) the narcissistic strand of patriotism that is associated for instance with tattooing your body with the southern cross or draping yourself in the national flag and 2) the neo-conservative strand of patriotism that you see for example on the right when they belief that patriotism has to involve a missionary pursuit of Judeo-Christian values.

MARK COLVIN: Why do you associate it with the right? I mean, it was Dr Johnson who was high Tory of the 18th century who said that patriotism was the last refuge of the scoundrel.

TIM SOUTPHOMMASANE: Feelings of patriotism in Australia haven't always been associated with the right. I think there's a very long left-wing tradition for instance of radical nationalism. Don't forget values of egalitarianism, mateship and the fair go have always been tinged with a very left-wing nationalistic flavour, until recently.

I think John Howard was very effective in seizing this territory from the traditional left during his prime ministership with his form of Anzac nationalism so I don't think it's always been that case, the case that patriotism has been of the right, but it certainly is the state of play at the moment.

MARK COLVIN: All right but we are a multicultural society and inevitably that means that you've got some people who call themselves Australian but who barrack for the English cricket team or still count themselves a bit Greek when it comes to the soccer or, you know, people have dual-allegiances. How are you going to ask them to suddenly be patriotic?

TIM SOUTPHOMMASANE: Well I think there is room for difference within patriotic sense of national identity and that's a nuance that hasn't always been articulated convincingly. Where I start is civic values.

I think when people think of patriotism, they think that you have to love meat pies, you have to drink VB, you have to love sport. But they're very superficial things. They're lifestyle components of Australia.

But I want to focus on civic values and I guess being Australian in my view means taking very seriously things like the fair go, egalitarianism and mateship and those values don't just exit in vacuum but exit in a context of a very discrete, national history.

I think Australians tell stories very well but we don't get our civic stories right all the time. Our civic history might not have the same flair or flamboyance as the Americans say. We weren't born of a revolution but I think there's a very distinguished and sober record of democracy as well that's worth celebrating and I want to shift the emphasis back on those aspects of the national history and the national story.

MARK COLVIN: There are some people in this country who have come here really to get away from nationalism. I think about people from the Balkans for instance. What wouldn't they be suspicious of any project that says, "let's be more nationalistic".

TIM SOUTPHOMMASANE: Well I think their suspicions are quite often very well grounded. I think the mistake is to think however, that a love of humanity or that cosmopolitanism will be enough. Stories and communities still count, not least national ones and I always say to people we don't for example see our politicians speaking to us in Esperanto but they speak to us in a national language appealing to a discrete national history in order to motivate citizens

The real challenge is really to get the balance right and I think there is a possibility of a moderate, liberal patriotism or national pride that we can celebrate. But I certainly don't want to deny that there are instances such as the Balkans where nationalistic excess have ended in bloodshed. That's not the kind of nationalism I would like to defend.

MARK COLVIN: From the peace movement to the globalisation supporters, from left to right, there is a stream of thought that says that nations themselves are, should vanish away, that we are international, that we are a world community.

TIM SOUTPHOMMASANE: What do I think of that? Well I think that yes, there has been a movement towards globalisation but that doesn't mean that the nation state has already been superseded. We still live in a world of nation states. The big decisions affecting us are made primarily by national governments. Our democracy takes a national flavour. We can't run away from that and I think there is a need for a dose of sociological realism if you will in these debates.

MARK COLVIN: So this is about civic virtue for you? Where do you start to build that in the society?

TIM SOUTPHOMMASANE: Well a lot I think depends on getting the language of leadership right. I think liberals and progressives in Australia have a great opportunity at the moment to build a new social contract for the 21st century. But that requires a consensus for reform.

I think Kevin Rudd has shown us that he's a very philosophically engaged leader but I think there's an opportunity for him here to engage in a new cultural narrative and to articulate a vision of citizenship.

MARK COLVIN: Surely you just can't do this with politics though?

TIM SOUTPHOMMASANE: Well of course not but I think...

MARK COLVIN: If you're talking about patriotism, it's got to imbue the society or it won't mean anything.

TIM SOUTPHOMMASANE: No indeed. But the starting point I think must rest in politics. Language and debates percolate from the top down I think. But I think with a dose of cultural leadership, we will see a more diffuse debate at large among Australians.

I think this really is a debate that Australians have wanted to have for a long time and it's a debate that isn't stuck I think in the old paradigm of left and right. I think we're talking really about a new generational debate here.

MARK COLVIN: Tim Soutphommasane whose book, Reclaiming Patriotism, Nation Building for Progressives is published next week.

So your a swing trader who wants sage advice?

I've thrown a ton of money at the problem and have seen some remarkable work. The idea that you can't get good trading advice on the net is a myth but there does seem to be a inverse relationship between size and sense.

Gary is no socialist (not that I am, so much, but I do think elites have overworked the folly of helping people meme, they have had no problem helping themselves and I think the US must have universal health care....I have enjoyed our discussions,but we disagree, thats all I'm really saying..) and he doesn't buy hype and honours his methods.....

NFTRH is geared toward seasoned investors and traders as well as novice investors in the learning stages. Be aware that the very origins of Biiwii.com are rooted in hype aversion and anti-convention. I believe that 'in the box' thinking has caused many people to get in trouble as of this writing (NFTRH official launch 10/1/08). This view is evidenced by the fact that Biiwii.com (but it is what it is) was launched in 2004 with its very first commentary warning of the dangers so outwardly apparent now. Do not expect the usual stock pick touts and chirping about performance. Risk management plays as important a role as capital appreciation over the long term.

http://www.biiwii.com/

sample letter


Futures, options, CFD and forex playas with experience and sound with risk management will find that the incredible claims of the "Daniel Code" website are amazingly, justified by past performance. The proprietor is a man of talent, charm and wisdom; his methods are gaining him a following.

http://www.thedanielcode.com/display.php?nav=articles

Taking responsibility for your life, your health and your wealth is a very serious business. Never imagine that you can, for example, as a newbie, trade yourself out of a financial jam, because your emotional stake in the outcome will guarantee failure. Be wary of beginners luck; so often confused with native genius. Never imagine you can day trade to victory, because the shorter time scales only offer rewards to those with big edges and vast experience. Finally, No "black box" will ever make you money. Only always knowing what your doing and why at all times can do that. Engagement in online argument about the market or a particular stocks chart direction, btw, are not signifiers of maturity or future success. If you debate method, however, your on stronger ground.

Finding your own pace and style as a trader is important and that can only occour as part of the broarder goal of finding your own true nature and your own "Right Livelihood" and where forgetting ends and surrendering to "process" and "flow" in your life will point the way.

The "Trading Tribe" is massive for me. Read and explore the site.

Often the best returns rest on simple conviction, rather than put money in a lot of baskets, you find the basket you think best, put all your eggs in it and then watch that basket!

Honourable mentions with regards to the strategy of balancing fundamentals, paradigm building and medium long term swing trades...and good sense.. Jesse, Duncan,

I like this guy as well.

For the rest, look here....

Individual Mastery of the infospheres and interwebs is possible but don't fall for simple causalities or conspiracies or moral fables, the truth is messy and coming to terms with your own heart and true nature will be as much as part of making any sense of the world and your way in the world as any "facts".

So says I, anyway.

Indian Students and the Indian press

Australia's third largest export industry has grown by topsy because it has leveraged off the immigration quotas, not because it delivers a quality education experience. Even our best universities have had matching Govt. funding cut with every increase in full fee OS tutition payments. We have monetised the traditions of excellence of our institutions.

A whole sector has grown up that has milked and abused students with the knowledge that what they are really selling is permanent residency; so lets only go through the motions, because who the hell cares.

The Indian students, in turn, carrying laptops and mobiles to and from institutions, not by car, but on public transport have naturally become targets for opportunistic assaults and robberies that are motivated by nothing more than our undereducated and well neglected underclass seeking easy pickings.

No one has more respect than this writer for Indians and Indian civilisation, the nation that bought us zero, the Gupta Age, the Karma Sutra and Chola bronzes is worthy of respect but what does really annoy is the hysteria of the Indian press with its accusations of racism. The hyper-ventilated mega-murdockism of this fake manufactured outrage for profit is far more tawdry than that nest of white collar rorters and scammers who pose as "immigration agents" and "education providers".

Australian society has many flaws but it stands at the end of a unique pattern of development that drew on a thousand years of subtle social progress; development that created a civilisation that is characterised by the rule of law and little socialised violence, only some individual and gang pathology. Our violent impulses are formalised into "armed forces" and directed outward, for good or ill.

Compare that to the indian village where the constant competition for status under the caste system is nothing more than institutionlised and formalised communal violence, where the exploitation of religion by post independance politicians has killed millions and where the very armature of national politics is driven by the narrow interests of religion and class.

The Indian press needs a mirror and we need to rethink, in the light of the GFC, global warming and a much harder world why the economic benefits of a high level of immigration flow to a narrow group of private interests while the cost, both to our reputation and our public treasury are borne by Australians who would rather see due process, justice, compassion and public benefit drive our immigration schemes instead of these crude openings for endless opportunism, fraud and abuse of process.
We have left the field to rorters, gamers and ranters on every side, a trend that devalues the very currency of our polity and will, unless curbed, in the final analysis, destroy it.



Independent Senator Nick Xenophon has called for a statutory compensation scheme to reimburse overseas students who are ripped off by unscrupulous education providers.

He is also pushing for a dedicated ombudsman to investigate their complaints.

Senator Xenophon says his proposals have been prompted by last night's Four Corners program, which exposed widespread dodgy practices in the multibillion-dollar international education industry.

He says a compensation fund could be created, possibly through a small levy on educational services, to provide refunds to international students who are ripped off.

"Whether it's on fees or whether it's on the accredited bodies - that they have to pay a small levy - to ensure that if dodgy operators don't do the right thing, that students can be assured they'll be able to get a refund, that they won't be out of pocket, he said.

"Because that's obviously a key concern of overseas students and their families.

"It's also important to have an international students' ombudsman that can actually look at complaints and have some real teeth to investigate and to provide support to students," he added.

"They're clearly not getting that level of support now."

Senator Xenophon says decisive action needs to be taken to protect Australia's third biggest export industry.

Australian Broadcasting Corporation
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TRANSCRIPT
Transcript: Holy Cash Cows

Full transcript of Holy Cash Cows, broadcast on 27 July 2009.

Reporter: Wendy Carlisle

Date: 27/07/2009

STUDENT PROTESTERS: We want justice, we want justice

WENDY CARLISLE: In late May and early June, Australians were astonished to see thousands of Indian students protesting on the streets of Melbourne and Sydney. Their complaints - muggings and bashings and police indifference.

INDIAN MAN: He got beaten by three guys.

(Indian man demonstrating wounds)

INDIAN MAN 2: In front of all the policemen. And still they are assuring that they will give us security. What kind of security?

WENDY CARLISLE: Coverage in India bordered on hysterical.

(Excerpt of footage from Indian News)

INDIAN MAN 3: My parents are calling please every half hour. Please come back. If nothing is happening, come back.

INDIAN NEWS REPORTER: So what will it take for Mr Kevin Rudd to finally wake up?

KEVIN RUDD, PRIME MINISTER: Our Indian community has been such a vital contributor to our culture, to our life, to our food, to our music. My kids love Bollywood, you know, Bollywood is a thing with all of our kids, they just love it. So we actually have this deep affection for your country and for your culture and I always say this too, imagine if we never had Indian food in our Australia, we would be sentenced to 100 years of English cuisine.

(End of Excerpt)

WENDY CARLISLE: There's more at stake than being rescued from a century of bad British food. India is one of the main buyers of Australian education - after coal and iron ore, it's our third biggest export earner. But Australia's education exports face much deeper problems than safety issues, there's now a rising clamour over dodgy courses, student rip-offs and an education system that's turned into a visa factory.

PUSHPINDER KAUR, STUDENT'S MOTHER: It is a fraud, it is we were shown so many rosy pictures about the school, actually it is not what it was really, what it really is, it is only, it was just a scam.

WENDY CARLISLE: If there is one principle that governs the export of Australian education, it is now simply money.

BOB BIRRELL, MONASH UNIVERSITY: Well, basically they've been bedazzled by the dollars.

WENDY CARLISLE: On Four Corners tonight, the dirty secret behind Australia's other education revolution.

(On Screen Text: Holy Cash Cows, Reporter: Wendy Carlisle)

(On Screen Text: Crash Landing)

(On Screen Text: Hyderabad, India)

WENDY CARLISLE: Last year 75,000 Indian students came to Australia to buy an education, and the possibility of a new and more prosperous life.

(On Screen Text: 9 July 2009)

Pushpinder Kaur and her son - aspiring pilot Prabmeet Singh - are preparing to meet with a high level delegation of Australian bureaucrats, police and academics. For Prabmeet Singh studying in Australia was a deeply unhappy experience and there is much unfinished business.

(Excerpt of footage of Pushpinder Kaur and Prabmeet Singh driving in a car)

PRABMEET SINGH, STUDENT: Let's hope we can find some help this time.

PUSHPINDER KAUR, STUDENT'S MOTHER: You went to get wings but your wings are clipped actually.

(End of Excerpt)

WENDY CARLISLE: The highly publicised Australian delegation has been rushed to India. It's an exercise in damage control.

(Excerpt of footage from delegation meeting)

COLIN WALTERS, FEDERAL DEPARTMENT OF EDUCATION: The education system of Australia has no time for racism in any form and absolutely condemns attacks on students, attacks on Indians.

(End of Excerpt)

WENDY CARLISLE: But safety isn't what many of these parents have come to complain about. Pushpinder Kaur says a Sydney flying school has taken their money, left their family broke and her son with no pilots licence.

(Excerpt continued)

PUSHPINDER KAUR, STUDENT'S MOTHER: The first instalment we had to pay in advance that is for about $3,500, the total is about $43,000, and when the whole of the amount has been credited to the account of the aviation school there, which is known as Aerospace, and the chief flying instructor's name is Sue Davis and she has taken the whole of the amount and after that she has stopped imparting any training or given any training flying hours to the students there.

My son and one of the other students is here, right before this honourable delegation. And they have come back, and their careers are ruined and we have lost all that money which we have sent there.

COLIN WALTERS, FEDERAL DEPARTMENT OF EDUCATION: We will take the depositions back and we will have a look, we will talk to the authorities in New South Wales and we will also look at our own legislation and see if there is any further possibility of intervening in that case.

(End of Excerpt)

WENDY CARLISLE: Pushpinder Kaur has heard all this before.

(Excerpt continued)

PUSHPINDER KAUR, STUDENT'S MOTHER: I'd just like to advise the honourable Australian members that already we have taken this matter up with the state regulatory bodies like VETAB (Vocational Education and Training Accreditation Board) and DEEWR (Department of Education, Employment and Workplace relations), but nothing has been done so far.

COLIN WALTERS, FEDERAL DEPARTMENT OF EDUCATION: Righto. Well we'll certainly take that back with us and see if there is anymore we can do. Thank you very much.

PUSHPINDER KAUR, STUDENT'S MOTHER: Thank you.

(End of Excerpt)

PRABMEET SINGH, STUDENT: It feels really sad, really bad, because I had gone there to fulfil my dream to become a pilot. But you know all my dreams have been shattered.

WENDY CARLISLE: If Prabmeet Singh's dreams have been shattered, back in Australia his friend Surendra Egalapati is still trying to keep his dream of becoming a pilot alive.

SURENDRA EGALAPATI, STUDENT: I was very passionate about flying. I liked flying to fly, so I started this career in 07.

WENDY CARLISLE: Like Prabmeet Singh the school Surendra Egalapati chose was Aerospace Aviation run by Sue Davis.

SUE DAVIS, AEROSPACE AVIATION: We welcome having overseas students with us. They all bring delightful experience with them and we enjoy their time. May I add that our student of the year for the last two years has actually been a different Indian student.

WENDY CARLISLE: Surendra Egalapati is now at a different flying school. But within months of starting at Aerospace Aviation things started to go wrong.

SURENDRA EGALAPATI, STUDENT: I started complaining in the month of October. First I went to the Indian High commission, I complained there and they had a meeting with them and Sue Davis has assured that this is not going to repeat again. And the same thing, they have Indian high commission has told me that and after that the same thing is again repeating and repeating.

(Excerpt of footage of meeting between Indian students)

INDIAN STUDENT: All we guys are doing is refund what is not used from the college.

(End of Excerpt)

WENDY CARLISLE: Soon he discovered other students in the class of 2007 were having similar problems.

VISHAL SARAWAT, STUDENT: There were not enough planes not even, not enough instructors. I was like flying with around 21 instructors you know.

WENDY CARLISLE: Twenty-one instructors?

VISHAL SARAWAT, STUDENT: Instructors for this and like, it was like there was no responsibility in the school's part, like it was like I have to beg to instructors to give me flight, like "give me flight, I want to fly, I want to fly".

MUKESH PINDORIA, STUDENT: The rest of the time, well, go to school and you were told to sit under a tree with some plastic chairs around to hoping that someone does not show up and you get that flight.

WENDY CARLISLE: Sit under a tree?

MUKESH PINDORIA, STUDENT: Yes.

WENDY CARLISLE: Can you describe that for me? What was the scene?

MUKESH PINDORIA, STUDENT: Well, it's just under a tree. You don't have any other facilities. You're just standing, even if it rains, you have to be out there. I mean there is no any other facilities inside where you can accommodate all the students.

WENDY CARLISLE: So how many would there be of you sitting under the tree at any one time?

MUKESH PINDORIA, STUDENT: Any one time, you might find 20, 25 students sitting under a tree.

WENDY CARLISLE: Scott Alex is a former student at Aerospace Aviation. He also quit the school over not getting his flying hours and was disturbed by what he saw.

SCOTT ALEX, STUDENT: It was definitely derogatory the way they spoke to them, the way they treated them.

WENDY CARLISLE: Can you give me an example?

SCOTT ALEX, STUDENT: Instructors or management?

WENDY CARLISLE: Take your pick.

SCOTT ALEX, STUDENT: Um okay instructors hating flying with curry eating Indian stinking yellow so on, and management, I know of a case where the operations manager actually pushed around a student who was complaining, so they just basically raised their voice and in the Indian culture you don't raise your voice, it's very rude. You especially don't swear.

WENDY CARLISLE: The students had signed up for a commercial pilots' licence course. Costing $43,500, Aerospace Aviation was to deliver 200 hours of flying over 52 weeks. But in Surendra Egalapati's case, he only received 130 hours over an 18 month period. A story it seems, repeated throughout the school

KAPIL RAJ, STUDENT: In the matter of four or five months I could only get 17.9 hours of flying.

YASWANTH MUDUNURI, STUDENT: I got only 50.9 hours of flying.

ARUN KUMER, STUDENT: I did 46 hours in 16 months.

VISHAL SARAWAT, STUDENT: I will use the word wasted my time, 16 months being there, like achieving nothing over there.

SUE DAVIS, AEROSPACE AVIATION: Aviation requires a commitment. We provide the facilities, the aircraft, the highly qualified trainers, but it must be matched by the student's desire to reach a safety standard. I won't back down from that. I take that most seriously, as a delegate of CASA (Civil Aviation Safety Authority) that these students must meet the requirements.

We have provided everything that those students need to get through the course. The students need to provide the diligence, the dedication and the commitment.

WENDY CARLISLE: So are the students lying? Why would the students do this?

SUE DAVIS, AEROSPACE AVIATION: I think students when they're away from home perhaps don't meet up to their parents' expectations. As a mother myself, I understand when our children let us down. And it's a young man's issue that they have to now face up to the fact that they haven't provided the diligence that they require to get through the course.

(Excerpt of footage of reconstruction - students going to DEEWR headquarters)

WENDY CARLISLE: By October last year so many of Aerospace Aviation's students were complaining, that DEEWR - the Federal Department of Education, Employment and Workplace Relations - invited them down to their Sydney headquarters to hear their stories. Twenty-six Indian students turned up, as well as Scott Alex.

(End of Excerpt)

SCOTT ALEX, STUDENT: They said to me, we're too nervous, we want you to come with us. So I did. And when they asked what's happening, everybody was quiet. And then I said one thing, one point like "you have to pay $5,000 a month whether you fly or not, that's a bit wrong", and then everybody just started talking. So I just went there for moral support I guess you could say.

WENDY CARLISLE: And with the department, the officers, did they give any undertakings to actually fix the problems? What did they say that they were going to do?

SCOTT ALEX, STUDENT: Oh yeah, they were shocked, they were shocked and appalled with everything we said, yeah.

WENDY CARLISLE: But if the officials from DEEWR were shocked by what they were hearing - they were slow in reacting. The students felt their complaints had disappeared into a bureaucratic black hole.

SURENDRA EGALAPATI, STUDENT: I don't think so they're running an investigation. I do the, if they do an investigation it could take hardly two months or one month, not more than that. But it has been some six to seven months till now.

WENDY CARLISLE: And you've heard nothing?

SURENDRA EGALAPATI, STUDENT: And we, we didn't heard anything from them.

WENDY CARLISLE: After eight months of waiting for the Department's response they gave up and took a dramatic step to recover their money.

MUKESH PINDORIA, STUDENT: Well if someone would have listened to us we complained to the school first, and then we went to the Department of Education. We went to Department of Immigration too and Department of Education and Employment and Workplace Relations, but no one listened to us and now we have ended up here in the Supreme Court of New South Wales.

WENDY CARLISLE: Eight of the Class of 2007 filed a statutory demand notice on Aerospace Aviation calling for the refund of $157,000 or the company would be wound up. Last month it went to the New South Wales Supreme Court where the students were in for a nasty surprise.

(On Screen Graphic - Sue Davis' Affidavit)

WENDY CARLISLE: In her affidavit, Sue Davis included a five page report from DEEWR - which appears to be an investigation into the students who launched the legal action.

Surprisingly, this document didn't address the detail of the students' complaints nor did it examine their side of the argument, but nevertheless concluded "it would seem the students complaints have little or no foundation".

WENDY CARLISLE (to Sue Davis): I'm just trying to understand why DEEWR would only be investigating or making a finding on the students in this document which were the ones that appeared before the Supreme Court.

SUE DAVIS, AEROSPACE AVIATION: Well I'm sorry, you'd have to ask DEEWR that.

WENDY CARLISLE: Is it coincidence?

SUE DAVIS, AEROSPACE AVIATION: You'd have to ask DEEWR that. I can't answer for DEEWR.

WENDY CARLISLE: So how did this document end up before the Supreme Court? We asked the Department of Education to explain just why it conducted an apparently one sided investigation on behalf of Aerospace Aviation into the Indian students.

(On Screen Graphic - written statement from Department of Education)

WENDY CARLISLE: In a written statement, the Department told four corners "for privacy reasons it would be inappropriate to discuss individual cases".

The Department's conduct raises fundamental questions about the integrity of the Government's investigations into student's complaints. Four Corners requested an interview with Education Minister Julia Gillard but she declined.

KARL KONRAD, AUST. IMMIGRATION LAW SERVICES: It seems to me that the protection of the school and the business interests of the school overrides the protection of the student or the student's right to know, or any other Australian citizen's right to know as far as I can see.

WENDY CARLISLE: But you got the Deputy Prime Minister saying she is committed to ensuring quality in the education that we provide international students. Do you question that commitment?

KARL KONRAD, AUST. IMMIGRATION LAW SERVICES: I openly question that commitment because the quality of their investigations would have to be regarded with anybody, with any investigation experience as a joke.

WENDY CARLISLE: But for Surendra Egalapati, the greatest surprise was yet to come. In her affidavit, Sue Davis makes the claim that his plane had strayed out of the training zone and into Sydney controlled airspace on July 29, 2007.

WENDY CARLISLE (to Surendra Egalapati): It says on 29th of July that you penetrated Sydney airspace. Did you this?

SURENDRA EGALAPATI, STUDENT: I didn't do this. I started my flying from August 21st, 07. The proof is my log book. This is my logbook. And my first flight is August 21, here at 07. This is a false evidence, I don't know what evidence she is going to show, but I can, this is my proof.

WENDY CARLISLE (to Sue Davis): Did you swear a false affidavit in order to smear the character of Surendra?

SUE DAVIS, AEROSPACE AVIATION: I did not swear any false affidavits at all, the documentation was before the courts. Mr Surendra did not advise us that there were problems that he could see, we understand that the paperwork was correct.

WENDY CARLISLE: This is your document, that you have submitted before the Supreme Court.

SUE DAVIS, AEROSPACE AVIATION: That's correct.

WENDY CARLISLE: That you swear is true.

SUE DAVIS, AEROSPACE AVIATION: And Mr Surendra has a copy of that.

WENDY CARLISLE: Sue Davis has now told Four Corners she made an error in her affidavit.

Earlier this month the students' case against Aerospace Aviation was set aside here in the Supreme Court, the court found the students had pursued the wrong legal route against the flying school and ordered them to pay costs which could amount to tens of thousands of dollars.

And now, in what must seem a cruel twist to the students, the New South Wales Government has found that the flying school has been using unqualified flying instructors - an offence so serious it risks losing its registration.

VISHAL SARAWAT, STUDENT: Obviously I'm very angry. I've like taken a loan. It's a big loan and I paid the money to the school. I came here for a purpose, which is like I haven't got anything, I haven't got the my commercial pilot licence.

WENDY CARLISLE: The experiences of the Indian students at aerospace aviation are not an isolated example. Karl Konrad, a Sydney migration agent, has been trying to raise the issue.

KARL KONRAD, AUST. IMMIGRATION LAW SERVICES: I mean for years I've been writing about dodgy education providers in Sydney and nobody cares. I've even sent my newsletters about them to the Commonwealth Government and didn't, don't even get a response.

Nobody comes and asks me you know what's going on in Sydney because they don't really care, but certainly since the international students have come out, it's brought up yes their safety issues, but there's all these other issues which have been going on that nobody has cared about.

(On Screen Text: Cooking the Books)

WENDY CARLISLE: In the past most foreign students came to Australia, studied and took their degrees home. In 2005 that started to change. In an attempt to address Australia's skills shortage the Federal Government allowed students to undertake vocational courses and then stay in Australia.

Literally hundreds of private colleges have sprung up offering courses in hairdressing, cooking and accounting.

BOB BIRRELL, MONASH UNIVERSITY: Make no mistake, the driver for this explosion in vocational college enrolments of the past few years has been the carrot of permanent residence or getting into the Australian labour market.

(Excerpt from PR video - AIFE)

STUDENT: Studies which I'll be completing right now from AIFE is all based on managerial subjects now in advance diploma.

(End of Excerpt)

WENDY CARLISLE: This cooking school in Sydney's inner west is one of the fastest growing businesses in Australia. Four years ago Austech was turning over just $1 million a year - now it's turning over more than $30 million a year.

In 2008 Austech's enrolments had climbed to over 1,600 even though it was only registered for just 124 students. How this was allowed to occur is baffling. Four corners talked to one former employee of Austech - who on condition of anonymity agreed to tell us how the college kept signing up more students.

FORMER EMPLOYEE (actors voice): Management said keep enrolling, the Government won't close us down because where will the students go? It was a factory. We used to laugh in our office about VETAB and the Department of Immigration, how could they not have known what was happening? They were handing out all the student visas. I thought at the end of the day they had contacts in the right places in Canberra.

WENDY CARLISLE: Late last year the New South Wales Government finally ordered Austech to halt its enrolments. They said Austech didn't have enough kitchens and had effectively defaulted on providing the courses it was marketing.

For many of Austech students not having enough kitchens wouldn't be that much of a problem, many students have come simply to do the course and qualify for permanent residency.

But not so for Kumar Khatri from Nepal. He genuinely wanted to be a chef. After 6 months at Austech hadn't seen the inside of a kitchen, he wasn't even sure Austech had one.

KUMAR KHATRI, STUDENT: No, no I didn't believe that there is a kitchen for the college because I haven't seen the college kitchen.

WENDY CARLISLE: You never saw the kitchen?

KUMAR KHATRI, STUDENT: No, no I haven't seen it.

WENDY CARLISLE: You don't think the college had a kitchen?

KUMAR KHATRI, STUDENT: Yeah, I came to know that boys told, my friends that there is a kitchen for the college but I haven't seen, because they didn't take me. Not only me, my friends, along well, those Australians were studying with me didn't see the college kitchen.

WENDY CARLISLE: Kumar Khatri decided to call it quits. He notified the college - in accordance with the rules - and enrolled elsewhere. What came next was unexpected.

KUMAR KHATRI, STUDENT: I was happy and when I begin my college it was around a gap of three months and I got a letter from the professional debt collector.

WENDY CARLISLE: He was told to pay AUSTECH $5,000 or be taken to court.

KUMAR KHATRI, STUDENT: And I just went directly to the college and he told me it's clear if you're going to pay you pay. If you do not pay we will just process the file, we'll take it to the immigration, your visa will be cancelled, Kumar for your kindness, please pay the amount.

WENDY CARLISLE: Kumar Khatri was furious, he went to see migration agent Biwek Thapa who by then was also helping six other Nepalese students deal with Austech's debt collectors.

BIWEK THAPA, EDUCATION AND MIGRATION AGENT: I emailed back to the assistant CEO and his name is Umesh Banga, and I said "look I think we need to resolve this internally before it goes to media or before it goes to external appeal", which could be Ombudsman or Department of Fair Trading or ACPET (Australian Council for Private Education and Training) or could be anyone.

So before it gets further, let's be civilised and get this sorted and make it fair to the international students as well. Or tell us what you have to say if you think that they do owe you the money. No response. And a month later, I received a letter in the mail by post, from their lawyer saying Dear Mr Biwek Thapa, we're sorry that we took more than a month to actually get back to you. We have we have decided to withdraw the case.

WENDY CARLISLE: Why do you think the college hit these students with bills for $5,000?

BIWEK THAPA, EDUCATION AND MIGRATION AGENT: I think it was a complete exploitation of international students because of the ignorance, they're new in the country, they're not, they're not confident even to talk - communication problem - they're scared their visa could be cancelled, enrolment could be cancelled.

They would get into all sorts of problem. They don't have money to go to a court and fight the case. It's just a try, try to see if they can get money out of these people.

WENDY CARLISLE: Austech's assistant CEO Umesh Banga declined our offer of an interview to discuss these allegations. Four corners then discovered he'd been planning his own media offensive. He had tried - unsuccessfully - to enlist the support of a new students union, led by Navjot Singh.

WENDY CARLISLE (to Navjot Singh): So you went to Umesh Banga to ask him if you could get permission to go to his campus and recruit students for your organization, your student representative organization.

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: Yep.

WENDY CARLISLE: And what did he say to you. Ok come on?

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: I can't recall his exact word, but the words were effect to ah, I stop collecting $10 from students, I will give you the cheque but in return you need to go to ABC and he was showing that he's getting calls from Wendy Carlisle and I suppose that's your name. And he said I can set interview for you and you just need to go there and talk something good about Austech.

WENDY CARLISLE: And he offered you money to do that?

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: Yes.

WENDY CARLISLE: How much did he offer you?

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: Ah he did not put, put an amount but he said "whatever you want we will give you the money".

WENDY CARLISLE: A blank cheque?

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: Yeah.

WENDY CARLISLE: And why did you say no?

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: Because we are not for sale.

WENDY CARLISLE: Why did you decide to come forward to Four Corners and say this?

NAVJOT SINGH, ALL INTERNATIONAL STUDENTS ASSOC.: Because I feel that somebody need to come forward and expose what's happening out in private colleges.

WENDY CARLISLE: Umesh Banga denies this. He told Four Corners he'd never offered money to Navjot Singh.

(On Screen Text: Greasing the Wheels)

WENDY CARLISLE: The pitfalls for foreign students are many - not just dodgy colleges. To navigate the red tape of how to study and stay in Australia many students often turn to unscrupulous education and migration agents.

ARVIND SURI, MIGRANT: Yeah, at that time it was really good when I came in this country and I start studying, so things were going very good at that time.

(Excerpt of footage from wedding video of Arvind Suri and Priya Suri)

(End of Excerpt)

WENDY CARLISLE: Arvind Suri graduated with his MA in engineering management and decided he wanted to live in Australia in January 2007. His parents had arranged for him to marry Priya who had a Masters in microbiology. Between them they would have enough points to gain permanent residency, and start a new life together.

ARVIND SURI, MIGRANT: They said like, it's good like you are getting settled in your life. You are getting your permanent residency and after that you because you are masters you will get a good job and you will get settled in your life, and also you will get married, so your marriage status going to be good.

(Excerpt of footage of Arvind Suri and Wendy Carlisle watching wedding video)

ARVIND SURI, MIGRANT: My father in law is singing a song for blessings of the Lord, that everything is happening under the (inaudible) of the Lord. So, everything will go well.

(End of Excerpt)

WENDY CARLISLE: Arvind Suri sought the help of lawyer and migration agent Sam Tejani seen here at a recent community fundraiser. Acting on Sam Tejani's advice Arvind Suri brought his bride to Australia.

ARVIND SURI, MIGRANT: He said like it it's a very simple condition, you don't need to worry about that. You guys are married and immigration department wouldn't mind that a husband needs to stay with the wife. It's very obvious, they need to understand that so you don't worry about that.

WENDY CARLISLE: Three months after Priya's arrival in Sydney the couple discovered that Sam Tejani had bungled their permanent residency application. Priya had been included as a non-migrating spouse, and she had just two days to leave the country.

ARVIND SURI, MIGRANT: (Cries) She went back and I went straight to Mr Tejani and I said why you made a big mess in my application? He said it's not a mess, it's just like immigration department don't understand, but ah you will get your permanent residency in the same application, so.

WENDY CARLISLE: He was still promising it?

ARVIND SURI, MIGRANT: He was still promising me.

WENDY CARLISLE: Did you believe him?

ARVIND SURI, MIGRANT: I was such a big idiot, I was believing him.

WENDY CARLISLE: Finally Arvind Suri stopped believing and complained to MARA - the Migration Agents Registration Authority.

(On Screen Graphic: document from Migration Agents Registration Authority)

WENDY CARLISLE: The authority found that Tejani "had tried to mislead the Authority, was not a person of integrity, and was not a fit and proper person to provide immigration assistance". MARA found that Tejani would pose "a serious risk to future clients if he continues to practice" and on August 13, 2008 suspended him for 2 years.

Not able to gain work as an engineering manager because he hasn't got permanent residency, Arvind Suri now works in a Sydney supermarket. He has suicidal thoughts, and his wife Priya is still in India and she's threatening to divorce him.

ARVIND SURI, MIGRANT: There is going to be a blot on my career and my fate forever that I spoiled my wife's visa and I used her physically and emotionally and sent her back to India.

(On Screen Text: reconstruction)

To add insult to injury, in January Arvind discovered that even though Sam Tejani was banned from working as a migration agent, he was still plying his wares. Arvind Suri emailed MARA to let them know.

Arvind Suri wrote, "I saw him distributing his business card to students on town hall square. It feels to me it's against the law and order of Australia". But before the regulator would investigate they asked Arvind to provide further information such as how he knew Sam Tejani was receiving cash payments.

Four Corners discovered that Sam Tejani is trading as a sole solicitor even though he is not licensed to do so. He's also holding himself out to be a migration agent, despite being banned for two years. These aren't the only areas where Sam Tejani is skirting the law. He's also helping students to cheat the English language test, one of the pillars of the education and immigration system.

To expose this practice Four Corners recruited a young Indian reporter to go undercover - she found Sam Tejani was willing to provide her with a number of options to pass the test. One of them was that someone else would sit the test for her.

UNDERCOVER REPORTER: Somebody smarter and who could obviously get a better score than I can, would go into the test and the examiners would keep quiet about it. Or that the examiners would switch the answer papers. I would go in but they'd switch the answer papers with the right answers and they could do that because they were friends of his and that he does people favours and then they return the favours.

WENDY CARLISLE: How much did he say that this would cost you?

UNDER COVER REPORTER: He was very reluctant to name the exact price and I kept pushing and he said three, four, maximum $5,000. If I did not go through him and if I tried to in the open market, he says it costs about $20,000, but because he knows these people it'll cost about five.

WENDY CARLISLE (On phone to Sam Tejani): Mr Tejani hi, its Wendy Carlisle here from the Four Corners program.

WENDY CARLISLE: Four Corners asked Mr Tejani for an interview but he refused, in a written response he denied the allegation and says he never offered to sell the English language test to anyone. Mr Tejani has now removed the registered migration agent and solicitors sign from his office.

(On Screen Text: The Work Experience Scam)

WENDY CARLISLE: For any students wanting to remain in Australia they must prove that they have done 900 hours of work experience in their chosen trade. Like the English language test, there is evidence of a flourishing black market in these certificates.

KARL KONRAD, AUST. IMMIGRATION LAW SERVICES: There's no doubt that the fake experience certificates or the letters that they need to pass the skill assessment process is very widespread and we brought this to the attention to the Immigration Department years ago, but it wasn't really acted on.

WENDY CARLISLE: Well how did you bring it to their attention?

KARL KONRAD, AUST. IMMIGRATION LAW SERVICES: We sent an email. I had many students come to my officers and say "oh I can buy letters for $3,000 at particular restaurants". They didn't name the restaurants, but the fact that I was getting many of these type of stories that we sent that information to the Immigration Department and they in turn thanked us for the information and said they would pass it on to Trade Recognition Australia. Nothing ever became of that and I didn't see any increase in the screening of those type of documentation.

WENDY CARLISLE: For the agents working in this area there is a reluctance to discuss this. Sanjay Deshwal is a leading migration agent in Sydney.

WENDY CARLISLE (to Sanjay Deshwal): Well how widespread do you think a racket is in work experience certificates?

SANJAY DESHWAL, EDUCATION AND MIGRATION AGENT: I wouldn't have a clue because clients come to us, and if a client brings to us the document we are not doing an investigative job. As a migration agent if you come to me for example from overseas or from a college over here, I have got no jurisdiction to check the authenticity of the documents.

You come to me and say okay this is my qualification from overseas, this is my qualification from Australia, this is my work experience letter, I have to lodge on the good faith. It's up to the assessing bodies and up to the Department of Immigration to investigate and monitor them.

WENDY CARLISLE: So you don't think it's a widespread scam that's operating?

SANJAY DESHWAL, EDUCATION AND MIGRATION AGENT: No, no. I won't go into that much like detail like. There are obviously like, when such a big market and such a what do you call, opportunism is there, then a lot of people will try to cash on on the bandwagon.

WENDY CARLISLE: Several students told Four Corners that in student circles, Sanjay Deshwal is known as the go-to man for fake documents. We sent our undercover reporter in to test these claims. He told her he could arrange for a work experience certificate from a restaurant.

WENDY CARLISLE (to undercover reporter): Did he say how much these work experience certificates would cost you?

UNDERCOVER REPORTER: Three to $4,000.

WENDY CARLISLE: He was in effect offering to broker this deal for you was he?

UNDERCOVER REPORTER: Yes, yes.

WENDY CARLISLE: Did you make it clear to Sanjay Deshwal that you didn't want to work for these work experience certificates?

UNDERCOVER REPORTER: Yes, yes, yes, I did tell him that I know people that wanted me to work for free to get that certificate, but I did not want to actually work. I had the money and I just needed the certificate and he said I wouldn't have to work for a single second inside that kitchen.

WENDY CARLISLE (On phone to Sanjay Deshwal): Mr Deshwal hi, it's Wendy Carlisle here from Four Corners. I'm very well, thank you.

WENDY CARLISLE: Mr Deshwal initially agreed to an interview but by the time Four Corners arrived at his office he'd changed his mind. The interview was off and he strongly denied the allegations.

While the Government has been happy to boast about Australia's education industry, hard questions must now be asked.

(Excerpt of footage from Australian delegation meeting in India)

PARENT: We have already taken loans.

AUSTRALIAN EDUCATION DELEGATE: I understand, I understand

(End of Excerpt)

WENDY CARLISLE: Why have the scams, dodgy colleges and corrupt practices been allowed to flourish on its watch?

BOB BIRRELL, MONASH UNIVERSITY: Well, basically they've been bedazzled by the dollars. As the, as the figured mounted in billions, every year and, and they could proudly say that this is a $15 billion industry, more than wheat, wool, and meat put together, there's, there's perhaps an understandable reluctance to look critically at the foundation of the industry.

MUKESH PINDORIA, STUDENT: Australia is not a good place to go because people even complaining about the schools and the Governments is doing nothing about it.

PUSHPINDER KAUR, STUDENT'S MOTHER: I think the Government should be more alert in these type of matters because it is, it is the career of the children which is at stake.

(Excerpt of footage from Australian Delegation meeting in India)


COLIN WALTERS, FEDERAL DEPARTMENT OF EDUCATION: So unfortunately we need to wrap it up now, we've got another meeting to go to. I am afraid we need to wrap it up now. If you've got any other questions perhaps I'll...

INDIAN AUDIENCE MEMBER: What is the basic reason...

COLIN WALTERS, FEDERAL DEPARTMENT OF EDUCATION: I am sorry Sir, but we'll now wrap it up and if you've got any more questions perhaps you can catch members of the delegation on the way out. Thank you very much indeed everyone.

WENDY CARLISLE: The Government needs to clean up the rot and restore confidence in our education industry. The consequences of not doing so will be dire. Our 3rd biggest export earner could be a $15 billion bubble about to burst, and Australia's reputation irreparably damaged.

http://www.abc.net.au/4corners/content/2009/s2637255.htm

Guys with Brains, Hearts and balance

This biz of living is difficult to get right, you have got to be able to live with yourself, connect meaningfully with others, avoid debt, delusion, denial and despair and generally acheive a relaxed independant and self aware state.

Which is why I really love to read posts by people who have balance....people who:

Are not partisan..
Have no strong opinions on market direction..
Aware that credible living is connected to self awareness and self reliance and carefully directed acquisition; of wholeness, of skills, of knowledge first of all and stuff least of all.

My success recently was in the giving away...of cigarettes and in the taking up of a desire to master the art of relaxation and the passion to practice.

Here are posts that moved with with their tone, topic and touch this month...

Cassandra Does Tokyo

http://nihoncassandra.blogspot.com/2009/06/moving-blues.html

My family and I are moving. Across an ocean. Large upheavals for the entire lot of us. Leaving friends and an indolent but simply honest way of life will be challenging for children and parents alike. But this is no time for regret as the die has proverbially been cast. As a result, I've had little time to write - much to my chagrin - hence the spartan posting of late, as the practical details associated with sifting and sorting more than a decade-and-a-half of accumulated shite and entrenched life that seemingly must (and now as I edit this, has) found its way into boxes and crates before floating across the azure, and hopefully placid (lest the container slip off), sea.

Down-sizing is a time-consuming though cathartic exercise. One gets lost in the endless photos, letters to or from friends, loved-ones now passed and old flames, pondering the whereabouts of old acquaintances whose address on a scrap of paper or business card has been used as a bookmark in a half-finished novel, or in ruminations upon mementos such the unusual brass desk calendar (something like this) with a fine 70-year old patina that turns to flip the two-sided cards within in order to change the prevailing day, (twice at the end of the month if it's a short one) ... one of the few tangible relics I possess from my grandfather, that made the cut on all prior moves, and will, again, this time. As I packed, I wondered of the origins and stories of these oddities and curios - the seemingly endless accumulated junk like the pair of E&Y mini-binoculars handed out at some function or another, never used, having consumed resources, the energy of asian labour, shippers diesel, the forwarders trans-shipments, multiple deliveries and manifests that brought it hither only to land (with one of it's siblings, no less) in a drawer, still-protected by its hermetical seal. Multiplied by five people, and untold drawers and shelves, now binomially at the crossroads between the increasingly pregnant rubbish bag, and membership in the growing tower of #42, #52, and #62 cartons, the exercise is arduous. Will the stuffed animals ever be re-cuddled, the re-match of "Clue", ever re-played, or the old cards and letters ever be re-read?!? Yet a few days later, with the boxes gone, I cannot tell you what became of most of them, such was the frenzy and blizzard of the removal. Now, I am profoundly unsettled. Not because of the impending move, but because I am not proud of the hoard. In fact, just the opposite. I am at once shocked and horrified by the obscenity of clothes, linen, PVC, toys, games, DVDs, CDs stuffed animals and all type of shiny, glazed colourful bric-a-brac that we human magpies collect (or, at least my family unit has collected). And yet, prior to this, I thought (or romantically imagined) we were parsimonious - at least compared to our peers. "Quality, not quantity". "No No No, you CANNOT have that - it's a waste...". The unending pleas to grandparents NOT to buy more junk. "Need little, want less", the wise catchphrase, over at Jesse's Cafe I hold out as a core value to demonstrate good non-acquisitive non-materialistic values. And yet, before me are boxes with too-many-multiples and sets of errrr ummm well, nearly everything, evidence I've failed in my attempts. Despite continual shedding of excess to friends, acquaintances, and the needy, the substantial purge of what will shortly be incinerated, and the sale of all the pedestrian furniture, devices that will not operate on 220v, what remains seems inconceivably vast, I feel empty, and ill as a result. I wish for that feeling when I first discovered DT Suzuki, identified with anicca and annata, and swore a now-broken oath that I'd never find myself where I presently am.

Analysing how this happened without my noticing, I begin to suspect that there is something allegorical in my predicament, both with respect to The Credit Bubble in general, and the erosion of America's fiscal position, and household balance sheets in particular. For just as I never set out with a plan to mindlessly consume and acquire, so too did America not consciously embark upon a credit-induced death-wish, nor the State and Her households conspire to burden themselves with untenably servicable quantities of debt. Incrementalism was the path. Manana, manana, manana was the mantra of denial that insured the difficult choice, the painful option, the road less travelled, was rarely contemplated let alone set out upon. Just as one doesn't become hugely obese by the pull of a rip-cord, the extension and multiplication of credit is not instanteously conjured. It is a slow-motion result cumulating from innumerable small decisions, each not life-threatening and reversible in themselves, but when conjoined, and embedded in feedback-loops, result in veritable disaster, be it fiscally, in one's waistline, or, in the accumulation of stuff. One's child desire's a brightly coloured plastic widget-thinger. One is tired, so one relents, makes the bargain with the devil and buys it - a respite from incessant demands, a bribe to keep the polity content. But intuitively, from wisdom and experience one knows it will rarely be played with thereafter, as are the multitudes of birthday presents, holiday gifts from family close and far. One knows the moment of weakness, far from currying favor or satiating demand, will only amplify it. One knows intuitively it's wrong and wasteful. But few are strong enough. Few people in the heat of that decisive moment - be it a mindless "toy" or an omnibus appropriations bill take into account cost vs. benefit analyses or an assessment of negative externalities. A plant, a book, a poem, a perennial bulb, a sketch, a charitable donation, all devalued in favor of PVC plastic bakelite injection molded synthetic rayon nylon stuff with imagination engagement values measured in the minutes or hours, but environmental half-lives measured in the centuries. Or deficit-spent consumption at the expense of investment. It is the same. How did we get here? Haven't more people noticed?

Does this stuff have value to anyone else? Would it find a market in its hovel of origin, outside of the salvage value from the materials from which is was constructed? Were they thinking of the gullible buyers, as I wonder about who made it? Decorative votive holders? Harvest motif napkin rings? Endless junk and clutter, some once useful, others never approached any reasonable utility. There is no secondary market value for most of it. Even the local charity ceased to accept clothes excepting those of a suitable pedigree. Beggars, it would seem, can, and are, choosy.

Now, I have shed [much of] my excess, filled my boxes, and sent them on their way in the container. Now, I am living in a minimalist purgatory for a couple of months until my [remaining] belongings arrive at their destination. I miss none of it. I feel liberated. If the container fell off of the ship, was waylaid by Somali pirates, or jack-knifed on the A7 enroute to delivery, I would shed no tears. I have my family, my health, a piano, some books, a trusty bicycle (which I've yet to figure out how to bring to its new home), and my running shoes. But this is potentially where the allegory stops. The last twelve months of de-leveraging at first glance, appeared to provide some strong introspective incentives. The upper boundary of aggregate credit appeared to have been reached, and the consequence of the mass-realization of this fact, combined with the cascading impact upon asset prices of system-wide reactions was too much to countenance. While I've satirically and bitterly mocked how we got there, as we were getting there, I do believe in the predicament at the moment, that stabilization of the patient was necessary. Just seven months ago, we had innumerable 'Ghost of Xmas Past' moments. "Never again" , "How could we have been so foolish?" "XYZ is the new normal", etc. Now, with asset prices on the mend, and feedback loop, well, feeding back in the prevailing direction, there is the belief that the worst is passed. Recovery is purportedly here (at least if viewed through the eyes of risk premia). Jimmy Stewart is already forgotten, as are the sleepless nights of what systemic obliteration might have meant. The promises of change and pleas of obedience to the deity of choice have been transgressed. Or at least so say the price action of the commodity complex and diversified inflation hedges.

This may true. But the crucial question, put most simply is: Has the denoument of the crisis passed, or is this merely the eye of the storm?? I am but an economist with a very small "e", however, as I wrote in favored post "If You Can't Tell Who The Sucker Is...", the question of what is likely to appear to be normal in hindsight is not (if this is The Big One as I believe it is) what is popularly perceived. "Peak Credit" has come and gone, and with it, the Era of Stupid Loans passed - for this generation anyway. In hindsight, we will wonder NOT why credit was crunched, but how the hallucinogenic wheat fungus that caused those with capital to, along with pixie dust conjured from it, to give it away to anyone and everyone who wanted it with such reckless abandon. So IF the era of Stupid Loans is finished, there will be no recovery. There will be precious little inflation, and it is likely deflation will persist.

I want to be bullish. I want asset prices to already be south of some long-term equilibrium, and be ready to rise. It would be less painful for The People. But with employment shocks still to ripple through the chain of dependencies, household balance sheets compromised, continued real-estate indigestion, our position between a fiscal rock & a hard place, and continued financial sector deleveraging, we collectively are the place that I've just been. We collectively are just beginning to sift through our shit - mentally sizing up what's important, what to take and what to leave. We are just beginning to realize that tough choices lie ahead - in all facets of life. We are just beginning to understand that these choices do not include 5-litre Cadillacs, absurdly over-applianced kitchens, or $5 iced-frappucino lattes. But, on the bight side - you won't miss most of it as much as you ex-ante believe you might...


Jesse on Life in Japan

http://jessescrossroadscafe.blogspot.com/2009/07/japan-calling-little-more-local-color.html

A friend in Japan is updating me on how things are going there.

Its been about ten years since I have worked in Tokyo personally, but everything he is saying is a logical extension of how things were at that time. I am very familiar with the NTT communication system, which was the basis of some of our early work here in the US. Its convenient sometimes to have a determined bureaucracy with plenty of money and power at your back when its time to get a strategic initiative achieved.

This is useful because people like to make facile comparisons between Japan and the US without really understanding some important differences in the markets, public policy, demographics, and culture.
"There are many things here that make life difficult, but on the other hand, make life much easier, some planned, some dictated by circumstances and by accident. It seems very socialist. Makes it very difficult to compare Japan and the US.

There is national health care here. Due to a focus on disease prevention (they have started to take waist measurements and warn you if your waist is say more than 34 inches), not eating too much meat, getting enough vitamin D from sunlight and getting a little exercise because you have to walk 10 minutes to the train station, you can expect, on average, to be fully functional until about 75 and live into your 80s.

Almost everyone is reimbursed for commute to work, by least expensive route, say bus and train, even if you work in a convenience store. Japanese people have told me that the idea is that everyone who wants to work should be able to work where they want without being deterred by the cost of the commute. At one firm I worked at, the limit for the reimbursement was 800 dollars per month, so a very few people commuted by bullet train from quite a distance away. More exactly, if you go to work 5 days a week, the company will reimburse you for the bus/train pass, which allows unlimited travel, so you can use the train pass to go shopping or do other things on weekends for free.

My pass for a half hour commute each way, about 40 miles round trip, is 120 dollars per month. This is why the public transportation systems work well and have continued to improve. All the trains are continuing in improve, and for example, the bullet train now uses one half the energy it did when it debuted 45 years ago. JR East, beginning with the Yamanote Line, is replacing all its trains with new regenerative braking trains that are lighter and roomier and use half the energy of the earlier models. Advertisements on the trains say it takes 1/10 the energy to go by train than by car, but I think that is for older models.

Which brings us to the biggest advantage: most people do not need a car here, and if they do need one, a household can get by with just one car.

I have long thought of cars as vampires sucking the economic life out of every household in the US. And the risk of death and serious injury from car accidents is about half what it is in the US (although the statistics may not be directly comparable).

In 45 years, only one rider has been killed on the bullet train, and that was because he tried to stick his hand in the door too late and got the sleeve of his jacket caught in the door. While there are commuter train accidents from time to time, they are rare, and I think in Tokyo, the last passenger deaths were about a decade ago when a train derailed. Since the auto fatalities in Japan are about 7,000 per year, whereas in the US they are around 40,000 per year with about double the population, I guess that if the Japanese drove as much as people in the US, there would be about another 10,000 auto fatalities per year here, so over the 20 years I have lived here, there are say 200,000 people walking around who wouldn't otherwise be here. That trumps absolutely all other considerations.

I think it is telling that during the oil price spike last year, the US cut its gasoline consumption by about 5%, whereas in Japan, gasoline consumption was cut by 14%. I said, the Japanese cut their gasoline consumption by 14%... BECAUSE THEY CAN.

Broadband, subsidized and incentivized, has been here for a decade. Around 1999, I picked up a Yahoo Broadband modem, filled out a form, brought it home, and plugged it in. 6 M/sec, 15 dollars a month. Although I didn't understand it at the time, the modem was converting my telephone calls into internet telephony, so calls to the US that were a dollar a minute by NTT were suddenly a flat 3 cents a minute. Around new year, I made a lot of phone calls, and was bracing for a thousand dollar phone bill... and then I realized that I hadn't gotten an NTT bill in months... it was instead a 20 dollar charge tacked on to my credit card.

The Japanese government has been panicking about the oil running out for more than a decade. I noticed Koizumi saying "global warming, global warming" over and over again, and mention of peak oil was conspicuous by its absence. That's when I realized that when he was addressing the captains of industry, what he was really saying was "You idiots, the oil is running out! Get the energy use of everything down!"

Because broadband is widely available, the Japanese government went from wanting 10% of workers to telecommute at least some of the time, to wanting 20% to telecommute by next year, as a means of reducing energy consumption.

Mitsubishi is advertising a split system heat pump air conditioner/heater that runs at about 6 cents per hour (and the electricity rate here is high, about 20 cents a kilowatt hour). My Sharp heat pump is 16 years old and runs for about 10 cents an hour. My total heating/cooling expense for a year is about 300 dollars.

There is a huge panic going on in the US about how bad the electricity grid is. I think there are estimates that unreliable electricity is costing the US 100 billion per year. In Tokyo, there has been only one major blackout in 20 years, and that affected only about a quarter of the city for half a day due to a crane snagging high tension wires. The only outages I have seen myself were when a construction crew accidentally severed a line (one hour) and when a fighter jet crashed into high tension wires (two hours). Quakes do not normally affect electricity, water, or telephone. Gas meters have automatic sensors that turn off gas supply, and then if it seems all clear after an hour, automatically reset. We sometimes have fairly big quakes every day for weeks on end... I'm not joking.

When a quake is detected by sensors, the sensors send signals to a central computer. The computer has models of 100,000 quake scenarios, and it matches the data to a scenario, estimating the surface shaking for each small grid square of Japan. If surface shaking in a particular location is predicted to exceed a certain level, the bullet trains automatically engage emergency braking. All city halls have automatic announcement systems that estimate the shaking and count down to the arrival of the primary wave at their particular location. Nuclear reactors and power generating stations receive advance warnings. Some residential condos also have this. I suppose it will become standard soon.

You can get warnings of a few seconds or minutes depending on how far away the quake is.

(After seeing the Kobe quake first hand, my solution was 1) buy earthquake ground shaking estimate map of Tokyo, 2) see closest station to downtown where risk drops substantially due to granite outcrop getting you off the alluvial plain. Estimates of shaking in downtown Tokyo is 10 times the estimated shaking where I live.)

This is why I think it is so difficult to compare the situations. You cannot walk away from the mortgage. On the other hand, your commute is subsidize and you do not need a car, so it is as if the condo were free."


The Duncan is a star.

Gary has talent.

There are others here.

Wandering from a dead past toward an unknown future

I beleive real change is afoot. The debt bubble in the final analysis is the endpoint of a money system which mispriced capital too cheap and therefore pumped up asset prices, then monitised to pay for lots of fossil fuels and consumption. With the illusions on which it was based shattered this credit creation system is completely busted. The centrality of Wall Street and the City has hit the brick wall of investor sentiment, physics (obsolete production paradigms) and politics and in the medium term will be disintermediated by a long credit winter. The baton has been passed to almost invisible organisms with snug burrows and good prospects that are out of sight to most.

The bankers who created a new alliance between private bankers and public government, the government bond enabled state ambition, used firstly to finance mercenary armies to pillage the competitors of Italian City States. Those bankers would have no difficulty recognising that a nation with the power to make its bonds the universal measure of value would ride its advantages to vast wealth, geopolitical clout and military power.

In the same way that we dimly recognise that much of what passed for financial modernity was the last gasps of that medieval order, they knew that secret interventions in the public market for such state debt can maintain the facade of solvency that covers the flight of insiders..

The architects of the old order of giant financial reptiles were also fully invested, naturally enough, in political power. Hence the bailouts to date, but the enormous cost has only bought a little time and in the end no tree grows to the sky and politics always follows the money. Money, barring a final hyperinflationary death rattle will be seen to now flow from first movers in a new technological, economic and social order.

The real deal ahead, imo, is all about conservation and efficiency and new production technologies. Its about a return to the classic human virtues and a recovery from a mania that was "all quickness but no movement" fueled by cheap fossil fuel energy. Only after rest and rehab will the West finally muster the sacrifice and effort required to build a cleaner, greener and clearly sustainable for the long haul future.

Popular culture will track the declining prestige of bankers and bondholders relative to innovators in manufacturing and technology and a new respect for greenies, farmers, scientists, teachers and librarians will slowly emerge.


So what we are in is that difficult period when those who will benefit from the great changes ahead lack power while those who will lose by them are well established with the means to defend the status quo.

We wander a no-mans land where reality is only slowly dawning where unless your absolutely sure about what your doing a burrow is the best bet.


The consensus view, far from grappling with the technical and political difficulties of implementing the required policy response, has failed even to admit the extent of the problem. Yet such an admission is a prerequisite, the first step in fact, of doing what needs to be done.

For almost two years now, our leaders have been in denial, burying the details and delaying the really tough decisions. In recent weeks, though, something has changed.


For the first time since the credit crunch hit the headlines in August 2007, reality is punching through. Powerful people are breaking ranks and saying what needs to be said. Pretty soon we may even begin tackling the root causes of this debacle by facing down the vested interests and making the changes necessary to rescue the Western world from years of economic stagnation.

Earlier this month, Angela Merkel, the redoubtable German Chancellor, took a stand and appealed for "a return to policies of reason" – calling time on "quantitative easing", the deeply misguided policy that has seen Western central banks double the size of their balance sheets to buy government debt.

QE was always a ruse to recapitalise insolvent banks by the back door, so their powerful executives could avoid admitting previous mistakes. Yet it has shattered the world's faith in the West's policy-making competence. It has destroyed any authority we had to tell economies elsewhere what to do.

QE will result in high inflation – in turn, destroying investment and jobs. And it will mean that, for years to come, Western taxpayers pay higher interest charges to service our government's debts.

Almost alone among the ranks of the seriously powerful speaking sense, Merkel was last week joined by Mervyn King. At the annual Mansion House dinner, the Bank of England Governor called for Gordon's Brown's disastrous "tripartite" reforms to be scrapped, returning banking supervision to Threadneedle Street.

That has to be right. UK banks have been able to act so irresponsibly because the authority to monitor them was split between the Bank and the FSA. In fact, Brown was so addicted to the political feel-good factor resulting from ever higher leverage that his system was explicitly designed to allow responsibility for reining in the banks to fall between two stools.

King also stated "it is not sensible to allow large banks to combine high street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee".

These words echoed around the world. The Governor is calling for a re-instatement of the "Glass-Steagall" firewall – the removal of which allowed investment banks to merge with commercial banks. That meant taxpayer-backed deposits could be used by bonus-fuelled traders to make high-risk bets – in the knowledge the state would have to fund a bail-out given that ordinary voters deposits were involved.

By calling for a new "Glass-Steagall", King is taking on Wall Street and the City – among the world's most powerful vested interests.

Yet, politicians need to realise it's precisely because this safeguard was removed, and the "universal banks" became so big, that what started as a banking crisis has become a fiscal crisis – a crisis so severe that some of the world's leading nations could default and, at the very least, several generations of Western taxpayers will be saddled with the bill.

Other harsh realities are now also coming to the fore. New figures confirmed UK government debt is rising quicker than at any time in history – not least due to the bank bail-outs. As the recession hits tax revenues, May saw the biggest surge in monthly public sector borrowing since records began.

In this context, the Tories are now finally allowing themselves to face down Brown and his economically-literate allies – by admitting spending cuts are necessary. How ridiculous does Brown sound when he contrasts "Labour investment with Tory cuts"?

Then there is "deflation" – in my view, the "biggest lie" of all. In May, CPI inflation remained at 2.2pc – above the Bank of England's target. Were it not for the government's temporary VAT cut, the CPI would be 3.4pc – with the Bank have to write yet another public letter explaining why it's so high. We're a million miles from deflation.

As I've often said, the "danger of deflation" was always a myth – conjured up to give Western governments an alibi to pursue wildly expansionary fiscal and monetary policy and perpetuated by the vested interests benefiting from such largesse.

If we're to emerge from this crisis, and avoid similar future disasters, powerful figures now need to recognise and expose such inconvenient truths.

Alarm bells on public sector pensions

Some state employees work hard – and we're lucky to have them. But, in general, public-sector workers enjoy shorter hours, longer holidays, better job security and higher wages than their private-sector counterparts.

Yet 90pc of public-sector workers also have gold-plated final-salary pensions, compared to only 10pc in the private sector. They retire earlier too.

Our ageing society means most of us will reach for our slippers later and on lower pensions than previously thought. But state workers remain immune to economic reality – at everyone else's expense.

The costs of this injustice are vast. Between 2001 and 2008, our public sector pension liability officially grew 110pc to £794bn. A new Policy Exchange report by Neil Record puts the true figure at a staggering £1,104bn.

This massive debt doesn't appear on the Government's balance sheet. Yet each year taxpayers spend more on public sector pensions than defence. By 2040, the annual bill will approach what we spend on the NHS.

A former Bank of England economist, Record has a deserved reputation as an astute, non-partisan fiscal expert. His report's advisory committee includes some of the UK's top actuaries and the former chairman of the Inland Revenue.

The Tory front-bench needs to act on this study. Spin is not enough. The ratings agencies are watching – and public-sector pensions are high on their list of concerns.

BRICs at the top table

Last week, leaders of four of the world's largest economies – Brazil, Russia, India and China – met in Yekaterinburg, Russia. Known as the BRICs, these vibrant nations now account for almost 20pc of global GDP – the same as the United States.

Even this startling figure understates the importance of the BRICs, and the emerging markets (EMs) more generally. Together, they now drive 42pc of global GDP – and rising. That outstrips the US and EU combined.

Over the next few years, as the Western world stagnates, the EMs – with their low debts and highly productive workforces – will keep growing. Global investors largely agree. That's one reason the world's top 10 performing share indices so far in 2009 are all EMs.

Crucially, EMs now boast two-thirds of the world's foreign exchange reserves. The BRICs control the lion's share of that haul.

For the most part, the Western media has dismissed this first BRIC summit as "unimportant". That's partly because the G7 nations weren't invited. The reality is the BRICs' emergence on the world stage is transforming global commerce – and politics too.

These countries are crucial Western creditors. Insolvency looms, unless they keep funding our spiralling government debts. Western leaders need to grow up and realise the world has changed. If we don't accept the emerging giants at the top table, they'll create their own – resulting in a less prosperous, more dangerous world.

It's refreshing to see that you are one of the few writers in the mainstream press who is constantly reminding us of the forthcoming oil crises that the government doesn't want to talk about probably because they think that we're depressed enough as it is.

You may also wish to look into what the Chinese are doing to monopolise RARE EARTH materials e.g. Neodymium is essential for producing the super-magnets inside wind turbines and hybrid cars. RARE EARTH elements are also vital for producing batteries and other such requirements in our so-called "green future". Transitioning into this future is by no means going to be as seamless and painless as our short-sighted politicians make out. The Chinese are already planning their green and fossil fuel energy requirements into the 22nd century. They have already got their teeth into Brazil and the deep offshore Petrobras project. They are also starting to monopolise on RARE EARTHS. It doesn't look like there will sufficient resources left over for the economies of the western hemisphere to carry-on-business-as usual. Check out RARE EARTHS.
Mark Pearce
on June 22, 2009
at 06:01 PM
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We're currently in a paradigm red shift. Deflation and inflation are two black holes that are consuming each other. The "negative feedback loop" is still running full steam and still requires inflation as a component. The only way deflation "wins in the end" is by getting pushed over the cliff by inflation disguised in some form or another (debt, commodities and equities). Debt is the worst. The offspring of all the bubbles have come home to roost. Until the high cost of debt disappears to the tune of tens of trillions of dollars, it remains highly inflationary in its current state. Furthermore, debt begets debt because the marginal productivity of debt turned negative throughout the creation of all the fiat driven bubbles, so the debt will only become more expensive - THAT is inflationary and will continue to eat away at the operating margins of individuals, businesses, and governments.

If only Ambrose Evans Pritchard and Edmund Conway in the DT had your sense Liam.
Deflation was a lie sold to the masses with a concerted media campaign using amongst others Conway and Pritchard Evans in the DT. Its prime purpose being to prop up inflated assets (houses) and prevent the necessary correction from taking place. The 'elite' who run the western banking system have no intention of allowing a needed correction to take place. They would rather debase the currency and prop up assets and eventually return to business as usual even at the risk of hyperinflation and anarchy.

He who has the gold, makes the rules..

The central reality of the dollar credibility crisis is that a trade deficit the size of the one possessed by the United States would have provoked the collapse of any other currency ages ago.

Without a doubt the US reserve currency status is maintained only on the basis of habit, the lack of alternatives and geopolitical keystones: the OPEC nations peg their currencies to the dollar.

The ability to buy oil in dollars independant and regardless of the actual state of the US trade deficit and domestic macro conditions is the last finger in a dike with lots of new leaks emerging. The other support for the dollar is a premium that might be considered "protection money" that is paid by Taiwan, Japan, Korea and others for protection from china and access to US markets.

None of this can last for much longer and is likely to founder on the geopolitical realignment of energy exporters in terms of immediate causes. Little wonder, therefore, on the real motives that support large and active western military deployments.

A new universal currency requires a credible supra-national issuer, true, but recent history suggests that like all magical power, it slowly subverts..

Much more likely, imo is that we move, in fits and starts ( wars and crashes) to a money system designed for the accumulation and rationing of economic resources for redeployment for the manufacture of capital goods based on both carefull prudential assessments and the price signals in local markets, one using a form of money that isn't a claim on a institution one without counterparty risk.

This seems to have been the role of gold in the past and will be in the future. It has always been the put option on monetary credibility and placing a coin in that fuse box can only result in its eventual promotion to the core role.

The aggressive policy adopted by the Fed in order to avoid the collapse of its financial system makes the current instability worse. An aggressive monetary policy might seem reasonable, but it comes at the price of the credibility of the US as an issuer of a reserve-currency. A status that required total victory in war, the accumulation of most of the worlds gold and a massive trade surplus based on both domestically produced technology and oil.

These heroic will have to be funded, in the final analysis, by the destruction of the real value of the future claims of dollar holders who accumulated them to avoid attack on their currencies in FX markets whenever dollar reserves were low.

This double standard offends those who after decades of recurring balance of payments crisis are lean and mean because in self defence they built economies well aligned to current realities and constitues an unstoppable force for dollar flight in all its forms.

Inflation and devaluation of the dollar are not an immediate threat but its potentially disrupting impact, on commercial and financial, as well as political relations is now baked in da cake. Hyperinflation is everywhere a currency phenomenon, even when the central bank sterilises the impact of expanding claims domestically, an attack on the currency by speculators because of the crisis in confidence it engenders cannot be avoided.

Over a period of twenty years or so a complete inversion in the current pattern of economic relationships between the developed and developing world seems to be a real possibility; sooner or later the truth of the golden rule will emerge; "he who has the gold makes the rules".

I like silver, myself.