Crisis? What crisis are you talking about?

If you were facing a major financial crisis which you didn't fully understand and had little control over, and you were running the government of a small, isolated country crucially dependent on export trade for income and energy supplies, what would be your priorities? This is what Kevin Rudd is doing…

From ABC News: The Government is set to bolster Australia's military presence in the region with a huge funding increase to be outlined in tomorrow's Defence white paper.

Submarines, ships and cruise-missile firepower are all being upgraded in anticipation of a shift of power in the Asia Pacific from west to east.

As reported by the ABC in February, the white paper orders 12 new submarines be built in Adelaide in the single biggest defence project in the nation's history…

And what about our State government in Victoria? Aha! More pure genius…

The Victorian Government will build the Frankston bypass under a public private partnership (PPP), regardless of whether it receives federal funding.

And…

The Victorian Government says almost 5,000 jobs will be created as it intervenes in five more large construction projects…The new projects to be fast tracked include an upgrade to Avalon airport…

I watched this on ABC TV news tonight, complete with Lindsay Fox (the owner of Avalon airport and a man who I would characterise as well connected) looking like the cat who'd got the cream.

It looks as if the pillagers of the system are getting down to some serious work. Peak oil rendering investments in airports and freeways useless? Are you a Commie or something? Prioritising investment to reduce our critical dependencies on foreign oil? Don't worry, technology/our great and powerful friends/God/Santa Claus will provide.

Meanwhile, over at The Oil Drum, Gail the Actuary posts the real story…

At this point, it seems to me that we are in the lull before the storm. Demand has dropped, because society could not afford high priced petroleum products, but the supply has not yet declined to reflect the lower price level. Stimulus packages have been put in places, but the cost has not yet filtered through the system. People are hopeful for a rebound, and this is reflected in the stock market prices.

To me, the most vulnerable system is the international monetary system. As long as countries trust each other, trade will continue as usual. Once this starts breaking down, it seem likely that countries will need real goods to barter, rather than relying on promises to pay. A breakdown in the international monetary system could cause a major interruption to trade, and start a downward spiral. It seems like this could happen at any time.

What do you think warrants the most effort and attention?