Wednesday, May 20, 2009

The Great Bifurcation

A headline from today's ABC News online: RBA subscribes to 'green shoots' theory. Have we ever been in such a time where the most august of experts, heirs of the great Western intellectual tradition, have seemed so utterly threadbare? And what are these guys basing their optimistic forecasts on? The Great Savior of us all, China! After all we got through the financial crisis of the late nineties didn't we? China saved us then!

But what do these people really know about China? What do the Chinese know about themselves? We can pretty quickly disappear into a hall of mirrors here. So let's just step back from this for a moment and look at this graph of World Oil Production to 2100…(you can click on this graph after you've read my bit to go to a very important article at The Oil Drum)
Now see the vertical dotted line roughly in the middle of the graph? And see the little halo at the top? That's where we are now. And the slope down to the right is where the World as a whole is headed as far as oil availability is concerned. And how does Australia rate in the vulnerability to oil supply shocks stakes? According to this article in "The Washington Times" Australia is less secure than the United Kingdom for vulnerability due to dependence on imported oil. And what does our economy completely depend on to maintain our accustomed prosperity? Yes my dears, it begins with the letter "O"…

Now it may be that the Reserve Bank of Australia is run by a bunch of swashbuckling risk-takers who habitually play double-or-nothing with the country's cash. Or it may be run by a crew of slippery-pole-climbers who have no ability to see beyond the very narrow slice of reality which they learned about all those years ago at Uni.

Does it make any difference if it's one or the other? I don't think so in the long run. But either way, the RBA certainly doesn't seem to be run by people I have much faith in. Somehow I don't think they have any idea of our dependency on oil imports and our rapidly increasing vulnerability in that regard. And I think their view of the world doesn't extend much more than a few months into the future. That's probably fine if you're managing the exchequer of a nomadic tribe in some primeval desert, but doesn't crack it for me when you're talking about managing a complex industrial nation in a rapidly changing environment.

We are at the very edge of titanic changes in our world. Australia is still jingling along as if the nineties had never gone away. Our leadership may have glimpsed the void ahead but has decided to retreat into a kind of childhood playtime where we all play housies and don't look up at the menace rising around us on all sides.

Don't be silly buggers and play along with them. Look after yourself. Get a grip of what the real game is going to be. This is the Great Bifurcation — the decisive split from the world we've all grown up in — and those who don't see what is coming towards us will be destroyed.


mjd said...

Hi Lloyd,

I thought you might appreciate this article:

Is California Too Big to Fail?Although I guess it would be more aptly titled, "Is California too big to be allowed to fail?"

Lloyd Morcom said...

Hi mjd

Interesting that a whole state can go off with the fairies. In the normal course of events the Federal government would bail them out bit what's normal these days? The Feds have their own issues…