The taper weight

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The US government survives because of QE. Its not going to reduce spending to match income in a democratic house. If it reduces QE, its only to "fight inflation". It is currently "fighting inflation" by artificially boosting equities and therefore increasing the flight to the most liquid currency. Ceasing QE will cause an equities crash. It needs to get its spending in line with income first.

Australia's economy stopped in its tracks because of a 9 month election campaign. The cupboard may look bare but there is plenty of borrow room. The best thing is to allow the states to refinance at low rates for 30 years and build infrastructure.

There is no need for a recession as inflation is not galloping. Its just the exchange rate. Local energy costs must be locked in now rather than a move to "world parity". That means a fixed gas price rather than a sop to Origin, Santos, Beach & AGL. If they want an $8 gas price then by all means get it elsewhere but reserve some here at $4.

As for boat arrivals at 100 per day. Lets cut a deal for some Irian Jaya dams and hydro power schemes. That way we need 100,000 workers. Should stop all the boats coming here. Especially if they have to work there for three years. It will not cost us any more than we pay now. Lets at least make sure when they come here they are taxpayers and know how to build stuff.

I would argue against the fall in the ozzie dollar being great for ozzie manufacturing, our manufacturers have been de skilling for the last 20yrs, most have now cottoned to the fact that things can be built just as good and much cheaper overseas and like car manufacturers have shown us, they can now import assembly kits to bolt on rather than make things here.

A lot of manufactures are now distributing overseas made parts.

The reason why unions want to impose higher tariffs is to prevent that.

But, no manufacturer wants to pay a semi skilled guy a tradesman wage..and as we are now hearing all assembly workers are trades people and all detail draughtsmen are now designers it follows manufacturers know they are paying too much for labor.

I seem to be looking up your comments more than the article itself. Keep this up. Highly appreciated.

I agree Geoff. Bernanke did not even make a real statement of slowing QE. It was the same 50-50 bet. Just that the mkt interpreted it as a slight, possible, maybe, could be, might be indication which was enough to trigger these hair trigger markets that have no fundamentals- just bubble buying from QE.

So will QE taper off? And what bond yields ratchet up? No way.

The US is broke, writing its own pay cheques from thin air. Can't balance the budget
without electoral armageddon and more spending makes it worse.

Where are those green shoots when you need them?

Like it or not ( this correction in our exchange rate), the Aussie at ( or above) parity was always going to cause more harm than good.
Sure...the wash out will cause short to medium term pain ( and Oz has more problems than just a distorted exchange rate~ like an over priced wage structure and an over priced real estate ...just for starters)...but this correction in the exchange rate HAD to happen.

Interesting article, agreed 20 years of growth thanks to population growth with mostly employed new hands. During the Hawke-Keating years it took 2 or 3 time less working time to buy a home compared to today average income, don't know for the car.

The US is only trying to win time given Europe predicament only Germany is going OK, France the next large economy in the Eurozone will have no growth for a long time with its high level of employer taxes/ charges and Europe has become the pub with no growth,

agreed with David and Geoff specially for infrastructures and giving a spade to boat people after a security check and health check, no free meal, legal migrants often take several jobs to start.

Agreed also with Bruce, the correction also was needed to stop speculative temporary money shifted from Europe low interest rate to Aussie land with a 2 or 3% extra gain in interest rate and an appreciating currency to top it, not anymore the depreciating currency makes the interest differential less attractive.

Interesting article and interesting analysis : In 1986, when the Australian dollar fell below US50c...etc

thanks also to the price and income accord

Great article thanks Alan. Interesting times.

Thanks Alan, no surprise to those of us that have followed the US energy revolution.

Is it not ironical, that Australia, could have followed the same path with our shale development. No doubt there will be respondents, that say Australia, does not have enough shale, to develop.

BHP did not have a problem! they just bought US shale.

Often, my comments have been panned, because I took the stance that gold was not relevant to the prosperity of a nation, however energy was.

The RBA had the opportunity of cutting the cash rate to 1%, 12 -18 months ago, but failed to take that path. Now the talk of cutting the cash rate, is nothing less than reprehensible, if anything, it should be going back to at least 3%, to cushion the blow, from a rising USD.

A bubble is created by a desperate central bank, they don't happen by accident, they often are the product of unrestrained fiscal spending, which actually kills jobs, rather than creating them. So monetary policy is pushed down to allow, the housing market to generate wealth.

Monetary policy is such a blunt tool, that holding cash rates low, for too long, causes a huge desperate rush of capital, into the housing market. We all know that a housing bubble only magnifies, structural problems.

So, whats the solution? Energy, is the solution, cheap clean energy.

We all think that science, is the tool we use to create apps. for i phones. "Hey man I invited my closest 500 friends to a party last night, unfortunately, I could not go because I had to send all these text messages, to my other, 500 friends. Just as well I did'nt go, there was 200 uninvited people trying to crash the party!".

Yeah, we are dazed and confused. Apps. can be used effectively, but generally are a waste of human resources.

Energy on the other hand, explains why everything exists.

My comments on superconductivity have created great controversy. The times, that I have stated, that energy could be collected, using supercool CO2, that acts like a battery. Some interest has been shown, however not by those who understand valence electrons.

Isn't it ironical, that a person can sit in front of a computer and talk about why the economy is going wrong and not understand that all banks, all i-phones, all hospitals, all refrigeration, all schools, all money interchange, would collapse without energy.

Hey! man don't talk like a capitalist, don't you know that the ice caps are melting. Hey! honey, can you put some more wood on the fire it's freezing in this house.

We, need our physics department in CSIRO, to get back, to explaining, why Tau particles, change characteristics, when the temperature changes. This will explain, why we can control electrons, in a supercooled state.

Imagine, harnessing the energy from shale gas, without fraking it, or removing it from the ground. The problem is, that Haliburton, might want to destroy your idea, because it detracts from their profit.

So, the only answer is for Australia, to do our own research! We need to have dedicated post grad. research in quantum physics. We need the equivalent of an Australian MIT. We need to get the CSIRO physics department, to be become a research facility, and not a group of statisticians tabulating data, in accordance with government parameters.

We need to let our cognition run wild. I would not give the solutions on this format, but I will say, that between 1968-72, the US department of energy, commissioned a study, to determined how to raise the profitability of shale gas. It was found the CO2 and shale gas co-valently interacted and gave off liquid.

So, I took it a step further and looked at, Einsteins theories of superconductivity and found that, the resistance, of the carrying body (Co2, in this case) reduces, with temperature (reduction).

Just like the Tau electron, has shown different states, at different energy levels. (Something that we could not prove, in 1968).

My conclusion, supercooling gases (Co2), can harness more electrical energy, than burning the gas that creates it.

What does that mean?, lower costs, improved science and Australia, can take control of our energy requirements.

Or, we could just continue to burn stuff and listen, to the whinging and moaning about how we are all going to die, when the ice caps melt.

I find it laughable for Alan Kohler to suggest the American economy " has returned to health " when the same greedy cocained addicted moron's who got the American's into financial trouble in the first place are still firmly entrenched in Obama's government and STILL in control of American economic policy making.People ought to watch Charle's Ferguson's jaw dropping DVD "Inside Job " to get a modern understanding of just what is actually happening on Wall Street and within the Obama adminstration before they foolishly believe the American economy is on the " the road to health ".
Alternatively one of America's greatest financial investors Jim Roger's recenty described those in charge at the Federal Reserve Bank as " madmen ".
What the American's have succeeded at is destabilising every other economy on the planet with their money printing which was alway's Bernake's aim and agenda.
The real problem post GFC is that prices for manufactured good's remain too high and scared consumer's no longer want to waste their money on goods with built in obsolescence that dont offer the consumer value for money.
While debt in a lot of countries remain's high as well and prices for manufactured good's remain's high ,you get slow or anaemic economic growth.
The first manufacturing companies to change this unsustainable business model will make a fortune.

Andrew - Although I am a huge fan of 'Inside Job', and always recommend it to friends with little understanding of modern banking practices in order to show how the GFC came about, it's a ridiculous stretch to say that it reflects Wall St today. I haven't seen anyone trying to sell a CDO or a CDO of CDOs since 2008. The main protagonists in that film, and in the crisis itself, were overwhelmingly appointees of that well-known economic illiterate, 'Dubya', and not of Obama who was a mere opposition Senator when the guano hit the blade.

So, whats, the definition of a madman? it's someone, you don't understand.

So, what's the definition of a rational explanation? it's an explanation of something, you do understand.

Now, I realise why, few are listening to rational explanations.

Science, has all the rational explanations, to turn our world into a prosperous and egalitarian world. But no one understands and those that do understand are being called madmen, by those that, just like video clips, produced by people, that just like to produce video clips.

We are still living in a world that fears the truth. Just like the "Dark ages", where scientists were burned alive, for questioning the status quo.

Hey, that could not happen in 2013! Yeah, that's why Spain is talking about making Queen Isabella a saint. Look at the Spanish economy and realise, that it is not a modern functional economy. The US is riddled with debt, because the rich don't want to send poor kids to school. Just like Steinbeck explained, in the Grapes of wrath. The immigrant workers, still work in slave like conditions.

Australian car manufacturing? All we need to do is upgrade the modelling. No we cant do that, it will mean paying people money, that they don't deserve. No it won't, it will mean a co-ordinated vertical loop, that is more efficient. Coles has shown how to take a dead supermarket chain and increase profitability but cutting costs to the consumer.

That's what it's about, cutting costs to the consumer. Just like the US debt market, it's about selling lower cost debt. Remember, that the USA's largest trading partner is Europe and Europe is a dead animal, floating on public spending.

China, will always be China, look at the words of Mao tse Tung, "The end justifies the means". That is, China will grow at the rate that China requires and Australia, will still benefit, from that growth. However if Australias dependence on China, is not matched with cost reductions, then our profitability will continue to decline.

The USA. Japan, Taiwan, South Korea, Germany all made vast quantities of wealth from manufacturing. If Australia, chooses to make wealth from financial means, then we are destined to fail. Australia, prior to the GFC was making $20 billion per anum from education. We need to conceptualise that paradigm and bring it back.

Read my previous post and understand that, you may be right, I may be a madman, but Australia, needs a madman at this point in our history. There are too few, that are prepared to look at new models of understanding, they are all too busy watching their i-phone.


Looks like it's time for you to go back on the medication. your theory about getting energy from super cool CO2....where does the energy come do the cooling? ( Genuine question...quite interested in how this would work).

As I say David, a madman is a person you don't understand. So perhaps you, need to expand.

Bruce you dont get energy from super cool Co2, the Co2 is like a lithium battery, it stores energy.

The greens talk about electric cars, as a way of stopping, pollution. What I am saying, is if we want to stop pollution, then we need to find a use for CO2.

Energy, is probably the hardest concept to understand. However if you understand that putting photovoltaic cells on your roof, will give you enough energy to heat water for you shower. Then there is no excuse, not to realise that Co2 can collect energy in the same way.

David, it' all about valence electrons, thats why photonics (solar cells) works.

To prove this, understand that Tau electron neutrinos, change in accordance to energy levels. Whats another form of energy level? Temperature!

So, David, the next time you see the sun shine, you will realise that nuclear energy created everything. Thats what the big gang gave us 13.8 billion years ago. Now go and take your happy pills, before your next free science lesson.

Post script. Sorry Bruce, I forgot to answer your question, the energy to cool the Co2, comes from the same place, that the energy to liquify natural gas comes from

Wouldn't that make the process energy neutral....or does the potential energy from the super cool C02 outstrip the energy needed in the cooling process?

Bruce, the problem with comparing, apples and oranges, is that, it is really fairly pointless to compare them.

All business, has start up production costs. That is the first requirement of business, the second requirement of business is to make a profit, from the goods that you are selling.

So, if you are required to spend money on refrigeration costs (cooling CO2), then that is a start up cost, now you are required to profit from energy sales (output profit).

Basically, my ideas stem from a report by US energy (1968-72), relating to the profitable removal of shale gas. The tests used CO2 to remove the gas, this method was found to be more profitable, than using extraction pumps.

The report, showed, that there was a larger kerogen output, from this method. So, I assumed that the co-valency of the carbon gases, was producing kerogen.

My next step was to refer to Einsteins work on superconductivity. This tells you that reduced temperature, reduces the speed of electrons. Therefor allowing greater control of these electrons. Yet reduced temperature of the holding body (Co2), decreases the capacitive reactance of the liquid, thereby increasing valence interchange between the gases (remembering that the Co2 is now a liquid gas).

This framework implies that greater kerogen would be produced.

Relating this effect, to the Tau particle, that has shown different, spin characteristics at high energy states, one can see that temperature is vital to electron energy, therefor valence transfer.

So, we all know what photovoltaic panels do, they collect plasma energy from the sun. This energy is a product of continual fusion at 10 million degrees C. Electrons change orbit from hydrogen atoms and are fused onto other hydrogen atoms to form hellium. Each time an electron changes orbit, it gives off a photon of energy.

There is absolutely no dispute, within science, that the Tau electron, responds to different temperatures.

So, there should be no dispute that, temperature is a way to controlling energy flow. As we approach absolute zero, electrons slow to the point of almost stopping, do they stop at absolute zero, no one knows, because you cannot observe something, without energy.

The dichotomy is, when the colder temperature slows the electron to it's slowest speed, a positive charge, will attract the electron, at it's greatest possible speed. Due to the reduced resistance in the holding body.

These areas need to be quantified, the science that I am stating is accurate, therefore worth exploring.