Welcome to visitor 40,000

Welcome to visitor 40,000 who arrived at 5.41am Australian Eastern Day Light savings time. He/she came from Bethany in Connecticut, USA. I had never heard of Bethany, but it is a small town whose slogan is "Rural is beautiful". Now how could I disagree with that?

Visitor 40,000 searched on the importance of Chinese history. This brought them to Another view of China - and the importance of shifting perspectives. This post would not have helped them especially - it has a somewhat different focus. Another post?

Personal Reflections - Anne of Green Gables, depression about indigenous issues, postives about India and Indonesia

While in China I bought a copy of L M Montgomery's Anne of Green Gables.

Published in 1908 and set in Canada's Prince Edward Island, the book tells the first part of the story of Anne Shirley, an orphan who came to stay with Marilla and Mathew.

The Avonlea series are some of Canada's most loved books and formed the base for a number of popular TV series and films.

The photo is from the Anne of Green Gables series web site and shows Marilla (Colleen Dewhurst) with Anne (Megan Follows).

I have just been re-reading the book as a break from the world around me, an antidote for the depression that comes from too much exposure to serious stuff.

Part of the trigger here came from listening to the detail of and responses to the report into the Northern Territory intervention. After listening to an hour of radio discussion, I wrote Depression about indigenous policy - and a challenge to North Coast Voices. This led to a very tart response from one of the writers on that blog pointing out that I had my facts wrong. I brought the comment up into the main post as a correction, but it added to the sense of depression.

The way I feel at the moment, I don't think that I want to be involved in further discussion on indigenous issues. Things seem to go round and round. I listened to Fred Chaney being interviewed again. As always, he made good points, but he sounded very weary. How could he not be? I really admire the way he has kept on going.

I re-entered the discussion on indigenous issues in part to educate myself. Concerned with constant policy failures, I tried to use my skills as an analyst to suggest the reasons for failure, identify principles that might be used to develop new policy approaches. I also started writing on Aboriginal history again after a break of many years, focused especially on Northern New South Wales.

My knowledge has certainly improved, and that has sometimes been useful in a policy environment and to at least some readers measured by comments. However, I don't think that I have much additional that I can add at least at a policy or analytical level - the position I have developed is too far outside the often polarised main streams to be helpful at this point.

At some point I will try to consolidate all the posts I have written over the last two years into a single document to see if there is in fact anything more that I might usefully say. In the meantime, I will limit myself to continuing to build my understanding of Aboriginal history within New England.

On a more positive note, I seem to have been doing something right on this site measured by the traffic stats, with both page view and visitor numbers running at consistently higher levels.

On a still more positive note, my thanks to Ramana for Blogger From Australia. I have enjoyed the new visitors and my follow backs to their sites. Really a very nice break from a world recently dominated by economics. Ramana seems to have built a real community through, I think, his very positive comment policy.

Tikno, as I think mentioned in my response to your comment, material on Indonesia-Australia is spread in a number of posts. However, you may find the following of interest:

• GDP - Australia in its Region (23 November 2006) looks at Australia's place in its region, including the impact this has on Australian trade policy. One point in that post was the need for growing integration between Australia and Indonesia.


• UNE's Overseas Student's Association (October 2008) shows an Indonesian student at the University of New England in 1960. The first Indonesians I met were Colombo Plan students at UNE. The first Indonesian food I ate was cooked by them.

I spent the best part of an hour searching for a full post I thought that I had written on the death of President Suharto. I wanted this one because it had some historical material in it on the Indonesia-Australia relationship. I finally found it unfinished in drafts!

I will try to update and publish this so that there is another post similar to the one I did on India.

In the meantime, back to Anne of Green Gables!

The Australian economic stimulus package - distributional and timing issues

This post continues the discussion I began in The Rudd economic stimulus package -a missed opportunity, looking at distributional and timing issues. There is nothing profound in the material that follows. Think of it as brief notes to myself to try to increase my own understanding.

Economic Linkages

The various Government initiatives are meant to fit together in this way:

• the various elements in the finance guarantee package are meant to ensure domestic liquidity and to provide a measure of insulation for Australia from the previous global financial turmoil.
• then there are the various longer term measures already announced that are intended to provide a long term growth base. I am not sure that these, and especially the integration between them, have yet been properly analysed.
• and now there is the fiscal stimulation package intended to provide a short term fillip to domestic demand (the one-off payments) that should in theory then phase into increased housing construction.

The One-off Welfare Payments

The one-off welfare payments are equivalent to around .9 per cent of Australian GDP. However, those to receive the payments are not distributed equally across Australia, with higher concentrations in particular areas. This means that the impact in local terms will vary and in many cases may be far higher than .9 per cent of local GDP.

The one-off pension payments ($A4.8 billion) will be especially important in those areas with above average concentrations of age pensioners. I have not attempted to chart this, although ABS census data could be used to chart distributional impacts using a combination of demographic structures with data on welfare recipients.

As a broad generalisation taking NSW as an example, the greatest relative impacts are likely to be in regional NSW simply because older people make up a higher proportion of the total population. The overall impact could be quite high in individual localities, equivalent to a one-off increase in total weekly incomes in some areas (the income in that area in that week) that could, on some rough back of envelope calculations, be over 50 per cent, in some cases well over 50 per cent.

Conversely, the one-off child support payment ($A3.9 billion) will have its greatest relative impact in areas where there is a substantial proportion of young from lower and middle income families eligible to receive the Family Tax Benefit such as the outer suburban areas. The area impact here is likely to be less simply because the payment is smaller, while the relative proportion of the young is also smaller.

I am not sure that I draw any substantive conclusions from this in terms of its aggregate (average) effects. I just find it interesting.

All these one-off payments will be made from 8 December, sort of a Christmas bonus. However, we should not assume that the total impact will be an increase in aggregate spend hitting at one point.

A reasonably significant proportion of benefit recipients live in social housing and pay income based rents. If the one-off payments are counted as income, and it is unclear as to what extent this might happen, then around 25 per cent will be absorbed by rent increases. To this degree, the overall spending stimulus will be reduced.

We also need to take debt into account. A number of recipients have small debt amounts and will use the money to reduce that debt, thus reducing the aggregate spend effects. Others may borrow against the future benefit payment, this bringing spend forward.

The net result of all this is that the aggregate spend impact may be lower, its timing a little more distributed, than would be suggested by the raw numbers.

In measuring impact, we also need to take into account where the money will be spent.

Based on my limited knowledge, I would expect the majority of the money to be spent on groceries and beverages including alcohol, entertainment including gambling, car repairs (many pensioners are struggling the keep old cars running), some smaller consumer durables, things for the kids, meeting medical and dental backlogs etc.

So the the spend will translate to an immediate increase in consumption for certain types of goods and services. However, the flow-on stimulatory effects, the multiplier effect, depends upon leakages including especially imports. Because we import so much, a significant proportion of the spend is likely to flow though to a one-off increase in imports, reducing the subsequent stimulatory effect.

The First Home Buyer Grant

The time limited funding for first home buyers ($A1.5 billion) applies to existing and new homes, with a deliberate skew to new homes.

Increased payments for existing homes should immediately flow over increased property prices as compared to what would otherwise have been the case.

I find the economics here a little complicated.

The lower the house price, the greater the impact simply because of the ratio between the fixed amount of the grant and the house price. We saw this when the original scheme was introduced - some of the greatest percentage increases in house prices occurred at the low end in regional market places. One outcome was a reduction in the margin between highest and lowest house prices.

So regional house prices should increase at the lower end.

The effect in the outer metro suburbs is a little more complicated. House prices have come down in some of these areas as people struggled with higher repayments. This decline will be reversed to some extent as new buyers come into the marketplace. This will actually have the useful side effect of making it easier for the over-extended to exit.

The effects of the change on the rental marketplace are a little unclear, at least to me. An increased number of new home buyers implies less rental houses. However, by definition, as first home buyers they area already renting. So that frees up the house they were living in for rental. On the surface, the net effect on rental availability is likely to be zero.

I have heard some commentary that the rise in house prices flowing from this move will of itself encourage construction. I cannot see it.

The only thing that I can think of is that the move will encourage transfer of people between areas, soaking up unused and presently over-priced inventory in some areas. This may encourage further construction, especially of flats.

The grant for new homes should encourage new construction, subject to the key constraint that land is available. Again, the ratio between the size of the grant and the development price is important in determining actual outcomes.

Development price combines land costs, all the multifarious state and local government charges, construction costs plus a profit margin. On the surface, the greatest relative impact is likely to be in regional areas and in the construction of flats.

There is an interesting linkage here between new and existing homes, one that was not clear to me when I started writing. New homes compete with existing homes for buyers. In theory, a rise in price for existing homes may make construction of new properties more attractive.

Conclusion.

I have run out of time. As I said, this post is really a note to myself to help me work through the issues.

Afternoon Update

As you might expect, the airwaves have been full of the package.

Just to check on the regional reaction I looked at Tamworth's Northern Daily Leader. One headline in the paper reads Home buyer incentive set to ignite market. Another story suggested that $4 billion of the funds would go to the country. I could not find the story again, but North Coast Voices carries the full press release on which the story was based.

I see that Neil is going to use his money to pay December accounts. He promises not to waste it!

The Rudd economic stimulus package -a missed opportunity

I have very mixed views on the Australian Government's stimulus package. In a post this morning, Keeping a sense of perspective, I suggested that the Rudd Government should not rush into an economic stimulus package. There I said:

Managing the real economy is a matter for sensible fiscal and monetary policy. Yet here the rhetoric of at least Australia's leaders is still dominated by the financial crisis - we must avoid global melt-down.

Please, Mr Rudd, take a deep breath. Yes, we need to take action to reduce the effects of economic downturn. But we also need time to think the best ways through.

Later that day the Government announced its economic stimulus package. I have summarised it here.

I have complained before about some elements of Mr Rudd's style. See, for example, Slow down Mr Rudd, for all our sakes, slow down. His tendency to rush, his focus on activity, can combine to create bad results.

I generally supported the Government's approach to bank guarantees because this was a response to an immediate crisis that really required a fast response. The same cannot be said for the latest measure.

Yes, and as I have argued, the economy will need stimulation. However, I also saw the downturn as an opportunity to do new things because downturn makes resources available. It is hard for a Government to do major new things when the economy is pressed hard against capacity constraints.

The wording of the announcement is an example of modern word spin set within an atmosphere of crisis.

This is an "Economic Security Strategy". It is not. It is an immediate stimulus measure.

The package is designed to "strengthen the Australian economy in the face of the worst global financial crisis since the Great Depression." The package will stimulate, not of itself strengthen, the Australian economy. "In the face of the worst global crisis" is a sales pitch.

When we turn to the detail, we find that the word "spend" has been replaced by "invest". We "invest" by providing pensioners with a one-off payment. This may be a good thing, but is hardly an investment.

I could provide further examples, but I think that you will see what I mean.

Turning now to the details of the statement, the measures break into three.

The first is one-off payments to pensioners and other welfare recipients, payments to be made from 8 December. This has been targeted to those most likely to spend. The statement presents this as a down payment on future changes to the pension system.

It is hard for me to argue too strongly against this measure given some of my previous statements on the social welfare system. However, the effect of the measure on domestic demand is a little difficult to gauge because of the spend patterns of those involved. Specifically, I would expect it to add to sales of food, drink and clothing . I am not sure how far beyond this effects will spread.

The second is an increase in first home buyer grants for new and existing homes. I have put the and in bold because therein lies a problem.

The substantial increase in the grant for new homes will translate to an increase in home building, if with a lag. However, the increase for existing homes makes little apparent sense because it is likely to translate to an immediate increase in house prices with no demand effects.

That's fine if the aim is to underpin house prices, although I do not think that this is a good thing. Otherwise its a waste of money.

The last and smallest immediate element of the package is its longer term elements.

The first is an increase in training places. That's good.

The second is a stated intention to bring infrastructure spending forward. That's puff. The Government was trying to do this already.

In all this, there is the question of value for money.

Take, as an example, this post, Business misses in the stimulus package, from the Australian Newsagency Blog. The argument here is that things such as investment incentives would have stimulated business activity. The writer has a point.

My view of the "Economic Security Strategy" is that it's a missed opportunity, that we could have got better long term results for the same spend if we had just taken a little more time to discuss it.

It's very rare that we do get an opportunity to spend a large sum of Government money outside normal parameters. I think that we have just muffed such an opportunity.

Tuesday Blogging Perspectives - a meander

Lat night I did my usual end day housekeeping, looking at the things I had achieved (or not) during the day, what I had to do tomorrow. As part of this, I look at the blogs and my blog publishing plan. Yes, I do have one. I just don't follow it most of the time!

First, a gentle reminder that comments on Lunch with Noric - and a request for advice are still open. While this blog is a personal blog, I also like writing with people in mind, so your advice as to what you like and don't would be very welcome.

As part of my review I looked at the traffic stats on this blog. This will never be an A list blog, but I am pleased at the way I am now steadily scoring over 100 page views, over 80 visitors, per day. I have had weeks with very high individual traffic in the past, but this has always been due to particular stories. Now I seem to have stabilised at a higher level independent of spikes. I am also going to pass 40,000 visitors this week.

In one of our discussions on Kondratiev Cycles, long economic waves that may or may not exist (I find the concept useful, Bob's view is rubbish), Bob Q suggested that my blogs were themselves an example of the new economy model in that I provided free content and a service, aiming to get my return from other things.

This is true at a very micro level. My problem is what return, and what do I do with it if I get it!

I was reminded of this yesterday. A short post that I wrote on a particular issue, in this case I won't give the details just at present, led to a request as to whether or not I would mind a paper running it as a letter to the editor. I did not mind because I thought the point I was making was worthwhile. Now they have decided instead to run it as a full story, and have asked me for a high resolution photo!

Then there was a request flowing from another story, Musings on Australian food and wine, suggesting that I might like to take part in a global story on kitchens to mark a major anniversary for an overseas firm. My feeling is that this one won't fly - you should see my kitchen! Still, it was nice to be asked.

Back in February in Beer brands and the start of a personal consumer revolution I declared war on the supermarket chains. One side effect (Bob Q will smile) was a focus on my local independents.

As a direct result, last Friday I was invited to try a very special bottle of red wine supplied by Shaun from Cellabrations Rosebery, while Alan from the next door Rosebery IGA deli supplied the cheese. I brought my camera, and will do a full story.

I keep telling them both that they are VERY BAD MEN because of their influence. My cheese spend has trippled. I won't comment on the wine! Still, the two of them have already been the indirect source of a number of stories. I will not give further details now, but I will run a full story later this week.

So you can see that my blogging does get a response, even if sometimes I am not sure what to do with the response.

In all this, I am conscious of the fact that in their own small way my blogs have become publications, parts of the media, in their own right. I do not overstate this. I am just aware that this places obligations upon me in terms of accuracy and focus.

Anybody who reads my blogs will know that I am a village person. I like to know and be known. Sometimes this has its downsides, but it is still worth it.

One of the nicest if sometimes the most difficult thing is responding to comments, even when negative. Village is conversation, even if this takes time.

My biggest frustration with comments lies in people who make a worthwhile comment, but then do not come back. I want to go and grab them, to say where have you been, please say some more.

Still in village mode, I have slowly formed the view that one of the best things that my blogs might do is to link people together, to break isolation, to link people back to their past.

At a personal level, the blogs have brought me back in contact with people I have known, people that I might otherwise not have met again. The blogs have also played a role in creating new linkages. Beyond this, I see a constant pattern in searches of people looking for information about things that have been important to them. I see this, too, in some of the comments I get.

I can only do so much here. I struggle with what I am already doing. However, I have begun to slant some of my writing to areas where there seems to be a need that I can fill within my current interests. In doing so I write posts as a test, recognising that interest can only be determined by search interests over time. As an example see UNE's Overseas Student's Association.

I say posts as a test.

The world in which we bloggers operate is very crowded. Further, our visibility depends upon things like the exact definition of search engine algorithms. I suspect that we have all been frustrated by the way in which a Google search on the same topic can deliver different results each time.

Some bloggers put a lot of time into raising their internet profile on things like Technorati. I do not. My feeling is that a focus on content is the only rule. Get content, and other things will follow.

This is where the test comes in. I know that results from stories that I write today are likely to come over an extended period. So I write and then wait.

Postscript

Interesting. This post was prepared in advance for publication today because I was going to be busy. In fact, it came up last night!

For those that are interested and want to comment on the current economic position, the comment stream in The international financial crisis - the ANZ pre-emptive strike is still open.

The First Australians - a message for SBS re their web site

I watched the program last night and wanted to do a post on it, so I went to your web site to check for details. Frankly, the site is just to flash (pun intended) to be really useful from my viewpoint.

I found the first episode very interesting, but also a little dissatisfying. You got me absorbed in the story, but then left me hanging at the end as the focus switched to Tasmania.

There were a few minor things that grated. Some of the indigenous commentary itself, and the use of the word nations (I think peoples is more accurate), things that introduced modern concepts and perceptions.

I also thought that it was too Sydney focused.

Just to put this in perspective,the first program covered the period in NSW from 1788 to roughly a bit before 1825. We begin in Sydney, then flick to the crossing of the Blue Mountains (1813), occupation of the land to the west and the establishment of Bathurst (1815), then the Wiradjuri fightback under Windradyne (c. 1800 - 1829) to the peace arrangements of December 1824.

This same period saw the establishment of Newcastle (1804), Port Macquarie (1821) and the opening of the Hunter to full settlement. So it wasn't just the Sydney peoples nor the Wiradjuri who were being affected. I kept waiting for references to other areas, but none came.

I recognise that the producers had to select, and maybe the story will be carried through in another episode. but I still think that it was a gap.

All this said, I thought that the program did a remarkably good job in putting together a coherent and fascinating story. I especially liked the use of maps.

All this may seem a long way from my starting point about the SBS web site.

I wanted a few simple things: a still that I could use to illustrate a story; some details of the program so that I could check spelling and also check details on line, especially of things that I did not know or where I though that there might be gaps.

The SBS site does not allow me to do this. It is all Adobe Flash, no text or stills. Flash isn't much use to me anyway, I don't have a lot of spare bandwidth, nor did I want to download the latest version of Flash just to access material.

The end result was that what began as a simple blog post required a reasonably significant investment of time to complete as I checked for stuff, tried to answer questions that I should have been able to answer from the web site.

I wrote the post in the end because the program itself created an itch to know more. Had I been less interested, and this has in fact happened with some SBS programs before, I would have simply given up.

Postscript

To make this post more useful especially for international readers, you can watch the episodes from the SBS web site. On the Sydney Morning Herald Web site, there is a multimedia presentation on the friendship between Windradyne and a local settler, William Suttor. You should get that here.

The international financial crisis - the ANZ pre-emptive strike

Watch the international responses to the Australian Government's decision in coordination with New Zealand action not just to guarantee all Australian bank deposits but also wholesale term borrowings by Australian banks from international banks.

The international ramifications will be fascinating. International banks can now lend to Australian banks backed by a triple A Government guarantee.

Australia can do this because of the country's position. Other countries will have to decide whether to follow. The competitive implications are enormous. Watch what happens!

Postscript

In writing this brief post, I think that the thing that I really missed in terms of focus was the extent to which the Australian Government's response was itself a competitive response especially to the UK moves. In some ways this forced the Government's hand because it placed Australia's banks -some of the most secure in the world -at a disadvantage.

For someone like me interested in competitive dynamics, it all remains a quite fascinating if somewhat depressing.

Sunday Essay - for Ramana: India and Australia

This photo shows the Guru Nanak Gurdwara ('The Temple on the Hill'), the second Sikh temple built in Woolgoolga, a seaside town on the New England/NSW North Coast.

Woolgoolga was Australia's first truly integrated multi-race town.

The first Sikh settlers came to Woolgoolga in the 1940s. Initially they worked as labourers on the banana plantations, but later acquired leasehold and freehold banana plantations. Sikh migrants from other parts of Australia were attracted to this area once they were aware of an established Sikh community.

The establishment of the Sikh community was made possible by the welcome of the host community. There are anecdotes of locals assisting the Sikh migrants in business, financial affairs, correspondence and encouragement to maintain their culture and religion. There were three members of the host community on the committee which built the First Sikh Temple of Australia in Woolgoolga.

Today over 95% of Woolgoolga's banana industry and 10% of that in Coffs Harbour is owned and operated by Australians of Sikh ancestry.There are 2,500 Sikhs in the Coffs Harbour City Council area and 450 students enrolled at Woolgoolga Public School of whom 21% are Sikhs. Of Woolgoolga High School's 877 students, 12% are Sikhs.

While my post Lunch with Noric - and a request for advice has so far drawn only two on-line comments, one from New Zealand, the other from India, it has already proved remarkably valuable in terms of post ideas.

In an off-line exchange, Kanagaroo Valley David raised some issues relevant to the global financial crisis. One of his comments helped trigger the following post, Saturday Morning Musings - finance 101 and the global financial crisis, while the exchange also led me to look at some demographic data trying to scope the Australian superannuation impact.

Jason Kemp, another friend of Noric's, commented on the blogging process:

In summary - I'm not so sure that you need to do any more than being true to yourself and to hold up the your mirror to see if those reflections might also add value to others.

There is an issue here with a personal blog. If you try to target to reader interests, does one risk losing the flavour that attrated people in the first instance?

Ramana Rajgopaul wrote that he would like to read more about Australia specific posts which will be of interest to non Australians. He concluded:

I personally believe that there is more to be benefited between Australia and India than what has been going on. Australia has tended to lean more towards China than India, and I would like to know why.

I think that Ramana is right that India has slipped down the Australian consciousness relative to China, cricket notwithstanding. As a simple example, I have written far more about the Chinese in Australia and about China than I have about India.

At a personal level, I have probably taken India for granted.

I grew up at the tail end of a world in which Commonwealth countries were still marked pink on the map. Thousands of Australians had served in India and the surrounding region in the Australian army, the British Army and indeed in some cases the Indian Army.

I was eight when Sir William Slim was appointed Australia's Governor General. Slim was immensely popular in Australia. He had led the fight against the Japanese in Burma where the Japanese had come close to threatening the allies' Indian base. This included an attack into Assam in early 1944 by 80,000 Japanese troops, an attack halted at the hill settlements of Imphal and Kohima where a vastly out-numbered and somewhat rag-tag allied force held off attack after attack in fierce hand to hand fighting. By late 1944, Slim's 14th Army was the Second World War’s largest Army of Commonwealth troops with nearly a million men in its service.

At secondary school, these things were still fresh. We saw documentary footage of the war, while stories of the fighting were popular in the school library. Kipling's books were still popular. I did some Indian history, and also studied India in geography. There were family connections as well, since my Uncle's family were Anglo, perhaps more correctly Australian, Indian and still had business interests there. There were books about India in various family homes.

My point in this somewhat rambling discourse is that many Australians had a familiarity with India. The Indian friends I met at University and then in Canberra spoke English and were in some way part of the family. I understood something of their world, including the complexities of relations affected by ethnic, religious and caste divides.

China, by contrast, was more alien, strange. There was, and I suspect that this is still true, far less mixing between Anglo Australians and the Chinese including Australian born than between Indians and Anglo Australians.

Just as Imperial and Commonwealth connections had contributed to familiarity, so that familiarity declined as the Commonwealth connections weakened. Australians had less access to India. However, I think that there were other factors as well.

The first was partition. British India with all its own strange complexities was replaced by two states, then three as Pakistan broke up. From an official Australian perspective, the complexities of relations between India and Pakistan made for a sometimes difficult balancing act. This was further complicated by some of the official policies adopted by the new Indian Republic - non-aligned, prickly, in some ways inward looking. The difficulties can be illustrated by the 1962 war between India and China.

On October 20, 1962, China invaded India to try to achieve a military settlement to a long-running territorial dispute. This was a major conflict that could have escalated into a very major war. Isolated, India appealed for help. However, there was little appetite for a potential conflict with China.

A complicating factor for India in the dispute, and one that affected Australian attitudes, was India's occupation of the Portuguese colony of Goa.

Goa had been a Portuguese colony since 1510. The Portuguese were determined to maintain control. On 12 December 1961, the Indian Army seized control of Goa. To many Australians, there was little apparent difference between China's use of force to try to settle a territorial dispute and India's unilateral action in Goa less than twelve months before.

I remember this one clearly because towards the end of 1962 I attended a meeting in Armidale addressed by the Indian High Commissioner setting out India's case against China. Still at school, I asked about Goa. Apart from reducing the High Commissioner to a state of fury, I still remember being surprised at how much support I got from the audience.

Economics was the second factor leading to reduced familiarity.

The economic importance of India to Australia declined in the immediate Post War period. On the Australian side, the Government's controls on investment overseas by Australians limited our international expansion to all parts of the world, not just India. More importantly, India's own rigid centralised but very inefficient controls took India outside the economic main stream.

Those Australians who did have Indian interests found it harder and harder to do business in the country, harder to access funds. Informal bazaar exchange systems became the major mechanism for many in getting funds out of the country around the rigid exchange control rules.

By 1970 many saw India as an economic basket case, doubting that the country could ever develop as a modern economy. Few, if any, foresaw India's later rise.

As India declined in popular awareness, China rose. The rise in formal relations is well charted in a speech by Alexander Downer.

The first trade agreement between the two countries was signed in 1973. In 1972, the value of two-way trade was just A$113 million. By 2001-02, two-way trade had reached A$19 billion.

Beyond the rise in economic relations, I think that there was also a romance with China that extended beyond the familial feel still attached to India.

Australians have come to recognise that India has arisen as an economic power, if with a lag. We now talk about India and China in one breath. We also worry about how to balance the relations between India, China and the US, about our place as at best a mid-size power whose relative position must decline. However, there are some aspects of India's evolving position that may not be so well recognised.

In numeric terms, the Chinese and Indian diasporas dominate globally among distributed peoples. We know both in Australia, although China is better recognised.

One of the features of the Indian diaspora has been an explosion in the global distribution of young, well educated Indian professionals and entrepreneurs. TiE-The Indus Entrepreneurs - can be taken as an example.

TiE was founded in Silicon Valley in 1992 by successful entrepreneurs and professionals with roots in the Indus region. Today TiE has over 12,000 members spread over 49 chapters in 11 countries, including Australia.

I know this group quite well. They are generally young, globally mobile and ambitious. No matter where located in the world, they tend to retain their links to India. They form the global cutting edge of Indian intellectual and economic expansion.

I currently have problems with excel and consequently was unable to download the latest migration statistics. As I remember the figures, Australia is now admitting more Indian than Chinese migrants and by a surprising margin.

A number of our Indian migrants as well as younger Australian born Indians also leave, attracted by greater opportunities elsewhere. Like other members of the growing Australian diaspora, most retain some links with this country.

Based on Indian population growth (India will pass China as the world's most populous country), proximity, language and existing family connections, the Indian proportion of the Australian population must grow.

The Indian settlers who came to and were welcomed at Woolgoolga, who helped form Australia's first multi-racial society, were the leading edge of what is now a wave.

India, China and Australia - to my mind this is the triangle that will come to dominate our thinking over the next twenty years.

Saturday Morning Musings - finance 101 and the global financial crisis

I had intended to write about cats this morning, or really any topic not connected in some way with the current global financial turmoil. However, it is hard to ignore the continuing chaos.

In writing, I seek to understand, then to explain. Some things, the madness of crowds is an example, cannot easily be understood beyond the abstract. Here words like "feeding frenzy" and "lemmings" come to mind.

The Prisoner's dilemma is one of the most famous concepts in game theory. In simplest terms, take two prisoners. If both keep quiet, they get off. The police don't have the evidence. However, if one confesses and incriminates the other, the one who confesses will get a very light sentence, the other a long sentence. If both confess, then they both receive a longish sentence.

What should the prisoners do? The optimum course is to keep quiet, no sentence. However, this carries the risk of the worst individual outcome if one confesses and the other does not .

The share market has been a bit like this.

The optimum course for all players is to limit selling to avoid placing downward pressure on prices. We have seen this in Australia before with house prices, people refrain from selling until prices start to recover. However, if you don't sell and others do, then you maximise your own losses relative to them. This creates pressures to sell.

Over and beyond the sheer excesses within the financial system, the fact that very clever people have been far too clever by half, there are two features of this crisis not present in some past crises.

The first is the role played by the ratings agencies, something I complained about in The international curse of the ratings agencies. The weight placed upon their rulings makes them players, not simply sources of information.

As an aside, I wonder whether the ratings agencies can survive this crash? As a simple example, the British local councils who based their decisions to deposit with Icelandic banks claim that they did so on the basis of the ratings accorded those banks by the ratings agencies. I wonder who will be the first to sue?

The second new feature are the new international accounting rules, something that Kangaroo Valley David referred to in an email to me. Introduced in response to previous corporate excesses such as Enron, they require companies to bring shifts in asset values to account as they occur.

The problem in this time of turmoil is that such crystallised losses reinforce the downward spiral by weakening balance sheets and lowering credit ratings. This actually reinforces the Prisoner dilemma effect.

In thinking about all this, I keep coming back to the real value of assets.

At one level, the value of an asset is what the market will pay for the asset. This, market value, is the conventional measure. However, its is always a short term, immediate measure.

In the longer term, market value for productive assets (I am not talking about gold or art works) depends on the income stream attached to the asset. This is the reason why shares generally out-perform real estate in the longer term.

Companies pay you a dividend and then reinvest the remaining profits in the business. This creates further profits. Companies also borrow to fund investment. So long as the returns on the investment exceed the cost of capital, this adds to profits. So with shares, you get a rising dividend stream plus a rise in asset values. The two are linked.

Finance 101 I know. However, I want to use this simple analysis to make a simple point.

Recently a colleague commented that there was an old-fashioned flavour to some of my management writing. This actually pulled me up. To be seen as old-fashioned can be the kiss of death for a management professional. That said, I have been consciously mounting a case for a return to what I see as management fundamentals. If that's old fashioned, then I will wear the tag.

One of my concerns has been what I see as the growing instability, the shortening of life cycles, in current organisations. In The fallacy of modern management I tried to use simple maths to show that our near universal obsession with above average growth at organisational levels is in fact a recipe for failure.

One company can achieve above average growth. By definition, all companies cannot. When the gap between the total targets and what is in fact achievable becomes too great, then the outcome is instability and rising failure rates.

Consider corporate borrowings. If corporate borrowings are based on the totality of corporate growth targets and those targets are unachievable, then you know that there will be over-borrowing. Normally, credit market rationing limits this effect. However, should this fail because of excessive lending, then problems result.

As a second example, consider PE ratios and dividend yields. These used to be based on historical earnings. You knew where you were and could make your own adjustments. If you change the measure to prospective earnings, and if the totality of those earning cannot in fact be achieved, the ratios become suspect in the extreme.

As I said, finance 101. However, this simple analysis has significant implications. Consider disclosure issues.

If total profit projections cannot be achieved, then why are we requiring companies to provide individual profit projections? If the value of assets is based on long term sustainable profits, why do we require and measure people on quarterly reports?

To my mind, we should consider putting a bullet through the entire current corporate control and reporting system. It does not and cannot work. Instead, we should focus on what we really want to achieve.

Postscript

I have been meaning to mention for a little while just how much I have enjoyed John Taplin's Blog and especially his comments on economics. I found it through Neil's Shared Items.

Postscript 2

My thanks to Barry Garden for including this post in his What Others are Saying About Global Financial Crisis?, a compendium of posts on the crisis.

Lunch with Noric - and a request for advice

Yesterday Noric Dilanchian and I had lunch.

Noric and I have been mates for many years, and it was one of those free-ranging discussions that I so enjoy. You know, the type of conversations that occur between people with wide interests and shared experiences who like and are comfortable with each other.

We began with cloud computing, Noric is going to do a blog post here, then ranged across the IT and internet world. From time to time the conversation meandered to what some of our colleagues were doing (they spread across multiple countries), dropped into history and philosophy, then passed onto family matters.

We spoke about blogs and blogging. Here Noric gave me his views on what I needed to do to improve my own performance, some of which I agreed with, some not.

I have been thinking about this issue a fair bit. Blogging is my main writing form and I spend a lot of time on it. Like all of us, I write for my own purposes, including especially the pleasure and sometimes pain of the writing itself. However, I also want my writing to be interesting and relevant to the reader.

Around eighty per cent of traffic on this blog is search engine generated. The remainder breaks up equally between click-throughs from other sites and return visitors.

I value my return visitors greatly. They are the salt that flavours the blogging experience. Some I know, they comment or refer to posts in their posts, some I do not. Some come daily, more drop in from time to time.

I know how to increase my traffic from search engines, although often I choose not to do so because the type of posts that this would require me to write is in conflict with my reasons for writing. However, I am less clear on the best way to increase relevance and interest for my regular readers.

To help my thinking here, a request for help to those who return.

What do you like or not like about this blog? What would you like to see more of? What do you see as my greatest strengths, my greatest weaknesses?

I do not guarantee to accept your views. I do promise that I will not get upset by any comments and that I will try to take your views into account.

Zimbabwe's 100 billion dollar note

I was struck by this photo from the BBC. I have never seen a 100 billion dollar note before. I note (no pun intended) that it's called a special agro-cheque. Very agro I'm sure.

I was in Shanghai when the power-sharing deal was signed. I watched it live on TV with a feeling of hope, although the body language was not always encouraging.

If you want to get a daily report or reports on Zimbabwe try the Zimbabwe Situation. The Zimbabwe Government's official web site can be found here. It has even been updated - that's not always been the case.

One of the thing that adds a strange and sad Kafka element to the world that Zimbabwe has become is that some of the elements of a civil society still struggle to survive.

Musings on the global financial crisis

I am only doing one major post today, and that on another blog. In Australia and the global financial crisis I have tried to extend my analysis on the current financial fire storm.

Postscript

There has obviously been a lot of coverage again today in the media and on blogs about the financial crisis. I will not attempt to summarise it all, much is ephemeral, just point to a few points.

The issue of trust, or the loss of it, continues as a regular theme, as does the need for more regulation in response. I agree with the first, but disagree with at least some of the arguments on the second,

The longer term implications of the crisis for global economic power is also now getting a fair bit of coverage as people look past the immediate issues. I have argued that the crisis will reinforce shifts. However, we also need to exercise care in terms of time horizons. The shifts we are dealing with remain longer term shifts.

Looking just at the Australian coverage, there is a degree of "aren't we good" that must be a bit galling to some international readers. We have done better than some others, and that is partially our own responsibility. But we have also been very lucky.

On a linked but different issue, I have suggested that in the midst of turmoil we need to watch the implications for our university sector. Overseas full fee paying students are not just a major source of export income, now one of the largest, but also critical to the financial viability of some of our major institutions.

Just to put this in perspective, if overseas student numbers were to decline by around a third as a consequence of the downturn (and this is possible), then some universities would face immediate financial problems.

In the midst of today's financial news, a new list of the top 200 global universities was released today. Those that are interested can find the list here. Only the Australian National University made the top twenty.