Henry
Thornton writes:

“Fears that the
return of inflation could lead to a prolonged rout in overheated commodity
prices have prompted more blood-letting in resources stocks, dragging down the
broader sharemarket.”

That’s The
Age
in action,
cheering as the capitalist system suffers a set-back, although to be fair
(“Why?” I hear you cry), the appropriate caveat is later inserted. “Those falls
are despite comments that the China boom story remains intact. Even
Goldman’s research department has said as much, telling clients that despite the
volatility in prices, it believes China’s industrialisation, with the prospect
of India to follow, has boosted the trend rate of annual global demand for key
commodities by between 0.5% and 1%.”

In fact, there was
some recovery
overnight
,
helping to stem what was looking like an ugly slide of the Aussie
dollar.

There was
speculative excess as metal prices exploded upward, and the correction has
created a sounder base for global economic activity. There is no reason to
question the immediate future of global growth but some cooling of the
overheated sectors seems inevitable as interest rates increase in most
countries.

So Henry, like Ken
Henry of Treasury and Ross Garnaut, says with Corporal Jones “don’t
panic”.

Last night Henry
dined with some distinguished scientists. Metal prices were mentioned only in
passing. The main topic was “Research Leadership” and the main issue is why
Treasury (and the department of industry) adopts such a negative attitude to the
question of support for Australian science and its
commercialisation.

China and
India are not just going to be
voracious consumers of metals, including uranium, coal and iron ore, but both
nations are getting serious about using advanced technology to create new
industries. China has a goal, entirely plausible
in the minds of the scientists present, to get ten of its universities into the
top 50 before very long. We will struggle to keep up and our best bet is to
engage in serious collaboration in high quality science. Not forgetting the
market, but one must doubt that the Indians or the Chinese will let us forget
that.

Read more at
Henry Thornton.

Peter Fray

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