Thoughtful piece, Cameron. Maybe somewhere in the recesses of the bureaucracy there's a group considering worst case scenarios; or is there?

I would have thought reforming and securing the revenue base was a good start, and Ken Henry's recommendations that Australia's 128 taxes be reduced to four is a pretty good start - but the Henry Review is being buried by both major parties. Tax reform is too hard.

Anyone sensitive to history will be able to see that Australia and China are NOT going to lead the world out of this financial collapse, and that the bursting of our bubbles is simply delayed.

Therefore, why don't we see more articles like this, contemplating such "what ifs"?

Discussing these possibilities or likelihoods isn't to "scare the horses" if we simply acknowledge past history will likely repeat unless we make thoroughgoing changes to the discredited neoliberal economics as currently taught in our places of higher learning.

Oh dear. What some people will do to get some attention.

>>We face a financial crisis with the global financial system being effectively insolvent and only maintained through fraudulent accounting practices and the creation of money out of thin air to temporarily maintain financial stability<<

Money is not created "out of thin air". It is borrowed. It attracts interest. It is used to build stuff, dig up stuff. And so long as the world economy remains robust - which it is - we will continue to use debt as a means to keep doing so.

>>This is the context that any review of our banking and financial system should be assessed against.<<

Clunk. You don't assess against a context, you assess within a context. Oh, forget it.

>>This being the case, perhaps we need Australia's banks to be owned either by the state or preferably at the community level with the primary role of providing basic banking services, at low risk, to the community that they serve... This would remove the incentive for risk taking that is embedded in the current banking system.<<

Oh, great. If you take the risk out of banking, you would need to stop lending. Take a moment to understand how that works, and what impact it would have on our daily lives. If you are worried about "unemployment, that could be as high as 22%" in the US, then you should be scared rigid by the effect of turning off the credit tap.

Maybe I've misunderstood?

No, I don't think so.

"Whether we like it or not, the majority of the world's debt will and must be purged before anything like a sustainable and stable financial system can be established."

Anyone for the gold standard? Ron Paul? The Tea Party?

I think I'll go and lie down for a while. Too much rot like this is bad for my blood pressure.

Thanks Freddington, there are many changes that will be required to our financial system - I only picked three. Radically simplifying the tax system is another step that will need to be taken. Both Tainter's and Greer's defintion of collapse involves a reduction in the level of complexity. It is hard to see the complexity of the current tax system being maintained indefinitely, although no doubt governments will attempt to do so in order to bolster tax revenues in any way they can.

Hello Pericles, if you haven't noticed this website is called Online Opinion, somewhere for anyone to voice their opinion. As far as attention seeking goes, I would put it to you this way. I live, just like you do, in a system that I believe is unsustainable and approaching a point where economic collapse/decline is a likely outcome. If that is the case then the more we do to adapt to that possibility prior to it happening the easier that will make everyones lives in the future. That is my opinion, based on the evidence as I see it. If you don't agree with that view - fine, that is your view, but none of the comments you made were in anyway constructive (other than your point on context - I accept that).

Secondly I don't think you understand my point with regard to debt and credit. If we are facing collapse, then credit is likely to dissappear quite quickly - that is the market at work, extinguishing debts that can't and won't be repaid. This will force businesses and individuals to adapt or fail/become bankrupt. If we acknowledged this possibility rather than going into denial mode, as you appear to be in, then we might adapt in time to stave off the worst possibilities off a deflationary spiral. Fractional reserve banking and fiat currencies are likely to be casualties of this spiral. Far better to do something about this before the collapse in my view, albeit highly unlikely.

Interesting article;
The Rate of Collapse I would think would depend on the complexity.
Rome collapsed over a couple of centuries depending on how you measure it.
A world system like we have now perhaps would collapse a bit at a time
but would the more complex parts collapse soonest and fastest.
The resources needed by the most complex would be released to the
less complex if the most complex collapsed totally.
In other words the collapse would be complex.

Gold has always worried me as a method of wealth storage.
If things got really tough would you be interested in buying gold ?
Could you eat it ? Could you do anything with it except sell it ?
If not then why buy it ?
Gold production appears to have already peaked, so the price may well
rise well above the current price but so what ?

In a collapsing society surely land would be a much better investment.

You are perfectly correct, leckos.

>>Hello Pericles, if you haven't noticed this website is called Online Opinion, somewhere for anyone to voice their opinion.<<

I had indeed noticed, and was voicing mine.

My overall opinion is that you deliberately selected high-emotion words and phrases, to disguise an alarming paucity of thought.

I observed that it is your opinion that "The global financial system [is] effectively insolvent and only maintained through fraudulent accounting practices".

Since you failed to demonstrate either insolvency or "fraudulent accounting practices" in any way, I felt it entirely appropriate to treat it as simply a throwaway line, designed for emotional impact, as opposed to presenting fact.

You also referred to "the creation of money out of thin air", which I also assumed was an opinion unsupported by reality, and in return gave you my own opinion of your concept.

>>I live, just like you do, in a system that I believe is unsustainable and approaching a point where economic collapse/decline is a likely outcome<<

I suspect that you do not, in fact, live "just like I do".

I don't hold with your "belief", hence it has no bearing on the way I live. Whereas you, I opine, live an entirely different way of life, free of debt, only spending this week's income, and growing vegetables.

>>If we are facing collapse, then credit is likely to dissappear [sic] quite quickly - that is the market at work, extinguishing debts that can't and won't be repaid.<<

This aspect of your opinion puzzles me most.

Your "cure" for the problem would appear to be to actively exacerbate it. Ditch credit, ditch fiat currency, ditch the system that has increased everybody's wealth in this country.

The problem - and this is my opinion - is that you have defined a "solution" without addressing the means to achieve it. If you were to do some more homework on the bare financials of it, and forget the high-falutin' Austrian School "wouldn't it be nice if only" guilt trip, you might have a better understanding of the issues we face.

Now we are talking Pericles.

One example - The suspension of mark to market accounting in the usa has enabled banks to essentially operate whilst being insolvent. If this rules was reinstated it is highly likely that most of these banks would declare bankruptcy overnight. Hence why it won't happen. Maybe I should have provided evidence, however this appears self evident, hence I did not.

My point about printing money put of thin air is a metaphor, but the actions of the Fed reserve at essence are no more sophisticated than this, although the actual process maybe.

I was not implying that we live the same rather that virtually everyone is dependant on the current system to function. Indeed the fact that all land in Oz is regulated by the government means that even the most ardent survivalist would be unable to survive independent of current power structures.

Your last point demonstrates the conundrum we face. We don't want to give up our wealth and hence will attempt to keep things normal, right up until we can't. My alternative is to give up a portion of out wealth, much of which is perceived wealth only, so that the depth of the collapse is shallower and we can maintain some of the beneficial parts of our society.

I would recommend the automatic earth website to you. It provides an excellent overview of the power relationships at play and the ponzi dynamics of or current economic system.