I don't find the arguments convincing.

"The Deputy Prime Minister, Ken Henry, believes that Australia is headed for a China fueled resources boom that will last to 2050."

Deputy Prime Minister? Has anyone told Julia?

"...before September 2008 that had then BHP boss Chip Goodyear also predicting that the commodity price boom would last for decades."

Both predictions seem to have every chance of being proven correct.

>>...any long term escape from the business cycle would not be due to the structure of the Australian economy itself. His case depends upon what is happening in the global economy.<<

Well of course our economy is dependent upon international trade. Isn't everyone's?

But it's exactly the "structure of the Australian economy", with a significant component being the export of raw materials to manufacturing countries, that will allow us to ride most of the financial storm that other economies -e.g. the UK and much of Europe - are finding more difficult to handle.

"There seems to be an underlying presupposition that another big boom is on the horizon."

People less prone to panic and doom-and-gloom forecasting, simply make the assumption that we are a little bit better placed than most, and hope that China's economy doesn't overheat badly.

The author seems preoccupied with "moral hazard".

"...the rich of the West and the rich of the Third World engaged in a fancy little game which involved offsetting risk to the poorest of the poor. This offsetting of risk is known as moral hazard.<<

This "offsetting of risk" in particular, Mr Beljac?

Or do you claim that all "offsetting of risk" is a moral hazard?

It would seem so, as you allow yourself the sweeping catch-all that:

"Whenever we have moral hazard systemic risk will be under priced by financial markets"

That may make sense to you. But if you accept your own suggestion that "offsetting of risk is known as moral hazard", then your sentence reads

"Whenever we have offsetting of risk, systemic risk will be under priced by financial markets"

Which even you have to admit is a pretty meaningless, and inaccurate, generalization.

The US is headed for an almighty collapse.They have sacrificed the real productive economy to further inflate the derivative bubble.The result is inevitable.The next collapse will be bigger than the last.

Whether or not China can save us is debatable,since we like the USA, have lost most of our manufacturing industry.

If the US economy is reduced to chaos,will we then be expendible allies who are no longer under the protection of the US nuclear umbrella? The USA could easily break up into separate states just like the USSR.

pericles

he said >>...any long term escape from the business cycle would not be due to the structure of the Australian economy itself. His case depends upon what is happening in the global economy.<<

I understood him to be saying that we are too dependent on resources. Also Henry is relying on there being no change in China's attitudes towards buying from us. If for example (which seems to be indicated) China gets the hump because we won't sell them controlling interests in our mining resources and buys from where they can have more influence (Africa, etc). Our economy could go into free fall.

In essence I think you do the article a disservice by not taking it in context of the whole rather than deduction to the ridiculous (meaningless phrases) I would encourage you to a rebuttal (by way of an alternative.

Knowing your ability to offer a logical argumentI for one would be interested.

If there is a long period of economic gloom, it's a result of demographics... To few babies in the middle-class countries and too many in the poor growing ones.

Have a look at Harry Dent for some great analysis. http://en.wikipedia.org/wiki/Harry_Dent

In short, the poor countries are only poor because they are investing in their future by financing their large numbers of children.

And our wealth, like the decline of the ROman empire, is because we are dying out... Fewer and fewer people are sharing our wealth and resoures

If you want to read about the reasons the author is right read the
following link to Gail Tverberg's article on the Energy Bulletin.
It is intended as a primer on oil depletion but successfully covers the
field and explains the surrounding economics.
The economics are mainly related to the US's debt but as we are all
in the same boat it becomes very relevant.

http://www.energybulletin.net/node/50722

The magic number is about US$85 a barrel, over that and a recession
is a virtual certainty. Yesterdays price US$77. Highest recent
price was US$82. Makes you think doesn't it ?

The following is certain

after this period of "recession and downturn", an economic recovery will ensue, building to a “boom”, the exact size and extent of which is indeterminable.

However, that boom (of indeterminable size and duration) will, in turn, be followed by another downturn.

The danger lies in the hubris of government to plan and manage such events.

The more any government intervenes to sustain a boom condition, the greater the price ultimately paid by ordinary folk, dealing with a failing economic cycle and additionally burdened with the debts incurred by government to fend off the inevitable.

(building up the banks of the Yangtze river for instance... it maintains the flow only at the price of increasing the flood plain. So when the banks burst the devastation is even greater and over a wider area than if nothing had been done)

The following is worth remembering:

"Adam Smith's 'invisible hand' is not above sudden, disturbing, movements. Since its inception, capitalism has known slumps and recessions, bubble and froth; no one has yet dis-invented the business cycle, and probably no one will; and what Schumpeter famously called the 'gales of creative destruction' still roar mightily from time to time. To lament these things is ultimately to lament the bracing blast of freedom itself."

Governments cannot stop business cycles for they are based on “confidence” in the future.

All that government can do is try to maintain confidence

Of course, some would suggest government should plan and manage the economy… well, just like global warming, somethings represent too many independent and interdependent variables for even the most despotic of governments to plan for or manage (communism being the classic and most despicable example of this failing).