Aron Ping D'Souza

Jurisprudence 5: The Jurisprudence and Religion

noreply@blogger.com (Aron Ping D'Souza) — Sun, 07 Feb 2010 11:16:00 +0000

I am pleased to announce that the fifth edition of my journal, Jurisprudence, is to be published today.

Please find more information about it at www.jurisprudence.com.au

Defense Lake Attack

noreply@blogger.com (Aron Ping D'Souza) — Mon, 31 Aug 2009 07:33:00 +0000

I ran the defense lake attack, 10km, yesterday.

Suffering from a cold, I didn't do particularly well.

I have a letter in today's The Age.

noreply@blogger.com (Aron Ping D'Souza) — Wed, 15 Jul 2009 07:13:00 +0000

John Garnaut misunderstands Chinese culture ("How we got China so wrong", BusinessDay, 13/7). He suggests that Rio Tinto's PR firm hands out envelopes full of cash to journalists attending events.

These "red envelopes", or lai see packets, are central parts of the Chinese gift-giving tradition. In traditional Chinese culture, the most appropriate gift is cash rather than, say, as in Australian culture, a bottle of wine. I give lai see to my colleagues, family members and even to my local shopkeepers around the Chinese New Year.

This is not a bribe, but an expression of my wish for their continued good luck in the year to come. I believe it is incorrect to suggest, based on the facts in the article, that Rio's activities are somehow improper.

Aron Ping D'Souza, editor, The Journal Jurisprudence, Melbourne

Published in The Age on 15 July 2009.

Should Australia join the EU (interview video)

noreply@blogger.com (Aron Ping D'Souza) — Mon, 11 May 2009 09:08:00 +0000

part 1

and part 2....

The Globalisation of Tall Poppy Syndrome

noreply@blogger.com (Aron Ping D'Souza) — Tue, 21 Apr 2009 08:00:00 +0000

As one of the world's smallest populations, we Australians are frequently nervous about our often fragile place in the global community. Our chronically inefficient industries produce few manufactured good worthy of export. One need only look to our pathetic domestic film industry to see that our cultural exports are effectively nil. We were once the richest country in the world, in the late nineteenth century, and we have declined in international stature and cultural significance ever since.

Yet, ironically, in the midst of the Global Financial Crisis, one of our greatest cultural traditions has not only take root, but risen to prominence throughout the world. What was once a uniquely Australian phenomenon is now the populist agenda of governments and citizens around the world. The tall poppy syndrome may, in fact, be our greatest cultural export.

Just a few years ago, hedge fund managers, investment bankers and short-sellers were the titans of Wall Street, what ever young man at Harvard and Oxford wanted to be. People like John Paulson, who made US$67 million in twenty-five minutes short selling, or Peter Theil, who turned a half-million dollars invested in Facebook into US$750 million, were among our pantheon of heroes.

These masters of the universe, so quickly, have become the scourge of capitalism gone wild, the scapegoat so quickly derided in Congress and Parliament. Bernie Madoff, the mastermind of a US$50 billion ponzi scheme, is now the face of a once proud profession.

No longer will we applaud those who worked hard to get into top universities, struggle to get MBAs and survive the cut-throat competition to rise to the top. Now, from Wall Street to the City, we want to cut them down.

But Australia was ahead of this trend; in fact, we invented it. Even in the heydays of a skyrocketing All Ordinaries, Australians derided their most successful bankers. In fact, outside of drinking and sports, as the adage goes, it is un-Australian be great at anything.

When Allan Moss retired from Macquarie Bank with a $100 million pay package, there was outrage. He didn't rape and pillage the most successful investment bank in Australian history, but there was outrage because he earned so much more than simple teachers and nurses. Editorial pages burst with letters deriding Moss' greed whilst pundits condemned him on talkback radio. It was the tall poppy syndrome at its finest.

The same kind of populist distain that was shown to the, in retrospect, angelic Mr Moss is now hurled throughout the world at the CEOs of AIG, Merrill Lynch and anyone who is braver enough to call himself a banker.

For years, Australians looked with disgust at Macquarie, and now that same attitude pervades the world.

Is the tall poppy syndrome the harbinger of the new economic order that will reform the world and save the world from greed?

Greed is now the third rail of global society, you touch it and you die. Yet, one cannot deny that self-interest created the amazing society we live in and produced the highest standard of living the world has ever seen.

Now, Americans and Europeans are just like us, disgusted by success and abhorring those who aspire to it.

Aron Ping D'Souza is the editor of the Journal Jurisprudence.

Australia and the EU

noreply@blogger.com (Aron Ping D'Souza) — Tue, 21 Apr 2009 07:59:00 +0000

I will be appearing on East Side FM in Sydney at 4:30 on Wednesday 29 April to discuss why Australia should join the EU.

Aron Ping D'Souza

Why housing prices can never fail.

noreply@blogger.com (Aron Ping D'Souza) — Wed, 07 Jan 2009 06:57:00 +0000

With the share market recording its worst year on record in 2008, people are justifiably worried about their investments and keen to see stability in 2009. However, adding to the uneasiness of caused by the share market, some of Melbourne’s poshest suburbs have seen values apparently collapse in the last six months. Some fear an American-style negative equity crisis; which is not far fetched because of the high debt levels of Australian home owners.

A prominent property developer commented to me, “We’ve seen the ASX fall 40% in the last year, its impossible that one sector of the economy fall so much and property prices not reflect it. Its just a matter of time.”

Yet, this insight is founded upon a poor understanding of how the global market economy functions. The Australian Government is a bit player in the global share market; despite the Rudd government’s largest infrastructural investments, they are essentially powerless to improve the standing of the share market. The equities market is dictated by global forces and only a concerted effort by the international community can do anything to stabilise it.

In contrast, the domestic property prices, particularly housing prices, are not the product of the global market, but of government policy. The symphony of first home buyer grants, capital gains deductions, and investment property tax offsets have created the exploitation in housing prices in the last decade. The policies of successive governments created and sustained the sky-high housing prices we see today.

And it’s a one way street. Housing prices rose, and a generation of middle-aged and older Australians benefited, whilst disenfranchising younger Australians, who salaries will never be of the level to purchase quality inner-city housing. Yet, the housing boom was created under a pile of debt and if housing prices, not just in Toorak but nationally, decrease substantially – home owners would have more debt than equity in their homes. The American-style negative equity crisis would be at hand.

Housing prices in the United States are created by market forces, as the plethora of direct and indirect government incentives that exist in Australia would be inconceivable to our fat cousins. Essentially speaking, housing prices in the United States are created by market forces whilst in Australia, they are artificially inflated by government policy.

In concert with this is the fact that there are votes in property. Unlike the United States, where most investment is in the share market, Australians invest heavily in self-managed investment properties. Every second person I run into seems to have purchased, with heavily loans from the bank, a unit or townhouse that they rent out and negatively-gear to take advantage of tax benefits. We have a national obsession with real estate, as the number of ads and articles in this newspaper will testify to.

Although not literally, there are votes in real estate. If the housing market declined substantially, voters would become uneasy with the current government. MPs should take note that the highest debt to equity ratios are in margins constituencies – on the outer suburban fringe. Thus, because housing prices are artificially constructed in this country, and an emphasis is placed on property in such large and influential voting blocs, property can never fail as an investment in this country.

Any government, either liberal or labour, will be forced to bailout any substantial fall in the property market, through increases to home buyer grants or in the various tax deductions, if they intent to get or stay in power. Unlike the share market, the state and Commonwealth governments have the power to control the housing market, which voters will recognise. Thus, like the American car industry, housing in Australia, is “too big to fail.”

Parliament

noreply@blogger.com (Aron Ping D'Souza) — Tue, 30 Dec 2008 08:18:00 +0000

Apparently the Parliament of Australia is keeping tabs on my work:

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;adv=;db=;group=;holdingType=;id=;orderBy=;page=;query=MajorSubjectId_Phrase%3A562;querytype=;rec=6;resCount=

Sad Reality

noreply@blogger.com (Aron Ping D'Souza) — Mon, 15 Dec 2008 05:38:00 +0000

The Australian economy is on the brink of recession. The American economy has been in recession for the past twelve months. Politicians in Washington and Canberra are feverishly planning strategies to combat the looming depression. It may be easy to conflate the American experience with the Australian future, but there are distinct issues that differentiate each governments approach to solving the current credit crisis.

In the simplest terms, the current economic situation was caused by an over consumption of debt. After September 11^th, on the back of numerous rates cutes by the US federal reserve, millions of Americans binged on debt to build larger houses and buy bigger 4WDs. When the housing market took a slight decline, the house of cards collapsed upon itself with the domino effect of foreclosures, lower housing prices and increasing unemployment.

The American solution to the current recession is to ease "the log jam" in the credit markets. As US Treasury Secretary Henry Paulson so often says, "access to credit" is essential to allow the economy to grow. Yet, politicians in the Bush White House have forgotten that the current crisis was not caused by a lack of credit, but too much credit. How can a crisis created by debt truly be cured by more debt?

The American government is trying to restore access to debt, so that consumers and business alike will again live off their brother's back and consumer more than they earn. In George Bush's dream, if his bailouts works, consumers will again swipe their credit cards and take up large home loans. American Politicians are seeking to rebuild the house of cards, in the false hope that that a society built on debt will not collapse again.

The American response to the credit crisis is as logical as suggesting that the problem of domestic abuse can be stopped through more wife-beating. Fighting fire with fire will only see the world burn. Fighting debt with debt will only see individuals, families and companies selling tomorrow's bread to feed today's stomachs.

Contrast the American strategy of kick-starting their economy through debt with the Rudd Government's plan to bring massive infrastructure projects forward. Instead of relying upon consumers to spend more and indebted themselves, Australia is taking the logical solution and spurring job growth through productive contributions to the overall health of the nation. Through roads, bridges and public transport, we are building a fifteen billion dollar foundation to future growth. To see the returns on these investments may take decades, but growth and productivity will certainly proliferate from them.

Antithetically, if lowering interest rates and cheapening debt convinces American consumers to spend, they will quickly rise out of a recession. However, this will not be supported by productive growth, as in the Rudd strategy, but the charade of increasing indebtedness. Debt is the illicit drug of the modern economy: It takes individuals to great highs, consuming more than one could normally consume, but then drags one to greater lows, destroying today's future for yesterday's pleasure.

The foundation of the great society must, therefore, be in productive gains, slower growth and a stronger foundation, like those found in the Australian strategy. Bailouts and stimulus packages may treat today's symptoms and propel economies to higher highs. But any heroin addict will tell you, the higher the highs, the lower the lows. The American medicine of treating debt with debt will only create another bubble waiting to burst.

Aron Ping D'Souza is a doctoral candidate in the University of Melbourne.

Fwd: More fame!

noreply@blogger.com (Aron Ping D'Souza) — Mon, 17 Nov 2008 00:51:00 +0000

A few months ago, I organised a Freshers Party for the Oxford University Society in Victoria. It was very successful, in my opinion, and it warranted a mention by Lady Kenny, the Secretary of University Society, in her regular letter to alumni.

APD

Aron,

I am circulated a letter from the Secretary of the University Society (Lady Kenny) once in a while. You will see that our Freshers' Farewell Party merited a mention – in particular your report!

Well done – and thanks again for helping to make the event a success.

Best wishes,

Elizabeth.

4.2 Freshers' send-off parties
Many branches gave farewell parties for freshers coming up to Oxford from their area, some of these branches for the first time. Our impression is that these have been fun and useful for everyone, and I'm including here a report from Aron D'Souza in Melbourne about their first freshers' party. As you'll see, they included possible Oxford applicants, as well as freshers. It seems to have been a happy mix.
Freshers Farewell
Nearly twenty alumni acted as hosts at the OUSV's Freshers Farewell. It was the first time the OUSV ran such an event and the turnout was brilliant. The event gave those going up this year a connection to Oxford and an opportunity to interact with and learn from those who have come down in recent (and not so recent) years. Additionally, students who were considering making an application were invited to learn more about Oxford and the application process. With the generous sponsorship of the Boston Consulting Group, about sixty people were present at BCG's wonderful office at 101 Collins Street.
By my count, there were eight freshers currently accepted into Oxford, most for second degrees. Additionally, there were about thirty five undergraduates and secondary school students who were in various stages of considering or preparing applications to Oxford. Some school officials attended, displaying a keen interest in encouraging some of their top students to apply to Oxford.
One alumnus commented to me, "By the end of the evening, it was apparent that the confidence of the students was clearly raised. No longer was Oxford distant and unreachable to these young people." One fresher came all the way from Sydney to attend the event and she commented, "It was a great help and awesome fun".
Hopefully, this event will become part of the regular OUSV calendar.

Telegraph

noreply@blogger.com (Aron Ping D'Souza) — Fri, 17 Oct 2008 08:35:00 +0000

I have been featured on Alex Sington's blog for The Telegraph newspaper.

http://blogs.telegraph.co.uk/alex_singleton/blog/2008/10/02/financial_crisis_what_the_blogosphere_is_saying

Aron Ping D'Souza

Such is Life

noreply@blogger.com (Aron Ping D'Souza) — Sun, 12 Oct 2008 22:43:00 +0000

Pheidippides, the runner of the first marathon, in ancient Greece
died immediately after delivering his message of victoria to the
people of Athens.

Such is an outcome that I can appreciate after running the 31st
Samsun Melbourne Marathon. The course began at the MCG and took its
way down St. Kilda Road and then through Albert Park. Continuing
along the foreshore, we passed St. Kilda, Elwood, Brighton and turned
at Hampton (after several hilly climbs).

After years of cycling, such a distance (42km) seemed small. But with
hot conditions (28°) and a headwind on the return from Hampton, it
was a challenge for the later fifteen kilometers. I had blisters in
my feet and my body by km 15, and my body was totally drained of
energy by km 35.

After nearly five hours, I arrived at the MCG, where the finish line
lay on the grass of the great stadium. I felt like a triumpherent
Caesar parading into Rome. My first action was to remove my shoes,
and try and relive some of the pain that had accumulated in the last
few hours.

It as not as fast a run as I would have liked. However, this being my
first marathon, it was something truly special and an achievement of
great note. As I write this, 24hrs latter, I still can not walk
straight and my legs are still far from recovered.

Hopefully I will recover by next sunday, as I am racing the 210km
Around the Bay in a Day.

Reply to the previous post

noreply@blogger.com (Aron Ping D'Souza) — Wed, 01 Oct 2008 13:42:00 +0000

A Letter from Wales

noreply@blogger.com (Aron Ping D'Souza) — Wed, 01 Oct 2008 13:14:00 +0000

As you may know, I have been writing in public fora for sometime. I'm lost track of how many letters, articles, book etc I have published, but it is quite numerous. yet, after years of serious writing (and numerous rejections), today, I feel that my writing has truly come to maturity.

This is not because it has been accepted by some major publisher or newspaper. Nor because it has gained wide attention from powerful or popular people. But merely because a simple letter, published in the times, shared my viewpoint with the world and it convinced one person, who took the time to write a thoughtful reply. Alain de Botton, author of Notes on Love and The Architecture of Happiness, defines Love as 'being consider, not for who you are or what you can do, but merely for being.' In many way, I feel as if my writing, now, has truly been consider and it is a feeling of love I experience.

The letter was from a Mr J.S. Coduri of Mid-Glamogan, South Wales. He wrote the letter on a type writer and edited with a pen! Apparently, he went to his local library and asked them to find my address, which took sometime.

The letter, it in poetic and beautiful typetting, is attached below.

It reads:

Tuesday 23rd September 2008
to; Aron Ping D'Souza. Editor of the Journals Jurisprudence and Applied eonomics [sic.]
address to be determined; later,

Dear Aron Ping D'Souza, Your letter in the Times show new light on the question [of] bonuses. A long time ago, in the 1960s, a new scheme came into play in [which] staff would get a bonus for working longer hours and doing more work. I think that the position was reversed in the financial world. Loarge bonuses to me smack of overcharging at all levels in law companies, insurance, bank ad finitum. I have always considered that a decent wage and salary at all levels, according to levels of competence and importance but not milking their own companies for larger bonuses and pensions,

More seriously I have considered that much of the action taken by boards verged on criminality. Staff awarded themselves money they had not earned or which would quite rightly be used to lower costs and charges but no.

In the wrong hands bonuses are an evil and open widely to abuse. However, we know that the root cause of the present trouble is good on a far higher level by the massive borrowings, by massive grooming of the public to accept hevy debts which they had no hope of repaying (a sort of Money Pornography) which showed them a type of living they really could not afford.

Today Martin Waller, in his city Diary, showed some figures which may hold part of the key to the fall of any company but did for some large ones. As you know liquidity and capital basis are essential... and eventualities. quote; The evidence that brokers and those high bonsues were getting money from old rope, for nothing but pure robbery. Unfortunately legally as this was allowed by the Treasury and FSA without bilding, was their proligancy in their wild parties, with wines at the top end of the market and costly meals that would feed villages in Africa for a whole week. These are the scum who should be wheedled out, weed, I mean, as weeds they are too numerous. You know more about the various technniques, financial instruments which have been used over the years to decide, bewilder, hide,, retreat into, hedge funds being one and contracts for difference etc. I have written for years, even to the Select Committee, whose task was very difficult but they could smell a rat as I did.

Yours Truely, John Codruir.

P.s. Our local librarian took a long time to find your address. Australia is along way away. How it suffered? I should think so. J.

I am truely touched that my opinions have been considered in such depth by persons unknown to me. I am currently drafting a reply to Mr Codruir and will post it on this website when it is finished.

Article in the Herald Sun

noreply@blogger.com (Aron Ping D'Souza) — Wed, 01 Oct 2008 02:01:00 +0000

I have an article in today's Herald Sun on the culture of responsibility. (With thanks to David Cameron for inspiration).

http://www.news.com.au/heraldsun/story/0,21985,24428114-5000117,00.html

Aron Ping D'Souza

City Salaries

noreply@blogger.com (Aron Ping D'Souza) — Mon, 22 Sep 2008 22:52:00 +0000

I've got a letter in today's Times of London.

Seems that editors, at home and abroad, like my comments about executive salaries. Too bad Allan Moss is retired; he was the source of many good articles.

http://www.timesonline.co.uk/tol/comment/letters/article4804969.ece

Aron D'Souza

Applied Economy

noreply@blogger.com (Aron Ping D'Souza) — Fri, 05 Sep 2008 11:25:00 +0000

I am pleased to support, as an associate editor, The Journal of Applied Economy. The editor, Mr HT Moore, will, I am sure, stewart this new journal to great heights.

J.App.Econ. will publish its inaugural edition in December of this year.

Aron Ping D'Souza

Nike+ Human Race 10km

noreply@blogger.com (Aron Ping D'Souza) — Sun, 31 Aug 2008 00:07:00 +0000

Believing that I was made purposefully, I know I'm too skinny to be a sprinter and not skinny enough to be a marathoner. My body, therefore, was built somewhere in between and 10km (for running) seems to be my perfect distance.

Today I raced the Nike+ 10km Human Race. Amongst a sea of red shirts (quite literally) and with the likes of Craig Mottram competing, I set myself the goal of 45min (of 4.5min/km).

It was a beautiful, cool but not cold Melbourne morning for the race - perfect conditions in my book. The course straddled the botanical gardens and rose through the CBD and then around the Fitzroy Gardens before finishing back at the Myer Music Bowl. Two major hills were
present, first at Anderson Street on the Botanical Gardens then at Russell Street in the City. I enjoyed the course, although it was a bit congested at points.

One of the worst things one can do when racing is compete with others. This may seem a bit backwards because isn't the point of racing competing against others? I believe if you racing to compete, you will always be disappointed - particularly in events where there are thousands of people running, and hundreds passing you up. If you run for self-gratification, which, in itself is a more ego-centric motivation, you will never be disappointed unless you disappoint yourself (e.g., not give it your best shot).

Today was the first race I did without my iPod and this, surprisingly, encouraged me compete against the masses. I was so focused on my position and who was passing me and who I was passing, I forgot to listen to my own body in the first few kilometers. By the fifth kilometer I realised this and began ignoring those around my and trying to detach myself from the crowd. Needless to say, next time I will race with my iPod which help me ignore those around me.

I have a great run and, now, sitting at home, I realise I could have pushed myself a bit harder but nonetheless I am happy with the result. The next challenge is the Melbourne Marathon (42km) in early October and the 210km Around the Bay Cycling Race the following week (which I might do twice if I'm feeling insane enough).

The Journal Jurisprudence

noreply@blogger.com (Aron Ping D'Souza) — Mon, 18 Aug 2008 00:03:00 +0000

The 1st Edition of the Journal Jurisprudence goes on sale next week. Plenty of orders have already come to Elias Clark Group, our publishers.

You can pre-order it for the low, low price of $40 from amazon.com - see, The Journal Jurisprudence at Amazon.com

My other books Special Protections and The Art of Time are also available from amazon.

Books by Aron Ping D'Souza

Target

noreply@blogger.com (Aron Ping D'Souza) — Mon, 11 Aug 2008 09:56:00 +0000

So its a bit crazy, but it seems like Target (the department store) is now stocking my second book Special Protections: The Ethics of Copyright and Aboriginal Iconography.

See, http://www.target.com/Special-Protections-Copyright-Aboriginal-Iconography/dp/0980522412

Herald Sun Comments

noreply@blogger.com (Aron Ping D'Souza) — Mon, 04 Aug 2008 11:59:00 +0000

In reply to my contentious article about Alan Moss in the Herald Sun
a few months ago, some colourful replies were printed.

As long as there are people on this planet who are homeless, starving
or suffering from preventable or curable diseases, I'll never be
convinced that anyone deserves $80 million.
Aron D'Souza (``Moss is worth every cent'', May 26), it's a matter of
ethics, not rocket science, or even ``jurisprudential forecasting'',
whatever that is.

John Howes, Geelong West

Aron D'Souza (``Moss is worth every cent'', May 26) suggests CEOs
have skills that the average person doesn't. Hasn't he heard of HIH,
OneTel or the sub-prime crisis? Those skills seemed to be limited to
sacking people, increasing fees or losing investors' money.

Ray Lawson, South Melbourne

Aron D'Souza (``Moss is worth every cent'', May 26) should add
politics to his studies. He would then be able to recognise the
social Darwinism that his view represents.

Colin Hayes, Williamstown

noreply@blogger.com (Aron Ping D'Souza) — Fri, 01 Aug 2008 08:55:00 +0000

To the surprise of most, I am an artist. Don't let the math in The Art of Time or the utilitarianism of my politics fool you, I have a serious artistic inclination and, for much of my life, it was manifested through film.

However, like most artists, I don't tend to like watching my own films. I've made about thirty films, on formats ranging from S-VHS or IMAX, and after their initial distribution runs, they are contemned to storage under lock and key. I must that I don't particularly like any of my films, with one exception, which I am happy to share with the world on YouTube.

"The Dream" is a epic visual poem, so to speak. It tells the story of the American civil rights era through visual montage inspired by Sergi Eisenstein. It runs for about eight minutes and was originally mastered on the awesome IMAX format. Much of the colouring was done by hand and numerous pieces of software were developed to achieve visual effects of the film. Mostly, I must say, the lasting legacy of my film career is of technical innovation rather than as a storyteller. "The Dream" is a testament to that technical prowess.

New Books

noreply@blogger.com (Aron Ping D'Souza) — Fri, 01 Aug 2008 01:55:00 +0000

I have recently authored two books and both are available for purchase.

Special Protections: The Ethics of Copyright and Aboriginal Iconography.... the title is pretty self-explanatory. 408 pages on the ethics of copyright and aboriginal artwork, with a strong law reform bent. Available at: http://www.amazon.com/Special-Protections-Copyright-Aboriginal-Iconography/dp/0980522412/ref=sr_1_1?ie=UTF8&s=books&qid=1217555630&sr=1-1

The Art of Time: Toward a Fundamental Grammar of the Cinematic applies theories of information to cinema to create a mathematical mode of analysis. Second edition. Available at http://www.amazon.com/Art-Time-Fundamental-Grammar-Cinematic/dp/0980522404/ref=sr_1_2?ie=UTF8&s=books&qid=1217554737&sr=8-2

2008-9 Race Schedual

noreply@blogger.com (Aron Ping D'Souza) — Mon, 07 Jul 2008 12:27:00 +0000

In the 2008-9 racing season, I intend to race the following events:
1) Melbourne Marathon (12 Oct 08)
2) Around the Bay (19 Oct 08)
3) Alpine Classic (25 Jan 09)
4) Melbourne to Sydney in under 36hr40min (attempting to equal or
break the world record) (March-April 09)
6) Louisville, KY (USA) ironman triathlon (Aug 09) (2.4 mi. swim •
112 mi. bike • 26.2 mi. run)
(with several half/olympic distance events prior).

Washington main culprit in oil run-up

noreply@blogger.com (Aron Ping D'Souza) — Mon, 07 Jul 2008 01:16:00 +0000

This article was published in the Australian Financial Review, 7 July 2008, pg. 63.

Due to the current spike in global oil prices, significant criticism has been levied at hedge funds and commodity speculators. From the well of the United States Senate to the City of London, critics have suggested that the exponential rise in crude oil prices is due, in significant part, to self-interested speculators.

The America government has even attempted to stand-up to these malicious speculators, with a senatorial enquiry chaired by former vice-presidential candidate Senator Joseph Lieberman, which reports that global oil prices are inflated by 26% due to speculators.

However, the American government, is largely unwilling to admit its part in the rise of global oil prices and the ensuring inflation in key goods, particularly foodstuffs. Due to the downturn in American housing market teamed with the massive deficit spending on the Iraq war, the international value of the America dollar has deceased significantly in the last five years. This, in its own right, does not directly inflate the cost of crude oil. However, the currencies of Saudi Arabia, the Riyal, and the United Arab Emirates' Dirham are both pegged to the US Dollar.

The Riyal and Dirham has been pegged to the Dollar since 2003 and 1997, respectively. Whilst the real value of the Dollar has been decreasing, the pegging rate has stayed consistent, thereby decreasing the real international value of the Riyal and Dirham. This has caused significant inflation in both Saudi Arabia and the UAE, which forces higher oil prices in an effort to maintain the real value to oil-producing nations.

If the Saudi's and Emirati's were to float or, at least, change to the pegging rate of their respective currencies, the international community would see a significant drop in oil price. Based on the decline of the US Dollar, when compared to a benchmark of international currencies, in the last five years, this could amount to as much as 30% decrease in international oil price. However, this would cause a run on the US Dollar and significant political pressure, particularly by US Secretary of State Condoleezza Rice, has seen this proposal effectively killed.

From families in Manchester to farmers in the Philippines, the international community has paid a very dear price, particularly in rising food prices, for America's monopolistic protection of its stranglehold on the global oil markets. It is evident, as oil prices are rising in the US and the dollar is still falling, that this policy has failed and a float of the Riyal and the Dirham needs to be seriously considered. The negative-feedback loop of higher oil prices, higher inflation and lower growth can only be cured by a radical shift in policy. Speculation has increased global oil prices, but the primary culprit is at the US State Department not the City and Wall Street.

Aron Ping D'Souza

Tutor in Political Economy

The University of Melbourne

Australia