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Interesting video from a MIT economy teacher: http://wallstreetpit.com/13455-simon-johnson-says-the-crisis-is-just-beginning http://www.smh.com.au/business/call-that-a-crisis-stand-by-for-the-worst-is-yet-to-come-20100108-lyzc.html World leaders and central bankers cannot count their chickens yet, writes Ambrose Evans-Pritchard. The contraction of the money supply in the US and Europe over the past six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke, the chairman of the US Federal Reserve, will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises - the final error that triggered the implosion of Lehman, American International Group and the Western banking system. As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st-century depression - more akin to Japan's lost decade than the 1840s or 1930s, but nothing like the normal cycles of the postwar era. The surplus regions - China, Japan, Northern Europe (or Germania), the Gulf - have not increased demand enough to compensate for belt-tightening in the deficit bloc - the Anglo-sphere, Southern Europe (or Club Med), Eastern Europe - and fiscal adrenalin is already fading in Europe. The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of gross domestic product sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent. Yields on AAA German, French, US and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending the practice of central banks buying their own governments' bonds (known as quantitative easing, or QE), the Fed will step it up. Bernanke will get religion again and ram down 10-year US Treasury yields, quietly targeting 2.5 per cent. The funds will try to play the liquidity game yet again, piling into crude oil, gold and Russian equities but this time returns will be meagre. They will learn to respect secular deflation. Weak sovereign wealth funds will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1 per cent from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of Japanese Government bonds will be a news event as the public debt punches above 225 per cent of GDP. Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China, too, will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while but only at the price of an asset bubble. Beijing must hit the brakes this year or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-08. The European Central Bank will stick to its Wagnerian course, standing aloof as ugly loan books set off wave two of Europe's banking woes. The Bundesbank will veto proper QE until it is too late, deeming it an implicit German bail-out for Club Med. More hedge funds will join the European Monetary Union divergence play, betting that the north-south split has gone beyond the point of no return for a currency union. This will enrage the Euro-group. Brussels will dust down its paper exploring the legal basis for capital controls. Italy's Economy and Finance Minister, Giulio Tremonti, will suggest using European Union anti-terrorism legislation against ''speculators''. Wage cuts will prove a self-defeating policy for Club Med, trapping it in textbook debt-deflation. The victims will start to notice this. Articles will appear in the Greek, Spanish, and Portuguese press airing doubts about EMU. Eurosceptic professors will be ungagged. Heresy will spread into mainstream parties. Greece's Prime Minister, George Papandreou, will baulk at EMU immolation. The Hellenic Socialists will call Europe's bluff, extracting loans that gain time but solve nothing. Berlin will climb down and pay, but only once. In the end the euro's fate will be decided by strikes, street protest and car bombs as the primacy of politics returns. I doubt that 2010 will see the denouement but the mood music will be bad enough to knock the euro off its stilts. The US dollar rally will gather pace. America's economy - though sick - will shine within the even sicker Organisation of Economic Co-operation and Development. The British will need a gilts crisis to shatter their complacency. In time the Dunkirk spirit will rise again. The pre-emptive QE by the Bank of England's governor, Mervyn King, and timely devaluation will bear fruit this year, sparing Britain the worst. By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.

Charest will help push for more French at Olympics KEVIN DOUGHERTY, The Gazette Published: 7 hours ago Premier Jean Charest will be in Beijing on Aug. 9, the day after the official opening of the Olympics, at a rally of heads of government and ministers from the 55-member Franco-phonie, lending support to the use of French at the Olympics. Amadou Diouf, secretary-general of the Francophonie, and Jacques Rogge, Belgian doctor and president of the International Olympic Committee, will co-chair the event. French President Nicolas Sarkozy, who will also attend the opening ceremonies, will be at the rally, but Prime Minister Stephen Harper will not. Clément Duhaime, who seconds Diouf as administrator of the Francophonie, told reporters yesterday that while French and English are the two official languages of the Olympics, in recent Games, the position of French has not always been respected. This time, in addition to the rally of Francophone leaders, the Francophonie has an agreement with the organizing committee for the Beijing Games to ensure French is used in announcements. The agreement also calls for translation of Olympic documents and the hiring of 40 translators and French-language journalists, as well as training for "several hundred" Chinese volunteers as guides at French cultural shows during the Games. "This is the first time we have gone so far," said Duhaime, a former Montrealer who was previously Quebec's representative in Paris. kdougherty@thegazette.canwest.com