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PUBLISHER'S LETTER Publisher & Editor-in-Chief Leo Simpson, B.Bus., FAICD Production Manager Greg Swain, B.Sc.(Hons.) Technical Staff John Clarke, B.E.(Elec.) Robert Flynn Rick Walters Reader Services Ann Jenkinson Advertising Manager Brendon Sheridan Phone (03) 9720 9198 Mobile 0416 009 217 Regular Contributors Brendan Akhurst Garry Cratt, VK2YBX Julian Edgar, Dip.T.(Sec.), B.Ed John Hill Mike Sheriff, B.Sc, VK2YFK Ross Tester Philip Watson, MIREE, VK2ZPW Bob Young SILICON CHIP is published 12 times a year by Silicon Chip Publications Pty Ltd. A.C.N. 003 205 490. All material copyright ©. No part of this publication may be reproduced without the written consent of the publisher. Printing: Macquarie Print, Dubbo, NSW. Distribution: Network Distribution Company. Subscription rates: $59 per year in Australia. For overseas rates, see the subscription page in this issue. Editorial & advertising offices: Unit 34, 1-3 Jubilee Avenue, Warrie­ wood, NSW 2102. Postal address: PO Box 139, Collaroy Beach, NSW 2097. Phone (02) 9979 5644. Fax (02) 9979 6503. ISSN 1030-2662 * Recommended and maximum price only. 2  Silicon Chip Deflation has been with us for a long time Anyone who has tried to follow the news of Asia and Austra­lia’s currency decline in the last few months must be confused. And worried! After all, some notable economists are now using the dreaded “D” word; D stands for deflation. It seems that inflation is no longer a worry and deflation is to be feared. Apparently, a little inflation is good for all of us but deflation could be really bad. Well, I have to say it. Most of these economists are talking rubbish. They just don’t know what is going to happen, any more than the ordinary person in the street. But I can also state that deflation has been around for a long time and we have been living with it very happily and we expect it to happen in the future! How can I say that? Deflation is defined as “an abnormal decline in the level of commodity prices, especially one that is not accompanied by an equal reduction in the costs of production”. This is exactly the deflation that some economists are worried about. As Asian coun­tries struggle to export their way out of trouble, they will supposedly flood Western markets with cheap goods and so Western economies will suffer. Well, hasn’t Asia been doing this all along? Over the last 40 years or so, we have seen the prices of virtually all manufactured goods plummet in real terms and this applies especially to electronic equipment of every description. The price drops have been brought about because of the two re­lentless forces of increasing competition and the march of tech­nology. There is no reason to suppose that this will not continue at an ever increasing rate, regardless of what happens in Asia. At the same time, we can expect the prices that Australia obtains for its commodities (minerals, wool, wheat, etc) to decline as well. Nothing new here. As an aside, the fact that Asia is in trouble now indicates that the calls for Australia to get heavily into “high technology” manu­facturing would have been to no avail. Asia has done just that and look where it is. Yes, yes, I know that I am ignoring such things as defective Asian banking systems, corruption, artifi­cially low interest rates, etc. All these are peripheral issues. The real reason that Asia is in trouble is that it has excessive production capacity for virtually everything and all those high-tech factories eventually have to be paid for. However, there has to be some silver lining to all the dark clouds, hasn’t there? If the economists are correct and Asia is to export its way out of trouble, it has to buy raw materials from somewhere and that is most likely to be Australia. So why is our currency on the decline? The point is that no-one really knows. The most common phrase you hear in economic news is “market sentiment” and that means that not much logic is being brought to bear. My tip, and it is as good as anyone else’s, is that Austra­lia’s currency will rebound. Perhaps it will do so even before this issue hits the news stands. But whatever happens, you can bet on electronic equipment continuing to get cheaper in real terms. So will most other mass-produced commodities. Everything else is in the lap of the gods. Leo Simpson