Sometimes the little surprises life hands you are the most pleasant. While in Houston at the Offshore Technology Conference, my trip sponsored by API, I happened to meet another blogger who introduced himself to me as a “raging liberal”. In the course of three days and a few good beers, Chris Nelder and I had some very enjoyable and interesting conversations. And, interestingly, Chris and I agree on where the policy debate stands as it pertains to energy. Chris wrote an outstanding article detailing his observations about the current situation, and, for the most part, I agree completely with his well thought out assessment. Here is his list of “10 Inconvenient Truths” that he feels all policy makers must understand before they can effectively plan for the future:
1. We have extracted nearly all of the world’s easy, cheap oil and gas, and now we’re getting down to the difficult, expensive stuff. The largest untapped resources that remain are in extreme places like deepwater and the Arctic, and marginal formations like shale. As a result, global oil production has for all intents and purposes peaked. Natural gas production will also peak in 10 to 15 years. Neither technology nor high prices will change that. Therefore we must begin to replace those fuels with renewables, and use what remains much more efficiently, with the expectation that most of the world’s oil and gas will be gone by the end of this century.
While I agree with Chris’s point about renewables, I’m not quite ready to buy into the idea that “most” of the world’s gas and oil will be gone by the end of the century, especially if we make progress developing cheap, renewable and clean alternatives. That’s not to say he might not be right, but I continue to look at the improvements in technology and the fact that the same sort of predictions have been made for decades and here we are. But on the main point of gearing up renewables, we agree completely. We must prepare for the possibility Chris is right and we need to do that now.
2. Drilling for oil and gas drilling in the OCS and ANWR must and will be done; our need for those fuels is simply too great to pass them up. An additional 2-3 mbpd will put a dent in the roughly 12 mbpd we now import, but if we drill for it now, it won’t come to market for 10 years or more. By that time, it probably won’t even compensate for the depletion of conventional oil in North America, nor will it do much to reduce prices. But it will be crucially necessary, and producing it won’t make an ugly mess of the environment.
You see someone on the left here who has studied the problem, understands the processes used and has formed an opinion that is outside his side’s political mainstream. He understands that technology has advanced to the point that the oil and gas industry can drill for oil and gas safely and with a very small footprint. In fact, advances in sub sea technology are almost to the point where the entire process can be safely and productively located under the waves. So, in a “comprehensive” scheme, the left has got to drop its almost knee-jerk resistance to such drilling and understand it must be a part of an overall energy solution.
3. Renewables are clearly the long-term answer, as is an all-electric infrastructure that runs on its clean power. However, it will likely take over 30 years for renewables to ramp up from a less than 2% share of primary energy today to 20% or more. They probably won’t even be able to fill the gap created by the decline of fossil fuels. Oil and gas currently provide about 58% of the world’s primary energy, and they will remain our primary fuels for a long time to come.
To believe “green fuels”/renewables are the immediate and total answer to today’s energy needs is to deny reality. We have to remember that there is going to be a growing energy gap as more and more nations come on-line in the first-world and demand more energy as a result. Oil, gas, nuclear and coal are going to play a large and significant part of bridging that gap even as we work to develop renewables. As a nation we cannot afford that sort of short-sighted thinking. It is critical that everyone understand that while the preference is for renewable, clean fuels, the reality is they’re still quite a ways off, while the energy demand continues to grow unabated and certainly with no concern for our personal energy preferences.
China has stated it won’t be left holding the financial bag in order to cut greenhouse gas emissions. Calling itself a “poorer” nation, China wants the 7 most developed countries to spend 1% of GDP on helping them and others.
China raised the price of its co-operation in the world’s climate change talks yesterday by calling for developed countries to spend 1 per cent of their domestic product helping poorer nations cut greenhouse gas emissions.
The funding – amounting to more than $300bn (£190bn, €240bn) based on Group of Seven countries – would be spent largely on the transfer of “green” technologies, such as renewable energy, to poorer countries.
Gao Guangsheng, head of the climate change office at the National Reform and Development Commission, the Chinese government’s main planning body, said that even such large funds “might not be enough”.
China’s toughened stance comes weeks ahead of United Nations talks in Poland aimed at forging a successor to the Kyoto protocol, whose main provisions expire in 2012.
China also suggests that to this point, emissions reduction has been mostly talk:
“Climate change policies need a lot of money to be invested, however developed countries have not made any substantive promises about how much they are going to spend on,” said Mr Gao. “And they did not fulfil some of the promises they made in the past very well either.”
Of course a number of reasons relate to why those previous promises haven’t been fulfilled. Most of them relate to economics and the realization that their promises are potentially crippling to their economies. That’s effecting the G20 meeting as we speak:
Fears are mounting that environmental issues could be almost entirely sidelined at tomorrow’s G20 summit in London as leaders of the world’s largest economies resist calls to make clear green commitments as part of the meeting’s closing communiqué.
According to Guardian reports, UK officials are leading a last-ditch effort to have clear environmental commitments incorporated into the global economic recovery package that will back up politicians’ repeated calls for a ” green new deal”.
Gordon Brown has said that the inclusion of a commitment on the environment would be one of the tests of the summit’s success, but he admitted that the negotiations were likely to be tough.
The draft version of the communiqué leaked at the weekend made only a passing reference to climate change and it is thought some nations are resisting more detailed commitments to dedicate a proportion of the global stimulus package to green projects that they fear could provide an excuse for protectionist measures.
There is also reluctance to incorporate climate change commitments that could be seen to step on the toes of the UN’s climate change negotiations, which are continuing this week at a separate conference in Bonn, Germany.
This, of course, is good news. Why?
“Everybody seems to be focusing on short-term recovery and getting long-term regulation of the banks right,” he said. “I haven’t heard anything that suggests green recovery and climate change are a major part of the [G20] agenda.”
That’s because that is the priority – not that anyone should expect the G20 to get any of financial part of it right either. However, the priority does keep them from making commitments that would cripple economic growth. And they, of course, know that – which is why they’re avoiding it and spinning it as a desire not to “step on the toes of the UN’s climate change negotiations”.
But back to China – you’ll enjoy this. It is called “having your cake and eating it too”:
[China’s climate ambassador Yu Qingtai]… said that China was willing to make a “due contribution” to curbing emissions, but warned that the country would not see its citizens “left in the dark” as a result of binding emission targets and was within its rights to continue to invest in coal power that allows its economy to grow.
Gotta love the Chinese – they make some of our spin merchants seem like rookies. China will decide what its “due contribution” will be while it builds thousands of coal fired plants. In the meantime, per China, it is up to the rest of the world to do what is necessary to curb emissions because, you know, the poorer nations just aren’t up to it. Su Wei, Chinese delegation chief to the UN climate change talks in Bonn:
Su said the success of the Copenhagen summit lies in whether or not the developed countries would make “substantial arrangements” for transferring climate-friendly technologies to and providing funds for developing countries.
Su noted the establishment of three international “mechanisms” is very important among the “substantial arrangements.”
“The first is to set up an international mechanism on climate-friendly technology development and transfer, to eliminate barriers hindering technology transfer, so that developing countries can get access to such technologies,” he said.
“Secondly, we should set up an effective financing mechanism to ensure the developed countries provide adequate funds for developing countries in their bid to cut emissions and fight climate change,” he added.
Thirdly, Su said an “effective supervision mechanism” should beset up to monitor the above-mentioned technology transfer and funding.
Nice. Known as the “you pay, we take” program, this pretty much excuses China (and the rest of the poorer BRIC nations) from doing much of anything. As long as China is convinced that a) enough technology hasn’t been transfered, or b) there hasn’t been enough “effective financing” of the effort, it can c) exempt itself from any cuts while insisting the rest of the developed world stick by its commitments.
Now that is how a master loots your wallet.
I am a reader. I am, in fact, a serious reader. For most of my life, this was a bit of a financial burden, and over time, an even greater physical burden, since I acquired a library of hundreds of books. A couple of years ago, I was liberated from much of this by the acquisition of a Sony PRS-500 eBook Reader. As of this last Tuesday afternoon, my Sony Reader had 400 books stored on it that I had acquired over the last three years.
On Tuesday night, my PRS-500 went Tango Uniform.
A dilemma immediately arose about how best to replace it. With the Kindle 2 now out, I had the following choice. Buy a new PRS-700 from Sony, or get a Kindle. With the new PRS-700, I could transfer all my old books. But I was stuck with Sony’s horrendously inconvenient book-buying process. Or I could get a new Kindle 2, which was a bit cheaper, far easier to obtain books for, but would require a massively inconvenient re-acquisition or conversion of my old books to the Kindle.
I made my choice, and bought the Kindle.
It arrived on Thursday, and I have to say that it’s not only signifigacantly better than the Sony, it’s a fantastic book reader in its own right.
The Form Factor
The Kindle is a bit larger than the Sony due to the QWERTY keyboard in the lower portion of the machine. It’s still small enough, though to be conveniently sized, and easy to handle. It’s quite thin, and light. In fact, the deluxe leather cover I purchased with it is almost as heavy as the Kindle itself.
The one downside to the device’s form factor is the QWERTY keyboard–but that’s pretty much an unavoidable downside. The buttons are small, and set very close together. This makes typing a bit slow a laborious. Of course, it’s physically impossible to get a decent keyboard on a small device, so you know going in that typing isn’t going to be convenient. It’s no different from a Blackberry or palm device. The surprise isn’t that the keyboard doesn’t allow convenient typing, but rather that there’s a usable keyboard at all. The Kindle’s keyboard is usable, and that is probably the best that anyone can reasonably expect.
That having been said, the buttons are designed in such a way as to minimize accidental pressing unless you intend to press them, which is a plus.
The controls are well-positioned on the device. As you can see from the picture, there are six main navigation buttons along the sides.
|Left Buttons||Right Buttons|
|Next Page||Next page|
In addition to the buttons, there is a joystick control placed between the menu and back buttons for navigating the cursor through the menus.
The nice thing about the design of the buttons is that the depress to the center of the device, not to the edge. This does a great job of preventing you from inadvertantly changing pages, or going to the home screen by accident while you handle the device. it’s a small, but very convenient detail. It’s also nice that there are Next page buttons on both sides of the device. This is the button you’re going to hit most often, after all, so they are conveniently accessible at all times, no matter how you hold the device. That’s helped out by the fact that they are significantly larger than the other buttons.
The image to the right gives a good real-world size comparison. As you can see, the Kindle is conveniently small.
One final note on the form factor. With the keyboard on the bottom, the screen is raised to the top of the device. This means that when you read in bed, you can rest the bottom of the device on the covers, and the whole screen is visible. On my Sony, the covers would obscure the bottom of the screen. Since I read before sleeping every night, this is a noticeable improvement.
The E-Ink Screen
I was a fan of the eInk technology on the Sony, but there were a few drawbacks. The contrast beteen the gray background and black text could have been better. The refresh rate of the screen was also noticeably–sometimes distractingly–slow. With only 4 grayscale colors, book covers and other images were nearly illegible.
That was a first-generation eInk screen, of course, and with the Kindle 2, there have been obvious improvements to the technology. The gray background is a bit lighter, increasing the contrast. The page refresh rate is also much, much faster, which makes “turning” the pages far less noticeable. It certainly takes less time than turning a page in a physical book.
The biggest improvement is in the fact that the screen displays 16 grayscale colors now. This makes the pictures far more legible and photograph-like. In fact, every time you turn the Kindle off, a picture of a some author or literary scene is displayed, and they all look good on the screen.
The most convenient of the feastures has to be the different font sizes. The Kindle not only uses a pleasant and easy to read serif font, it offers a choice of 6 different font sizes. There’s enough variation in font size to make easy reading for practically anyone.
Navigating through the device is very easy. No matter where you are, you can get to the main menu screen by pushing the Home key. The back key gets you out of any menus or secondary screens with one click.
Having to navigate through menus with the joystick control is slightly inconvenient compared to the Sony, however. The Sony provides ten physical buttons that correspond to the menu items, so instead of navigating, you simply push the appropriate button. On the Kindle, you have to nudge the joystick to move from item to item.
The menu system is faily intuitive, providing you with slightly different menus, depending on what screen you’re looking at on the device. At all times, you are presented with menus that are relevant to what you’re doing with the device at the time.
If you find you’re doing something where you can’t actually read your book, the Kindle offers a voice-to-text feature that is surprisingly good. You get the choice between a male or female voice, and can vary the speed at which the voice reads between three different settings. The voice is obviously computer-generated, but it sounds closer to a human voice than any device I’ve previously worked with. It still has trouble pronouncing certain words, but for listening while you drive–or ride your motorcycle–it’s a pretty neat feature. It’s also neat that the Kindle has a built-in speaker, as well as a 3.5mm mini jack for headphones.
In addition, the Kindle will also play MP3 files.
Unfortunately, some publishers threatened to sue Amazon, saying that the voice to text feature was a copyright violation–which it clearly is not. Amazon, however, rather than getting involved in a legal battle, allows publishers to disable the text to speech feature, so not every book will be hearable.
The Kindle does not take any external storage media, like an SD card. It does, however, come with 2GB of onboard memory. That’s enough memory to store about 1500 books, which seems like more than enough to get by. Any book you buy at Amazon is perpetually available for download, too so, you can always swap out books if you find that 1,500 books isn’t enough.
The Kindle contains an EVDO modem that operates off the Sprint 3G network. When you buy a book from the Amazon store, the book is delivered directly to the device via the network. In addition, the Kindle is assigned an email address, so you can take your text or RTF documents, and email them to that address, and Amazon will, for ten cents, convert the document to the Kindle format, and deliver it straight to the device as well.
eBook prices at the Amazon store are surprisingly good. The cost of an eBook is significantly less than the paper versions. I was able to buy Amity Schlaes’ newest book, The Forgotten Man, for $9.57, as opposed to the $25 hardback price. In addition to that, I was able to pick up modern translations of some classics, such as Livy’s History of Rome, the collected works of Tacitus in one eBook, Xenophon’s Anabasis, The Peloponnesian War by Thucydides, Julius Ceasar’s Commentaries on the Wars, and The Histories of Herodotus for about $3.50 each.
In addition to wireless book delivery from the Amazon store, you can also transfer books from your computer to the device via the included USB cable. So, if you don’t want to shell out the dime for wireless delivery to your device when you convert a document, you can have Amazon convert the document and send it to your email address for free, then use the USB cable to transfer it to the device.
I buy a lot of sci-fi at the Baen Books Webscriptions web site, which offers books in the Kindle format. In addition, nearly all of the books from the Gutenberg Project, as well as many other titles, are all available for free in several eBook formats, including the Kindle, from ManyBooks. Having the USB connection allows the Kindle to be seen as a hard drive on your computer, and you can transfer those eBooks from your computer to the Kindle.
In addition to going online at Amazon, the Kindle is also a web browser, and you can simply go to a web site and read it. I’m not sure if this is going to be a permanent feature of the Kindle, because I’m sure Sprint wants money for the use of its EVDO network, so this may or may not be a feature that goes away. On the other hand, it’s a pretty pretty primitive browser. It takes forever for a web page to load, and you have to use the joystick to navigate from link to link. It’s not very convenient, so I can’t see someone wanting to use it on a regular basis.
You can, by the way, turn the wireless on and off as necessary, for lots of battery life extension.
I have been extremely impressed by the Kindle. The speed at which it works, the ease of obtaining books, and the though that has gone into its design make this a definite winner in my book. (Pun. Deal with it.) It has been a pleasure to use for the last couple of days, and from my experience, it is vastly superior to the Sony Reader in nearly every way. It’s been an absolute joy to use. Now, all I need is a new Palm Pre, and I’ll be set.
My only problem with it has been how easy and seductive it is to get new books for it. I just purchased Winston Churchill’s 6-volume memoir of World War II for $36.69. Clearly, I’m going to have to figure out how to reign those impulse purchases in.
Today, the GOP released a request for proposal for a new web site. This is the RFP (PDF). I have read it all the way through. It’s quite a document. It’s an especially interesting read for someone like me, who responds to RFPs for web development for a living. I say “interesting” because it’s a masterpiece of confusion and idiocy.
I assume it was written by someone who has heard of this new thing called “com-poo-tors”, and who doesn’t actually have one, but has been told that they’ll be very big in the future.
Let’s take a little closer look at this document, shall we?
Integrate outside products through common API’s, widgets, or iframes (examples: Kimbia fundraising, Voter Vault, Widgetbox, Ning).
As far as I know, there is no common API for those applications. Each has it’s own API, I’m sure. They may be accessible through a common technology, i.e., any ODBC compliant data/programming model like PHP or .NET will probably be able to access them in some way. But there’s not going to be anything common about it. I also love the use of the term “widgets”. Because every tech person knows what a “widget” is. It’s such a specific term.
But the best part is asking for the use of the IFRAME tag. I guess that’s OK. As long as you won’t be wanting to use the XHTML Strict doctype, or anything. Or you’ve never heard of the OBJECT tag.
Flash interfaces can often make mundane tasks exciting, and having Flash developers who understand user behavior will make the site more user-friendly.
Well, that’s a perfectly uncontroversial statement. If there’s one thing that everybdy in the web-based tech community agrees on, it’s how wonderful Flash is. because it makes things, you know, move. And it’s so easy to optimize for search engines!
An ideal client will have a CMS that is already built out and ready to plug into the system, so the only programming time will be building the outward facing presence.
“No limitations on design”? Oh. OK. There’ll be no limitations on cost, then.Because, as everyone knows, every CMS system uses the exact database schema that the RNC uses, so there will need to be no data import, or customized programming to access the RNC’s content data. All you have to do is install the CMS, and, like magic, the only work you’ll have to do is set up a really nice theme. And how convenient that Flash will require no custom ActionScript programming to integrate into the CMS.
The really helpful thing about the RFP is that there are no indications of what database backend the RNC uses, no information about the database size or schema, no indication of the server technology they’d like to use, or, actually, any technical details at all. But, when you throw all that stuff in, the RFP gets so, you know, long, and boring.
But long and boring is one thing this document is not. In fact, it’s only two pages long. Once you start throwing that sort of stuff in, you end up with a hideous and stuffy nightmare of an RFP like this.
But, one thing the RNC does want: They want to know what it’ll cost them.
All costs of the project will be delivered with proposal.
Well, it’s a good thing the RFP is so chock full of the kinds of detailed information that will allow a contractor to make accurate time/cost estimates. But, I kid. In actuality, the RNC has made costing this proposal childishly simple, with the addition of this:
No limitations on design; the RNC will be in on the entire process and will ensure everything is to our exact specifications.
“No limitations on design”? Oh. OK. There’ll be no limitations on cost, then. Your web site will cost $∞. Or, whatever amount causes you to stop saying, “I’m done fiddling with it now.” It’s up to you.
I’ll be billing every two weeks, thanks.
Surely this is all some sort of elaborate joke. Perhaps on Monday the RNC will tell us that they were just having us on. Then, once we’ve all had a good laugh, they’ll release the real RFP.
Because whatever this document is, it’s not an RFP. At best, this is some sort of marketing-related statement of intent. It’s nothing more than a series of barely-related bullet points that say:
- We want a cool web site.
- We want neat external applications to run on it.
- Flash is fun.
- We want it to be easy to use, ’cause we ain’t got us much of that compooter learnin’.
- Make it pretty.
This the new, high-tech-savvy GOP? This is the kind of in-depth attention to leveraging technology that the refurbished, Michel Steele RNC has planned?
This is a travesty. And it’s sad. Especially since the opening paragraph states:
This RFP and the ambitious goals behind it result from the help of the RNC Tech Summit and the 7,000 grassroots volunteers who participated both online and in-person.
Wow. That must have been an über-effective tech summit.
My first reaction to Pres. Obama’s speech last night was depression. Here were the Democrats giving the president standing O’s for completely converting the Republic into a social democracy. I mentioned that on Facebook, and one of my readers said it reminded him of Amidala’s line from Star Wars Episode III: “So this is how liberty ends…with thunderous applause.”
But on more careful review, I find that I am not, in fact, depressed over the long-term. Indeed, last night’s speech seems to me not to herald the beginning of a new era for big government and socialism, but rather the last gasp of a dying ideology.
We are, I think, at the cusp of a new era, but it isn’t the one that Pres. Obama and his acolytes in the Congress are thinking it is. Neither the Democrats nor the Republicans, it is clear, have any idea about what is happening. Very few people do. I am going to try and explain something very complicated, and do so very simply, and as briefly as I can. So, with the realization that all simplifications are inevitably wrong in some particular, let me explain.
“Ed’s dead, baby. Ed’s dead.”*
We stand now, I think, in a very historically similar position to the one described by Barbara Tuchman, in the beginning chapter of her monumental work on the outbreak of Word War I, The Guns of August:
So gorgeous was the spectacle on the May morning of 1910 when 9 kings rode in the funeral of Edward VII of England that the crowd, waiting in hushed and black-clad awe, could not keep back gasps of admiration. In scarlet and blue and green and purple, 3 by 3 the sovereigns rode though the palace gates, with plumed helmets, gold braid, crimson sashes, and jeweled orders flashing in the sun. After them came 5 heirs apparent, 40 more imperial or royal highnesses, 7 queens, and a scattering of special ambassadors from uncrowned countries. Together they represented 70 nations in the greatest assemblage of royalty and rank ever gathered in one place and, of its kind, the last. The muffled tongue of Big Ben tolled 9 by the clock as the cortege left the palace, but on history’s clock it was sunset, and the sun of the old world was setting in a dying blaze of splendor never to be seen again.
Four years later, the world order of 1815-1914 was drowned in fire and blood. The Age of Royalty was over, and the Age of Democracy had begun. I believe that Pres. Obama’s speech of last night may very well be the historical equivalent to Edward VII’s funeral.
Ever since it began in late 2007, a blog called Fabius Maximus has been arguing that we are watching the decline and fall–indeed, collapse–of our current economic and financial system. A précis of the argument can be found here, and a more comprehensive archive can be found here. Just as the black-clad crowds lining the streets of the capitol of the British Empire on the morning of May 20, 1910 might have found it inconceivable that their generation would witness the collapse of both the European geopolitical regime, and, ultimately, the British Empire itself, so it may be inconceivable to us that we are witnessing the collapse of the Post-WWII economic and political regime. But I believe it is nevertheless true.
“MONEY! Doesn’t it make you feel good just to say that, Jerry?”
Let me start by explaining what money is. Money is a medium of exchange, that is, it is an object of some kind that I can exchange for goods and service, rather than trying to barter with people to obtain what I need. It may consist of elaborately carved cowry shells, tiny beads painstakingly stitched to strips of leather, round pieces of metal with the image of guys named Julius or Claudius hammered into them, or little pieces of high-quality paper that say “Federal Reserve Note” on them.
But whatever it is, money has certain minimal characteristics. It must be convertible, i.e., if I do a job for you, I have to be willing to accept it as payment, and whoever I buy bread or clothes from has to be willing to accept it in exchange, too. It also has to be difficult to replicate, so that when I accept it, I am reasonably assured that it is the genuine article.
For nearly all of recorded history “money” has been synonymous with gold or silver. And right up till the late 18th century, it was more or les the perfect money. It was intrinsically valuable, in that raw silver or gold was as easily convertible as hammered or minted coins. It was also practically impossible to counterfeit, the best efforts of alchemist to convert dross into gold notwithstanding. It was also relatively rare, and it difficult to obtain new supplies of it without intensive–and extremely expensive–mining operations.
Additionally, there simply wasn’t much to buy. Most people grew their own food, produced their own clothes from flax or wool, and built their own houses by hand. Money was essentially a luxury, and it bought mainly luxury goods for fat cats. Kings could raise and equip armies with it. Merchants could buy nice clothes. But for the most part, money was a tool for use by the rich, and by the relatively few urban dwellers. And, as such, gold or silver was perfect for that level of economic activity.
By the 19th century, though, there were lots more things to buy, and lots more city dwellers, and that trend was increasing rapidly. Hard money became…problematic. The thing about having a hard currency based in gold or silver is that, at the end of the day, whether you run a fully convertible gold standard, or some sort of fractional reserve system, the size of the money supply is always constrained by the amount of gold or silver on hand.
If the economy takes off on a tear, it’s extremely difficult to expand the money supply to meet the demand. When the supply dries up, the economy just shudders to a quick stop, because nobody has enough spare money to fund more expansion. So the economy collapses until it reaches equilibrium with the available money supply, and the cycle starts again. Look at a chart of US economic activity in the 19th century and you see it’s a system of booms and busts, which were far steeper than any we’ve seen since the depression. So the fundamental problem with a gold standard is that it’s relatively inflexible when used by a vibrant, diverse economy. When everybody needs gold, and the demand is unpredictable, gold is very difficult to use unless you’re willing to live with severe booms and busts.
The Great Depression was the death knell for the gold-based world economic system. Those nations that jettisoned gold the fastest, recovered the most. Of course, WWII intervened in the depression, so it took a decade or so to get back to the business of commerce–as opposed to the business of building things to kill Nazis. But, by 1944, everyone–on the Allied side, at least–had recovered enough breathing room to meet at Bretton Woods, NH, and hammer out a new economic system.
What they came up with was a system of fiat currencies, all freely convertible in the FOREX market.
Now, governments could adjust their money supplies appropriately by printing more money or less of it, and taxing their populations more leniently or more severely, as needed. This is the system most of us have grown up with…and it’s dying.
It’s dying because of something innate in human nature that the gold standard was better equipped to deal with: the urge to loot the system.
It’s an urge that has always been there. Sometimes it has been the result of intentional government action to cheapen the currency. If you were, say, the king of Persia, you didn’t need to consult the priests of Ahura Mazda to know that if you changed from using 10 grams of gold per coin, to using only 9 grams per coin, you could stretch your gold supply by 10%. You could then take the extra gold, and buy yourself a nice hat. Or use the extra gold to make one. Whatever.
Of course, people would notice this pretty quickly, and items that used to cost 9 gold pieces would cost 10 pieces–inflation!–but because gold had an intrinsic value, the same weight of gold could be exchanged. It was still pernicious, of course, but because gold had an intrinsic value–and because the supply of gold was relatively inflexible–it wasn’t usually seriously pernicious.
Sometimes, the urge to loot the system has been done by private individuals, who figured out that if they shaved a bit off the edges of their gold pieces, they could accrue enough gold shavings to buy themselves a nice hat, too. This, by the way, is why when we began minting coins instead of hammering them out. They were minted with milled edges, making shaving attempts immediately obvious.
By the 19th century, the looting attempts became widespread, populist movements, like the “Free Silver” movement. At the time, gold was real money. If you took a bunch of gold to a Minting facility, the mint would return you an equal weight in gold coins–minus a nominal minting fee. After huge silver deposits were discovered at places like the Comstock Lode, populist agitation began for minting silver in the same way, at a ratio of 20 ounces of silver for 1 ounce of gold. The massive amount of silver floating around would, of course, have made this an extremely inflationary policy, and the farming and borrowing interests would have benefited by paying off bills for less than they had borrowed…enabling themselves to use the extra saving to buy a nice hat.
But during the First Age of Money, the looting was always constrained by the fact that gold had an intrinsic value, and that the supply of gold was inelastic. There were, therefore built-in constraints to the looting impulse.
When the Bretton Woods Agreement launched the Second Age of Money, it solved the problem of the inelasticity of the money supply, and enabled monetary authorities to fine-tune the money supply in response to economic activity. That was a good thing in the sense that it flattened–although did not eliminate–the business cycle fluctuations.
But the bad thing was that it completely removed any physical restraint on the money supply. It depended on governments and monetary authorities to exercise self-restraint, rather than impersonal, externally imposed constraints. The result has been 65 years of continually expanding credit, more or less constant inflation to a greater or lesser degree, and unrestrained spending and borrowing.
Governments–and their democratic (small “d”) constituencies quickly learned that they could loot the system. Social insurance, medical care, military expansion…whatever the Big Idea of the minute was, we could have it. And if we didn’t want to pay the taxes to the government to pay for it–and, mostly, we didn’t–we could simply borrow it. We could obtain a whole bunch of little green pieces of paper now in exchange for a promise we’d pay back more little green pieces of paper sometime in the future. In the meantime, we could buy all the hats we wanted!
But now, we are obligated to pay back various people about fifty trillion pieces of green paper. Unfortunately, the entire household worth of everyone in the country is worth about forty trillion pieces of green paper.
How can the current economic and financial system possibly be considered solvent at this point? How will re-expanding the cycle of debt re-invigorate it?
No, we’ve had our fun. We got to loot the system for 65 years. Now, the hat bill is coming due.
I suspect we’ll pay the hat bill the same way that Germany repaid their war reparations debt after WWI. “Hey, you remember that reparations bill for 3 billion marks that we’re supposed to pay next week? Yeah. I just wanted to let you know that we’ve sent that order off to the printers, this week, and we should have that printed up for you by Tuesday.”
The result was massive hyperinflation, the collapse of credit, and 5 years of compete economic stagnation, serious economic pain, severe unemployment…and the ability to start over in the mid-20s with a clean balance sheet. Clean enough, in fact, that by 1936 Germany had more or less completely emerged from the Great Depression, while the employment rate in the United States hovered at around 18%.
What Pres. Obama is proposing may result in nothing more than additional spending that helps bring about the collapse of the Post-WWII economic regime, while at the same time providing–temporarily–a social safety net that will provide some help as we pass through a difficult transitional period.
“I was there at the dawn of the Third Age of Mankind…”
OK. Maybe it’s not that grandiose, but I think we are seeing the dawn of the Third Age of Money.
No one in the government realizes how the economic world is changing. So their proposed solutions are likely to be exposed over time as ineffective and, perhaps even counter-productive. The credibility of governments around the world is now invested in staving off an economic collapse. When their failures become evident, and their “solutions” are exposed as fantasies, that credibility will collapse. Who will want to buy government bonds, or use worthless government money? Who will trust the governments who lead us into the economic abyss?
Unfortunately, rather that realizing that we are entering a transition, and trying to discover how to shepherd us through that transition, they are invested in preserving the dying system of government-regulated money supply and credit. And even if they realized that we were in a transitional period, they would still do nothing about it because it would require voluntarily releasing their power over the economy.
Governments have always been in charge of money; determining what money is, how it will be exchanged, how new money will be created, etc. In part, this is traditional, in that only government had the resources and ability to fund and oversee mining and exploration activities, regulate what legal tender consisted of, and all of the other monetary functions. There simply were no other large organizations in existence to perform those tasks.
It wasn’t until the 17th century that organizations began to emerge that could begin performing those tasks, and not until the 18th century that it became practical. Private money of various types began to sprout up everywhere. 18th-century America was, for a time, replete every decent-sized bank issuing its own currency based on deposits.
Eventually, the Federal government cracked down on that private money, not so much from jealousy of the government’s role as the issuer of currency, but because private banks suffered from the same tendency to loot the system, issuing more and more inflated currency until it was worthless, and they ended up wiping out their depositors in the collapse as their obligations came due. There were some solid money banks of course, but the spectacular failures of so many private currency attempts led the government to tax them so heavily that private currency issuance became uneconomic. Governments may not have been perfect, but the constraints of the gold system meant that they didn’t fail as completely and spectacularly as private banks did.
What was missing in private currency of the time, and what has been missing in the current post-WWII financial system is feedback. Yes, there is some, but it takes a long time to filter into the monetary authority, and is derived indirectly from statistics on economic activity, rather than by any sort of direct observation. The Fed raises interest rates today, for instance, and it takes around eight months to observe the indirect effects of the monetary policy change. This is why the role of the Fed, has often been described as steering a car by looking through the rear-view mirror. Based on seeing where you’ve been, you make decisions about where you must go. That may be a form a feedback, but it is so separated in time from the inputs that it’s an inherently unstable system.
By the same token, what killed depositors in banks that issued private money was a lack of feedback. It wasn’t possible to see that bankers were looting the system in time to withdraw your money.
We call this lack of feedback asymmetrical information. We’ve never been able to even approach the ability to have full information about what a bank or government is doing that may affect the money supply, or economic activity as a whole. We’ve never been able to see all sides of the story, as it were. So, we’ve had to more or less leave it in the hands of government, simply because governments have been the only organizations with the size and scope to reduce, even partially, the problem of feedback.
So, it seems pretty hopeless, doesn’t it? The financial world we’ve grown up with is collapsing under the sheer weight of looting. If governments can’t do it, and a return to the gold standard can’t do it, then where are we? At the edge of another dark age?
I foresee the rise of private money once again, and returning in such force as to negate the government’s role in the economy. In fact, the pieces for creating the Third Age of Money are already there.
The Internet will be the platform for the new money. But it’s just the platform; the communications media. The actual objects that make up the Third Age of Money will almost be located in cyberspace.
First, there is encryption. In the not-too-distant future, you will go online with a persona, i.e., an online identity with a unique, highly encrypted digital signature. No more logging in with different user names and passwords at 100 different web sites. Your persona will be uniquely identified as you through the use of 4096-bit or 8192-bit public key encryption. Your persona will be impossible to forge or duplicate. It will be unique. Your “bank” and your “money” will be similarly encrypted.
Second, is your ATM/debit card. It won’t be exactly the same, of course. It will be far more secure, probably through the use of biological identification systems to verify authorization, such as retinal scans. It will be linked directly to your persona’s bank account.
Third, is the ability of all the major banks and credit card companies to do online transactions, and to convert one system of private money to another at a publicly known exchange rate. So, you can pay directly to your account–or withdraw from it–in Discover Dollars, or MasterBucks, or Credit Suisse Francs. Or perhaps there might even be a universally acknowledged unit of currency–the “Credit”–that all the private companies agree to use.
But, the most important element of creating a reliable private money system that is resistant to looting the system is feedback. The reduction of asymmetrical information. And that exists, too. eBay has been using it for years. Indeed, in no small way, the system implemented by eBay may be a key element of our future.
Imagine a system where, every time I do business with your persona, I rate your reliability, and it doesn’t matter of the persona is an individual or a bank…or a government. Every day, millions of people who do transactions in MasterCard can rate the reliability and value of the MasterBucks system. Private companies like Standard and Poors or Moody’s would not only rate MasterBucks, but consumers would rate the reliability of S&P or Moody’s judgments.
And not only are the bank’s persona’s being rated, but your persona is as well, by every one who does business with it.
Put them all together and you have a secure form of private money that’s convertible, impossible to forge, and is subject to constant feedback about its value and performance. Does MasterBucks have too high a debt ratio or too much exposure to non-performing loans at MasterCard? No problem. It’s instantly convertible to Credit Suisse Franks. And the conversion rate lowers MasterBucks reliability ratings even more, signaling the company to correct its course, or lose its depositors.
Think of the implications this has for taxation, especially income taxation. Keep all your money in Credit Suisse Francs, say, and the US government will never even be able to see a record of your deposits or withdrawals. How will they track your income? And who will want to pay governments that failed to prevent the collapse for…well…anything? Who will accede to the demand for money by governments that repudiated their debts, and destroyed the life savings of millions?
I can foresee huge implications for the future that are very pro-liberty. In the long term. In the short term, though, if I’m right, and the current financial system is collapsing we will be in for a very rough decade or so. Very rough indeed.
*Apologies to Quentin Tarantino.