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Friday, November 25, 2011

Reading List: Currency Wars

Rickards, James. Currency Wars. New York: Portfolio / Penguin, 2011. ISBN 978-1-59184-449-5.
Debasement of currency dates from antiquity (and doubtless from prehistory—if your daughter's dowry was one cow and three goats, do you think you'd choose them from the best in your herd?), but currency war in the modern sense first emerged in the 20th century in the aftermath of World War I. When global commerce—the first era of globalisation—became established in the 19th century, most of the trading partners were either on the gold standard or settled their accounts in a currency freely convertible to gold, with the British pound dominating as the unit of account in international trade. A letter of credit financing a shipload of goods exported from Argentina to Italy could be written by a bank in London and traded by an investor in New York without any currency risk during the voyage because all parties denominated the transaction in pounds sterling, which the Bank of England would exchange for gold on demand. This system of global money was not designed by “experts” nor managed by “maestros”—it evolved organically and adapted itself to the needs of its users in the marketplace.

All of this was destroyed by World War I. As described here, and in more detail in Lords of Finance (August 2011), in the aftermath of the war all of the European powers on both sides had expended their gold and foreign exchange reserves in the war effort, and the United States had amassed a large fraction of all of the gold in the world in its vaults and was creditor in chief to the allies to whom, in turn, Germany owed enormous reparation payments for generations to come. This set the stage for what the author calls Currency War I, from 1921 through 1936, in which central bankers attempted to sort out the consequences of the war, often making disastrous though well-intentioned decisions which, arguably, contributed to a decade of pre-depression malaise in Britain, the U.S. stock market bubble and 1929 crash, the Weimar Germany hyperinflation, and its aftermath which contributed to the rise of Hitler.

At the end of World War II, the United States was in an even more commanding position than at the conclusion of the first war. With Europe devastated, it sat on an even more imposing hoard of gold, and when it convened the Bretton Woods conference in 1944, with the war still underway, despite the conference's list of attendees hailing from 44 allied nations, it was clear that the Golden Rule applied: he who has the gold makes the rules. Well, the U.S. had the gold, and the system adopted at the conference made the U.S. dollar central to the postwar monetary system. The dollar was fixed to gold at the rate of US$35/troy ounce, with the U.S. Treasury committed to exchanging dollars for gold at that rate in unlimited quantities. All other currencies were fixed to the dollar, and hence indirectly to gold, so that except in the extraordinary circumstance of a revaluation against the dollar, exchange rate risk would not exist. While the Bretton Woods system was more complex than the pre-World War I gold standard (in particular, it allowed central banks to hold reserves in other paper currencies in addition to gold), it tried to achieve the same stability in exchange rates as the pure gold standard.

Amazingly, this system, the brainchild of Soviet agent Harry Dexter White and economic charlatan John Maynard Keynes, worked surprisingly well until the late 1960s, when profligate deficit spending by the U.S. government began to cause foreign holders of an ever-increasing pile of dollars to trade them in for the yellow metal. This was the opening shot in what the author deems Currency War II, which ran from 1967 through 1987, ending in the adoption of the present system of floating exchange rates among currencies backed by nothing whatsoever.

The author believes we are now in the initial phase of Currency War III, in which a perfect storm of unsustainable sovereign debt, economic contraction, demographic pressure on social insurance schemes, and trade imbalances creates the preconditions for the kind of “beggar thy neighbour” competitive devaluations which characterised Currency War I. This is, in effect, a race to the bottom with each unanchored paper currency trying to become cheaper against the others to achieve a transitory export advantage. But, of course, as a moment's reflection will make evident, with currencies decoupled from any tangible asset, the only limit in a race to the bottom is zero, and in a world where trillions of monetary units can be created by the click of a mouse without even the need to crank up the printing press, this funny money is, in the words of Gerald Celente, “not worth the paper it isn't printed on”.

In financial crises, there is a progression from:

  1. Currency war
  2. Trade war
  3. Shooting war

Currency War I led to all three phases. Currency War II was arrested at the “trade war” step, although had the Carter administration and Paul Volcker not administered the bitter medicine to the U.S. economy to extirpate inflation, it's entirely possible a resource war to seize oil fields might have ensued. Now we're in Currency War III (this is the author's view, with which I agree): where will it go from here? Well, nobody knows, and the author is the first to acknowledge that the best a forecaster can do is to sketch a number of plausible scenarios which might play out depending upon precipitating events and the actions of decision makers in time of crisis. Chapter 11 (how appropriate!) describes the four scenarios Rickards sees as probable outcomes and what they would mean for investors and companies engaged in international trade. Some of these may be breathtaking, if not heart-stopping, but as the author points out, all of them are grounded in precedents which have already occurred in the last century.

The book begins with a chilling wargame in which the author participated. Strategic planners often remain stuck counting ships, troops, and tanks, and forget that all of these military assets are worthless without the funds to keep them operating, and that these assets are increasingly integrated into a world financial system whose complexity (and hence systemic risk, either to an accidental excursion or a deliberate disruption) is greater than ever before. Analyses of the stability of global finance often assume players are rational and therefore would not act in a way which was ultimately damaging to their own self interest. This is ominously reminiscent of those who, as late as the spring of 1914, forecast that a general conflict in Europe was unthinkable because it would be the ruin of all of the combatants. Indeed, it was, and yet still it happened.

The Kindle edition has the table of contents and notes properly linked, but the index is just a list of unlinked terms.

Posted at 23:18 Permalink

Monday, November 21, 2011

Reading List: How the Hippies Saved Physics

Kaiser, David. How the Hippies Saved Physics. New York: W. W. Norton, 2011. ISBN 978-0-393-07636-3.
From its origin in the early years of the twentieth century until the outbreak of World War II, quantum theory inspired deeply philosophical reflection as to its meaning and implications for concepts rarely pondered before in physics, such as the meaning of “measurement”, the rôle of the “observer”, the existence of an objective reality apart from the result of a measurement, and whether the randomness of quantum measurements was fundamental or due to our lack of knowledge of an underlying stratum of reality. Quantum theory seemed to imply that the universe could not be neatly reduced to isolated particles which interacted only locally, but admitted “entanglement” among separated particles which seemed to verge upon mystic conceptions of “all is one”. These weighty issues occupied the correspondence and conference debates of the pioneers of quantum theory including Planck, Heisenberg, Einstein, Bohr, Schrödinger, Pauli, Dirac, Born, and others.

And then the war came, and then the war came to an end, and with it ended the inquiry into the philosophical foundations of quantum theory. During the conflict, physicists on all sides were central to war efforts including nuclear weapons, guided missiles, radar, and operations research, and after the war they were perceived by governments as a strategic resource—subsidised in their education and research and provided with lavish facilities in return for having them on tap when their intellectual capacities were needed. In this environment, the education and culture of physics underwent a fundamental change. Suddenly the field was much larger than before, filled with those interested more in their own careers than probing the bottom of deep questions, and oriented toward, in Richard Feynman's words, “getting the answer out”. Instead of debating what their equations said about the nature of reality, the motto of the age became “shut up and calculate”, and physicists who didn't found their career prospects severely constrained.

Such was the situation from the end of World War II through the 1960s, when the defence (and later space program) funding gravy train came to an end due to crowding out of R&D budgets by the Vietnam War and the growing financial crisis due to debasement of the dollar. Suddenly, an entire cohort of Ph.D. physicists who, a few years before could expect to choose among a variety of tenure-track positions in academia or posts in government or industry research laboratories, found themselves superbly qualified to do work which nobody seemed willing to pay them to do. Well, whatever you say about physicists, they're nothing if they aren't creative, so a small group of out of the box thinkers in the San Francisco Bay area self-organised into the Fundamental Fysiks Group and began to re-open the deep puzzles in quantum mechanics which had laid fallow since the 1930s. This group, founded by Elizabeth Rauscher and George Weissmann, whose members came to include Henry Stapp, Philippe Eberhard, Nick Herbert, Jack Sarfatti, Saul-Paul Sirag, Fred Alan Wolf, John Clauser, and Fritjof Capra, came to focus on Bell's theorem and its implications for quantum entanglement, what Einstein called “spooky action at a distance”, and the potential for instantaneous communications not limited by the speed of light.

The author argues that the group's work, communicated through samizdat circulation of manuscripts, the occasional publication in mainstream journals, and contact with established researchers open to considering foundational questions, provided the impetus for today's vibrant theoretical and experimental investigation of quantum information theory, computing, and encryption. There is no doubt whatsoever from the trail of citations that Nick Herbert's attempts to create a faster-than-light signalling device led directly to the quantum no-cloning theorem.

Not only did the group reestablish the prewar style of doing physics, more philosophical than computational, they also rediscovered the way science had been funded from the Medicis until the advent of Big Science. While some group members held conventional posts, others were supported by wealthy patrons interested in their work purely from its intellectual value. We encounter a variety of characters who probably couldn't have existed in any decade other than the 1970s including Werner Erhard, Michael Murphy, Ira Einhorn, and Uri Geller.

The group's activities ranged far beyond the classrooms and laboratories into which postwar physics had been confined, to the thermal baths at Esalen and outreach to the public through books which became worldwide bestsellers and remain in print to this day. Their curiosity also wandered well beyond the conventional bounds of physics, encompassing ESP (and speculating as to how quantum processes might explain it). This caused many mainstream physicists to keep members at arm's length, even as their insights on quantum processes were infiltrating the journals.

Many of us who lived through (I prefer the term “endured”) the 1970s remember them as a dull brown interlude of broken dreams, ugly cars, funny money, and malaise. But, among a small community of thinkers orphaned from the career treadmill of mainstream physics, it was a renaissance of investigation of the most profound questions in physics, and the spark which lit today's research into quantum information processing.

The Kindle edition has the table of contents, and notes properly linked, but the index is just a useless list of terms. An interview of the author, Jack Sarfatti, and Fred Alan Wolf by George Knapp on “Coast to Coast AM” is available.

Posted at 22:01 Permalink

Friday, November 11, 2011

Recipes: Jamaican Jerk Paleo Meatloaf

Here is a further modified version of the Fourmilab Plausibly Paleo Meatloaf recipe which is more spicy and hence interesting. This is a recipe by and for hotheads—if you don't like spicy food, give this one a pass. If you're unsure about the chamber pressure you can sustain in the interest of yumminess, halve the amount of jerk seasoning in the recipes below and work up to your own level of maximum pleasure.

My own flavour of “paleo” is “all but condiments”. I adhere to the paleo guidelines for main ingredients, but admit non-paleo components in the seasonings which render food tasty. This means that if there's some non-paleo substance in jerk paste or Worcestershire sauce, that's fine with me because it's just a seasoning, a small fraction of the mass of the result, and worth the risk in exchange for making an otherwise bland dish a pleasure to eat.

Ingredient Quantity
Ground beef 500 g
Ground pork 500 g
Onions 2 medium
Eggs 2
Jerk seasoning 4 Tbsp
Worcestershire sauce 2 Tbsp
Garlic purée 2 Tbsp

Preheat the oven to 175°C in circulating air mode if available. Place the cracked eggs, garlic, jerk seasoning, and Worcestershire sauce in a bowl and blend until well mixed. Peel, slice and finely chop the onions. Put the ground pork, beef, chopped onion, and blended eggs and spices into a large bowl and mix well. I use “garlic in a tube” purée—substitute six cloves of crushed fresh garlic if you prefer.

Mould into a glass or aluminium baking pan and place in the preheated oven. If the pan is over-full, it may bubble over, so if you're worried, place a baking tin beneath the pan. Let it bake for 90 minutes; if you prefer going by core temperature, look for 72°C in the middle of the meatloaf.

Remove from the oven and if there's fat around the outside of the pan, drain it and feed it to the hogs or otherwise dispose of it responsibly. Let the meatloaf cool; if you indulge immediately, slices are prone to disintegrate as you remove them from the pan.

This recipe makes about four servings. It's great as leftovers, either cold or reheated.

You may be tempted to put catsup on this this tasty treat. But we can do better.

Ingredient Quantity
Omega 3 mayonnaise 4 Tbsp
Jerk seasoning 2 tsp

Mix the prepared mayonnaise and jerk seasoning together, ideally letting the mix stand for an hour or so before serving. Spread on slices of the meatloaf and enjoy! As with the meatloaf recipe, if you find this too hot, simply reduce the ratio of jerk paste to mayonnaise until you're happy with it.

That's a spicy meatloaf!

Posted at 14:09 Permalink

Wednesday, November 9, 2011

Reading List: Righteous Indignation

Breitbart, Andrew. Righteous Indignation. New York: Grand Central, 2011. ISBN 978-0-446-57282-8.
Andrew Breitbart has quickly established himself as the quintessential happy warrior in the struggle for individual liberty. His breitbart.com and breitbart.tv sites have become “go to” resources for news and video content, and his ever-expanding constellation of “Big” sites (Big Hollywood, Big Government, Big Journalism, etc.) have set the standard for group blogs which break news rather than just link to or comment upon content filtered through the legacy media.

In this book, he describes his personal journey from growing up in “the belly of the beast”—the Los Angeles suburb of Brentwood, his party days at college, and rocky start in the real world, then discovering while watching the Clarence Thomas confirmation hearings on television, that much of the conventional “wisdom” he had uncritically imbibed from the milieu in which he grew up, his education, and the media just didn't make any sense or fit with his innate conception of right and wrong. This caused him to embark upon an intellectual journey which is described here, and a new career in the centre of the New Media cyclone, helping to create the Huffington Post, editing the Drudge Report, and then founding his own media empire and breaking stories which would never have seen the light of day in the age of the legacy media monopoly, including the sting which brought down ACORN.

Although he often comes across as grumpy and somewhat hyper in media appearances, I believe Breitbart well deserves the title “happy warrior” because he clearly loves every moment of what he's doing—striding into the lion's den, exploding the lies and hypocrisy of his opponents with their own words and incontrovertible audio and video evidence, and prosecuting the culture war, however daunting the odds, with the ferocity of Churchill's Britain in 1940. He seems to relish being a lightning rod—on his Twitter feed, he “re-tweets” all of the hate messages he receives.

This book is substantially more thoughtful than I expected; I went in thinking I'd be reading the adventures of a gadfly-provocateur, and while there's certainly some of that, there is genuine depth here which may be enlightening to many readers. While I can't assume agreement with someone whom I've never met, I came away thinking that Breitbart's view of his opponents is similar to the one I have arrived at independently, as described in Enemies. Breitbart describes a “complex” consisting of the legacy media, the Democrat party, labour unions (particularly those of public employees), academia and the education establishment, and organs of the regulatory state which reinforce one another, ruthlessly suppress opposition, and advance an agenda which is inimical to liberty and the rule of law. I highly recommend this book; it far exceeded my expectations and caused me to think more deeply about several things which were previously ill-formed in my mind. I'll discuss them below, but note that these are my own thoughts and should not be attributed to this book.

While reading Breitbart's book, I became aware that the seemingly eternal conflict in human societies is between slavers: people who see others as a collective to be used to “greater ends” (which are usually startlingly congruent with the slavers' own self-interest), and individuals who simply want to be left alone to enjoy their lives, keep the fruits of their labour, not suffer from aggression, and be free to pursue their lives as they wish as long as they do not aggress against others. I've re-purposed Larry Niven's term “slavers” from the known space universe to encompass all of the movements over the tawdry millennia of human history and pre-history which have seen people as the means to an end instead of sovereign beings, whether they called themselves dictators, emperors, kings, Jacobins, socialists, progressives, communists, fascists, Nazis, “liberals”, Islamists, or whatever deceptive term they invent tomorrow after the most recent one has been discredited by its predictably sorry results. Looking at all of these manifestations of the enemy as slavers solves a number of puzzles which might otherwise seem contradictory. For example, why did the American left so seamlessly shift its allegiance from communist dictators to Islamist theocrats who, looked at dispassionately, agree on almost nothing? Because they do agree on one key point: they are slavers, and that resonates with wannabe slavers in a society living the twilight of liberty.

Breitbart discusses the asymmetry of the tactics of the slavers and partisans of individual liberty at some length. He argues that the slavers consistently use the amoral Alinsky playbook while their opponents restrict themselves to a more constrained set of tactics grounded in their own morality. In chapter 7, he presents his own “Pragmatic Primer for Realistic Revolutionaries” which attempts to navigate this difficult strait. My own view, expressed more crudely, is that “If you're in a fair fight, your tactics suck”.

One of the key tactics of the slavers is deploying the mob into the streets. As documented by Ann Coulter in Demonic, the mob has been an integral part of the slaver arsenal since antiquity, and since the French revolution its use has been consistent by the opponents of liberty. In the United States and, to a lesser extent, in other countries, we are presently seeing the emergence of the “Occupy” movement, which is an archetypal mob composed of mostly clueless cannon fodder manipulated by slavers to their own ends. Many dismiss this latest manifestation of the mob based upon the self-evident vapidity of its members; I believe this to be a mistake. Most mobs in history were populated by people much the same—what you need to look at is the élite vanguard who is directing them and the greater agenda they are advancing. I look at the present manifestation of the mob in the U.S. like the release of a software product. The present “Occupy” protests are the “alpha test”: verifying the concept, communication channels, messaging in the legacy media, and transmission of the agenda from those at the top to the foot soldiers. The “beta test” phase will be August 2012 at the Republican National Convention in Tampa, Florida. There we shall see a mob raised nationwide and transported into that community to disrupt the nomination process (although, if it goes the way I envision infra, this may be attenuated and be smaller and more spontaneous). The “production release” will be in the two weeks running up the general election on November 6th, 2012—that is when the mob will be unleashed nationwide to intimidate voters, attack campaign headquarters, deface advertising messages, and try to tilt the results. Mob actions will not be reported in the legacy media, which will be concentrating on other things.

One key take-away from this book for me is just how predictable the actions of the Left are—they are a large coalition of groups of people most of whom (at the bottom) are ill-informed and incapable of critical thinking, and so it takes a while to devise, distribute, and deploy the kinds of simple-minded slogans they're inclined to chant. This, Breitbart argues, makes them vulnerable to agile opponents able to act within their OODA loop, exploiting quick reaction time against a larger but more lethargic opponent.

The next U.S. presidential election is scheduled for November 6th, 2012, a little less than one spin around the Sun from today. Let me go out on a limb and predict precisely what the legacy media will be talking about as the final days before the election click off. The Republican contender for the presidency will be Mitt Romney, who will have received, in the entire nomination process, a free pass from legacy media precisely as McCain did in 2008, while taking down each “non-Romney” in turn on whatever vulnerability they can find or, failing that, invent. People seem to be increasingly resigned to the inevitability of Romney as the nominee, and on the Intrade prediction market as I write this, the probability of his nomination is trading at 67.1% with Perry in second place at 8.8%.

Within a week of Romney's nomination, the legacy media will, in unison as if led by an invisible hand, pivot to the whole “Mormon thing”, and between August and November 2012, the electorate will be educated through every medium and incessantly until, to those vulnerable to such saturation and without other sources of information, issues such as structural unemployment, confiscatory taxation, runaway regulation, unsustainable debt service and entitlement obligations, monetary collapse, and external threats will be entirely displaced by discussions of golden plates, seer stones, temple garments, the Book of Abraham, Kolob, human exaltation, the plurality of gods, and other aspects of Romney's religion of record, which will be presented so as to cause him to be perceived as a member of a cult far outside the mainstream and unacceptable to the Christian majority of the nation and particularly the evangelical component of the Republican base (who will never vote for Obama, but might be encouraged to stay home rather than vote for Romney).

In writing this, I do not intend in any way to impugn Romney's credentials as a candidate and prospective president (he would certainly be a tremendous improvement over the present occupant of that office, and were I a member of the U.S. electorate, I'd be happy affixing a “Romney: He'll Do” bumper sticker to my Bradley Fighting Vehicle), nor do I wish to offend any of my LDS friends. It's just that if, as appears likely at the moment, Romney becomes the Republican nominee, I believe we're in for one of the ugliest religious character assassination campaigns ever seen in the history of the Republic. Unlike the 1960 campaign (which I am old enough to recall), where the anti-Catholic animus against Kennedy was mostly beneath the surface and confined to the fringes, this time I expect the anti-Mormon slander to be everywhere in the legacy media, couched, of course, as “dispassionate historical reporting”.

This will, of course, be shameful, but the slavers are shameless. Should Romney be the nominee, I'm simply saying that those who see him as the best alternative to avert the cataclysm of a second Obama term be fully prepared for what is coming in the general election campaign.

Should these ugly predictions play out as I envision, those who cherish freedom should be thankful Andrew Breitbart is on our side.

Posted at 23:34 Permalink

Monday, November 7, 2011

Google™ Page Rank Query Updated

About a month ago Google changed the URL used by third party queries of PageRank™. This broke my Perl program which supports PageRank queries from the command line, a Web form, or embedded in a Web page.

I have just posted an update to the Page Rank Query distribution which incorporates an updated WWW::Google::PageRank Perl module which supports the modified request URL. If you have customised my Perl program, you need not modify your page_rank.pl program; you need only replace WWW::Google::PageRank with the updated (0.17) version.

If your own Perl programs which use this module to query PageRank have broken recently, updating the Perl module on your system should fix them.

Posted at 19:54 Permalink

Saturday, November 5, 2011

Reading List: Takedown

Thor, Brad. Takedown. New York: Pocket Books, 2006. ISBN 978-1-4516-3615-4.
This is the fifth in the author's Scot Harvath series, which began with The Lions of Lucerne (October 2010). In this episode, Harvath, an agent for a covert branch of the U.S. Department of Homeland Security, completes a snatch and exfiltration of a terrorist bombmaker granted political asylum in Canada, delivers him into custody in Manhattan, and plans to spend a lazy fourth of July holiday in the Big Apple with one of his closest friends, a Delta Force operative recently retired after a combat injury. Their bar-hopping agenda is rudely interrupted by an escalating series of terrorist attacks which culminate in bridge and tunnel bombings which, along with sniper and rocket-propelled grenade attacks on boat and air traffic, isolate Manhattan from the mainland and inflict massive civilian casualties.

As Harvath establishes contact with his superiors, he discovers he is the only operative in the city and, worse, that a sequence of inexplicable and extremely violent attacks on targets irrelevant to any known terrorist objective seems to indicate the attacks so far, however horrific, may be just a diversion and/or intended to facilitate a further agenda. Without support or hope of reinforcement from his own agency, he recruits a pick-up team of former special operators recovering from the physical and psychological consequences of combat injuries he met at the Veterans Affairs hospital New York as the attacks unfolded and starts to follow the trail of the terrorists loose in Manhattan. As the story develops, layer after layer of deception is revealed, not only on the part of the terrorists and the shadowy figures behind them and pulling their strings, but also within the U.S. government, reaching all the way to the White House. And if you thought you'd heard the last of the dinky infovore Troll and his giant Ovcharkas, he's back!

This is a well-crafted thriller and will keep you turning the pages. That said, I found it somewhat odd that a person with such a sense of honour and loyalty to his friends and brothers in arms as Harvath would so readily tolerate deception among his superiors which led directly to their deaths, regardless of the purported “national security” priorities. It is indicative of how rapidly the American Empire is sliding into the abyss that outrageous violations of human rights, the rule of law, and due process which occur in this story to give it that frisson of edginess that Thor seeks in his novels now seem tame compared to remote-controlled murder by missile of American citizens in nations with which the U.S. is not at war ordered by a secret committee on the sole authority of the president. Perhaps as the series progresses, we'll encounter triple zero agents—murder by mouse click.

As usual, I have a few quibbles.

Spoiler warning: Plot and/or ending details follow.  
  • The president's press secretary does not write his speeches. This is the job of speechwriters, one or more of whom usually accompanies the president even on holiday. (Chapter 18)
  • The Surgeon General is not the president's personal physician. (Chapter 42)
  • If I were rappelling through a manhole several stories into the bowels of Manhattan, I think I'd use a high tensile strength tripod rather than the “high tinsel” tripod used in chapter 59. Now if the bad guy was way up in a Christmas tree….
  • In chapter 100, the Troll attaches a “lightweight silencer” to his custom-built rifle firing the .338 Lapua sniper round. Even if you managed to fit a suppressor to a rifle firing this round and it effectively muffled the sound of the muzzle blast (highly dubious), there would be no point in doing so because the bullet remains supersonic more than a kilometre from the muzzle (depending on altitude and temperature), and the shock wave from the bullet would easily be audible anywhere in Gibraltar. Living across the road from a rifle range, I'm acutely aware of the sound of supersonic bullets coming more or less in my direction, and these are just 5.56 and 7.62 NATO, not Lapua “reach out and whack someone” ammo.
Spoilers end here.  

Posted at 21:37 Permalink