Author Archives: Admin

Blue China

Hugo Restall thinks about the implications of Chinese aircraft carriers and its prospective blue water navy:

These are worst case scenarios. There is another possibility, however: that China’s ambitious plan might be a positive development. In the past, the People’s Liberation Army has emphasized asymmetrical warfare, apparently believing it could find inexpensive and innovative ways to counteract American might. If it is now moving toward a more conventional road of military modernization, pitting like against like, that is less likely to cause the miscalculations that lead to war, because China is less likely to be seduced by ideas that it can neutralize U.S. superiority with asymmetry.

East Asian Distinctions

James Fallows talks about his forthcoming China book, Postcards from Tomorrow Square:

in watching Japan’s rise and then its financial stagnation, we’d seen the last dramatic stage in East Asian economic development. The similarities in China’s approach — and, mainly, the differences — have been an important touchstone all the way through. And as I think will be evident to readers, I have found China’s economic rise to be a fundamentally more open phenomenon, for the rest of the world, than Japan’s approach was.

As for the latest crisis — hey, blame Alan Greenspan! Not me.

The Coming War on Hedge Funds

Susan Lee on the post-crash, post-Madoff universe.

The euro at 10

Excellent summary on the euro currency’s first decade of life:

As important, the creation of a single European Central Bank (ECB) has better insulated monetary policy from political manipulation. Politicians could no longer attempt to inflate their way out of their employment or fiscal problems. National central banks could no longer finance fiscal deficits, removing a source of economic instability.

The single economic space anchored by the euro has also forced European policy makers to compete for people, goods and capital with improved policies. While we had hoped to see more reform by now, the pan-European reduction in corporate tax rates is one fiscal benefit of the euro. Even Germany has cut corporate taxes, after its efforts to harmonize rates across the European Union failed.

New Year’s Wishes

May your 2009 be less “interesting” than 2008.

Medicine, high-tech and low

Two new books on health care:

Bionic limbs will be wired directly into the brain; stem cells will patch ailing organs; engineered livers and kidneys will make transplants obsolete. Neural chip implants will be available for the healthy who want to be just a little sharper. (“And if you think doctors will act as ethical gatekeepers and balk at elective brain surgery,” Dr. Hanson writes, “I think you’re wrong.”)

In hospitals of the future “emancipated medical machines” will see problems and correct them expertly, with no need for human input. Doctors and nurses will supervise robots smart and dumb: the smart ones will perform surgery unerringly, while the dumb ones will do all the menial labor, cleaning floors, and lifting and turning patients, “freeing the warm hands of humans to better care for other humans in need.”

Those warm hands will be spending a lot of time tapping keyboards. Already, Webcams and wireless computer technology mean that a single critical-care doctor in a command center can make rounds on dozens of intensive-care patients in hospitals miles away. On the horizon is a worldwide network of health care “nodes,” with instant information on anyone anywhere and keyboard-driven care crisscrossing the globe.

Or, stick with the basics:

the toilet, which many experts credit with a greater impact on disease eradication in developed countries over the last two centuries than any other device or drug on record. In a narrative that spans the primitive privies of China and India and space-age toilet factories of Japan, the British journalist Rose George tells a story every bit as complicated and mind-blowingly high-tech as Dr. Hanson’s.

The Real China Story

The New York Times, in its series on the origins of the financial crisis it calls “The Reckoning,” pins our housing and credit bubbles on Chinese savings and the U.S.-China trade gap. This is basically the view of Alan Greenspan and Ben Bernanke. We were helpless. Monetary policy had become ineffective. The New York Times also says the U.S. failed to react to the China-U.S. “imbalances” soon enough, that we took a “passive” approach. 

In fact, most of this is backward. We did not under-react to China. We overreacted. The U.S. weak-dollar policy — a combination of historically low Fed interest rates and a Treasury calling for a cheaper currency — was a direct and violent reaction to the trade gap. A series of Treasury secretaries and top U.S. economists, from John Snow and Hank Paulson to John Taylor and Martin Feldstein, explicitly backed this policy as a way to “correct” these “imbalances.” This weak-dollar policy was designed to reduce the trade gap but in fact boosted it by pushing oil and other commodity prices through the roof. It also created and pushed excess dollars into other hard assets like real estate, resulting in the housing boom and then bust.

America’s overreaction to China’s rise in particular and our misunderstanding of global trade and finance in general was thus, I believe, the chief source of our current predicament. The Fed and Treasury failed to grasp the truly global nature of the economy and the centrality of the dollar around the world. I tell the story of Chinese-U.S. interaction in this long paper, “Entrepreneurship and Innovation in China: 1978-2008.”

A Wet Christmas

‘Twas the night before Christmas
And all through the house
Not a thing was dry
Not even my spouse

The icy rain fell
The water pipe froze
Slipping and sliding
There was no time to doze

We vacuumed and pumped
The whole night through
Yet when we awoke
Santa’s dream had come true 

Merry Christmas. 

The Myth of “GDP”

Good sense from Greg Mankiw:

Usually, GDP is a reasonable proxy for economic well-being, so more is better, but that is not true in this example. Part of the problem here is that GDP includes government purchases at cost. If the government hires people to produce stuff that is worthless, that stuff is included in GDP just as much as if the government buys something valuable. When calculating GDP, the national income accountants do not pass judgment on the social utility of government spending. Anyone concerned with economic well-being has to go beyond thinking about GDP.

Bold Ben

I’ve been a harsh critic of the Greenspan-Bernanke monetary policy that was the chief cause of our current economic mess. But it’s also true that, once the financial firestorm hit, Ben Bernanke, perhaps the world’s leading student of financial crises, has taken bold and creative action to douse it. Nobel laureate Bob Lucas thinks Bernanke is on the right track:

monetary policy as Mr. Bernanke implements it has been the most helpful counter-recession action taken to date, in my opinion, and it will continue to have many advantages in future months. It is fast and flexible. There is no other way that so much cash could have been put into the system as fast as this $600 billion was, and if necessary it can be taken out just as quickly. The cash comes in the form of loans. It entails no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities. These seem to me important virtues.

Abundance of Scarcity

John Tierney asks:

Does being spectacularly wrong about a major issue in your field of expertise hurt your chances of becoming the presidential science advisor? Apparently not, judging by reports . . . that Barack Obama will name John P. Holdren as his science advisor. . . .

Holdren was a big proponent of the erroneous Ehrlich “population bomb” thesis. Seems in general to be an alarmist, scarcity scare-monger, and all-around bully who mixes three parts politics for every one part science.

Tech Killers

Michael Malone says Washington is killing Silicon Valley. Among the depressing metrics:

in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986.

Citing in particular an amazingly large array of new accounting rules, including but not limited to Sarbanes-Oxley, Malone gets the key problem:

From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. They treat it as if it is a natural phenomenon that can be manipulated and exploited, rather than the fragile creation of several generations of hard work, risk-taking and inventiveness.

Playoffs? You kiddin’ me? Playoffs!?

Yes, Jim Mora, the Colts are back in the playoffs.

The thirty-year miracle

Three decades ago today, Deng Xiaoping shook the world.

Au on the move again

Gold’s on the move again, up to $867 an ounce this afternoon. It still does its job exposing the crucial monetary mistakes that drive our dramatic booms and busts.

The nuts & bolts of the Net

For those who found the Google-net-neutrality-edge-caching story confusing, here’s a terrifically lucid primer by my PFF colleague Adam Marcus explaining “edge caching” and content delivery networks (CDNs) and, even more basically, the concepts of bandwidth and latency.

The Madoff Maneuver?

Andy Kessler wonders:

If you’re going to go down, you might as well go big and get something named after you. Why should Ponzi keep hogging the limelight?

Quote(s) of the Day

So nice, we quote him twice:

“. . . [Madoff] is a genius who should immediately be put in charge of the Social Security and Medicare trust funds.”

— Holman Jenkins, December 17, 2008

“Congress, now in the process of convincing itself it should run the auto industry, no doubt will see in Mr. Madoff proof that Congress is needed to manage rich people’s money and ordinary people’s too. Then we’ll all be in the same position as Mr. Madoff’s clients.”

— Holman Jenkins, again!

When Nerds Attack!

Yesterday’s Wall Street Journal story on the supposed softening of Google’s “net neutrality” policy stance, which I posted about here, predictably got all the nerds talking. 

Here was my attempt, over at the Technology Liberation Front, to put this topic in perspective:

_______________________ 

Bandwidth, Storewidth, and Net Neutrality

Very happy to see the discussion over The Wall Street Journal‘s Google/net neutrality story. Always good to see holes poked and the truth set free.

But let’s not allow the eruptions, backlashes, recriminations, and “debunkings” — This topic has been debunked. End of story. Over. Sit down! — obscure the still-fundamental issues. This is a terrific starting point for debate, not an end.

Content delivery networks (CDNs) and caching have always been a part of my analysis of the net neutrality debate. Here was testimony that George Gilder and I prepared for a Senate Commerce Committee hearing almost five years ago, in April 2004, where we predicted that a somewhat obscure new MCI “network layers” proposal, as it was then called, would be the next big communications policy issue. (At about the same time, my now-colleague Adam Thierer was also identifying this as an emerging issue/threat.)

Gilder and I tried to make the point that this “layers” — or network neutrality — proposal would, even if attractive in theory, be very difficult to define or implement. Networks are a dynamic realm of ever-shifting bottlenecks, where bandwidth, storage, caching, and peering, in the core, edge, and access, in the data center, on end-user devices, from the heavens and under the seas, constantly require new architectures, upgrades, and investments, thus triggering further cascades of hardware, software, and protocol changes elsewhere in this growing global web. It seemed to us at the time, ill-defined as it was, that this new policy proposal was probably a weapon for one group of Internet companies, with one type of business model, to bludgeon another set of Internet companies with a different business model. 

We wrote extensively about storage, caching, and content delivery networks in the pages of the Gilder Technology Report, first laying out the big conceptual issues in a 1999 article, “The Antediluvian Paradigm.” [Correction: “The Post-Diluvian Paradigm”] Gilder coined a word for this nexus of storage and bandwidth: Storewidth. Gilder and I even hosted a conference, also dubbed “Storewidth,” dedicated to these storage, memory, and content delivery network technologies. See, for instance, this press release for the 2001 conference with all the big players in the field, including Akamai, EMC, Network Appliance, Mirror Image, and one Eric Schmidt, chief executive officer of . . . Novell. In 2002, Google’s Larry Page spoke, as did Jay Adelson, founder of the big data-center-network-peering company Equinix, Yahoo!, and many of the big network and content companies. (more…)

What not to do

The Wall Street Journal documents Japan’s endless series of profligate pump-priming “stimuli” in the 1990s.

The experiment, predictably, failed.

Here’s Dan Mitchell with a critique that goes beyond Japan:

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