The NASDAQ index has been going down so fast in the last few weeks that it seems like the dial on a time machine stuck in reverse. Just two weeks ago we noted that departure when it zipped by 2000 and slid to around 1900. That got us musing on the past American Century and what seems to be the coming Asian Century. Although we have been warning about the phony rally since last year and the upcoming troubles, the precipitous drop in stocks has even caught us by surprise. This week, we were going to tap this device, let's call it the NASDAQ Index /Date-Time-Continuum, as it approached 1776. Our idea was to riff on that enormous English blunder that triggered the American War of Independence and how it forever doomed the British Empire's chances of forging an unassailable economic hegemony.
In this vain, we had intended to speculate on England's "stubborn" King George III who got himself into an easily avoidable war --there was plenty of room for negotiation-- and how, had he not, we might have seen today the united economic power of Australia, Canada, the US and Great Britain all being directed, through, perhaps, a representative governing body, centered in London.
But alas, as many a craftier tactician has been forced to say: "we were overtaken by events"...in this case a market that just keeps retreating. And given that we can't be sure the NASDAQ index will get back over 1776 any time soon, we thought maybe we'd preemptively leap back to the 1200's, where surely we will be safe from even the worst of market moves for some time to come. This brought us to fundamentals and fundamentalism....
The 13th century was pivotal: Europe was slowly working its way out of what came to be called the Dark Ages. In Italy, it was still common to paint religious figures with sallow skins, sporting gold dishes around their heads, against a flattened world. Further north gangs of macabre St Vitus dancers were keeping people in the villages and hamlets from having a good night's sleep and the only subject you could study at the newly founded Sorbonne was taught by priests for future priests. You were either in the Church, landowner, raider or serf likely to be recruited in religious wars that were called Crusades. It would take several hundred years for Italians like Cellini and DaVinci to learn how to cast a bronze statue the size of the rediscovered equestrian of Marcus Aurelius (now residing in the Capitoline Hill Museum).
Meanwhile 500 miles to the South in Palermo, (al-Madina), there was a great center of learning under the rule of the Normans but still primarily Arabic speaking. In Moorish dominated al-Andalusia in the South of Spain mathematicians and cartographers gathered around a number of important centers of learning. To the East in places like Baghdad and Damascus the great libraries of the world and attending academicians gathered to discuss the latest scientific findings. It is no coincidence that the numbering system we use today, particularly the concept of 0, algebra, the sextant, and numerous astronomical discoveries were developed and refined in this flourishing Arab cultural world.
In the late 10th century, nearly 700 years before Galileo, a huge observatory was built near Tehran, Iran by the astronomer al-Khujandi. He built a large sextant inside the observatory, and was the first astronomer to be capable of measuring to an accuracy of arcseconds. He observed a series of meridian transits of the Sun, which allowed him to calculate the obliquity of the ecliptic, also known as the tilt of the Earth's axis relative to the Sun. As we know today, the Earth's tilt is approximately 23o34', and al-Khujandi measured it as being 23o32'19". Using this information, he also compiled a list of latitudes and longitudes of major cities.
Most technical, scientific and, particularly medical information, only became available to Europe when Latin translations of Arabic texts began to appear. Up to that time, Arabic, whether or not spoken at home by the Jewish and Muslim intelligentsia of the epoch, was the scientific lingua franca.
To find out how the Arabic civilization got from there to here, at this critical turning point, we would have to take a lot of things into account but there is no doubt that the rise and later dominance of religious fundamentalism played a decisive role. As the suppression of Copernicus, the burning of Bruno and the excommunication of Galileo played out in a Europe that was moving inexorably toward Newton and Einstein, the Arab world was being engulfed into a religious dominated torpor.
This is perhaps why, here in Dymaxia, we have set our eyes on the ongoing political fight for embryonic stem cell research. Stem cell research, combined with our recently obtained knowledge of genetics and the genome seems extremely promising, perhaps, magnitudes more promising than the last century's developments in drug research and development. And yet it is being stymied by the same kind of religious forces that worked to shut down the Muslim world, but were slowly defeated in Europe. Could these forces be making their last stand in the mountains of Pakistan as we like to think or perhaps here in the US of A?
It's now pretty clear that on the surface the real issues of our time will be worked out by symbolic inference. Ever since Fritz Mondale said, in all honesty, he would have to raise taxes, and George Bush the Elder charged Reagan with voodoo economics or Al Gore grasped his ill-fated "lock box", it's become clear that in national politics and economic policies, the details have gone to the devil. Where code words were once limited to racism and sexism, they now serve as clues for all manner of things so that politicians have maximum deniability and flexibility as, say, this week, they try to convince us of their decisiveness for whatever the scenario du jour demands.
There is little upside for truth and in a very tight race, and much to be lost by wrestling with the issues. Where once it was vision, we now have political leaders who vie with one another for "resoluteness ". Paul Krugman has an interesting piece in the NY Times this week called "Reading the Script" (free subscription required, unfortunately) in which he talks about the media's penchant to follow a narrative line or script crafted in part by the owners of the megaphone themselves in step with the political Spinmeisters and their red hot fax and email machines. Commentators fall into line evaluating performance based on how closely they hew to this fluent and blackiswhite script. In this regard it was interesting to watch David Brooks right after Kerry's speech the other night and read his words two days later. He had, he said, read Kerry's speech and thus (explaining his obvious flip-flop) had got a grip on himself.
Re: the economy, the narrative goes that there is a booming recovery somewhere out there and that, facts be damned, recovery we will have. Here in Dymaxia, we have talked, quite often about the massive stimulus that has gone into this last cycle to our possible great peril. This has been a borrowing induced recovery that finally after three years moved into gear in the first quarter of this year only to peter out in the second leaving us still with massive deficits at home, low job creation, a trade imbalance that could easily bring down the dollar and the world economy to boot and interest rates so low that the Fed will have no way down to further goose things if the slowdown continues.
The real problems, we believe, will continue to compound, perhaps gradually, but perhaps not so gradually, in the coming years as things start to catch up with us. One huge blip that is likely to be off the radar for the duration of the campaign is the inexorable move of the baby boomer population towards retirement age beginning in the next five years. This great population wave will gradually put greater and greater pressure on Social Security, Medicare/Medicaid, on other social services and, given its size, it will vote successfully to defend and expand these benefits. Already we see the Federal entity that ensures corporate pension funds straining towards a form of bankruptcy as large companies like United Airlines (last week) renege on their promises. In an extended and deep downturn, the pressure will be placed on companies like General Motors and Ford to try to get out from under their very large obligations, shifting them also to the government and, of course, our children.
Further pressure from the Boomers will also go to programs like unemployment insurance, food stamps and Medicaid as people in their 60's lose their jobs and fail to get rehired or become dole subsidized Wal-Mart greeters. It's estimated that, disproportionately, only half the population over 60 who have lost jobs in this downturn were able to get new work.
For almost 20 years starting in 1982 the stock market grew at an average rate of over 12% per year. In that kind of environment, anybody could make money, even a monkey throwing darts into a chart; and that monkey's luck, it seems, encouraged the bulk of the population to get into the market. With all of the lumpen investoriat gathered in one place, we got the great Internet boom, which, as we remember, got so outlandish that a company in the waste fish oil business in Texas, changed its name to whatever dot com and immediately tripled its market value.
Sitting at any watering hole, you heard the bartender exchanging stock tips with the waitress; partying in Podunk and telling people you worked in "high tech" could bring you star quality and gather a crowd of would-be punters.
For a while everybody was happy; they could look at their portfolios any hour of the day and see their net worth climbing off the charts. Suddenly, that retirement RV, that Lexus in the driveway or the summer house in the Hamptons seemed in reach. Everybody agreed it was lots of fun. The Internet had solved all our problems and there were jobs galore and the government even began to run surpluses and pay down the debt.
What people had forgotten or perhaps never known is that leading up to 1982 we had had a long period of declines in the stock market and that we had seen similar periods from 1929 to 1945. The stock market doesn't always go up and booms even if grounded at first, are usually momentary periods of folly where everything goes and the predators finally get their full day in the sun.
There will, we fear, be tough times ahead as the economy has so far failed to really unwind from the disaster of the Tech Boom. The recent debt boom has only served to forestall the extent of the dip. It should come as no surprise that interest rates will go up and catch some people out on a limb. They are, after all, being told we are "turning the corner". Who knows, maybe it will be the price of oil that finally tips the balance, or a terrorist attack or a war that won't end or maybe it will be one half trillion dollar deficit too many. We can only hope not. However don't make any bets a boom like the late 90's is just out of sight and that this is what will cover over deficits and provide the bulwark against the coming stress.
In the inference game, all this --and there's really lot's more-- in the great TV eye and the to and fro of spinners gets reduced to some inanity like whether the candidate is down on America or not.
In DC, Information, like Traffic has to Flow Smoothly
In the inference war, there is a battle for minds. Now pause for a moment and take a look at the choke-hold being put on the information pipeline that sometimes resembles the barriers being thrown up all over Washington in what has become the latest land grab in the capital in the name of this week's terrorist alert.
In the fight going on over the free flow of information, the land grab is being fought in the name of that potent combo of copyright protection and homeland security.
We talked about Orrin Hatch's INDUCE ACT a couple of weeks ago but it is only one of a number of efforts to squash legitimate modes of information flow that, of course, given what we said above, are all the more important in the face of the political shadow plays.
We can understand why the politicians cater to ambiguity just as we understand why the public is largely unaware of what goes on in the halls of Congress and in the courtrooms where the reach of certain laws get extended or limited. We also believe, lo and behold, that authors and the industries that promote their works should get paid for their work but we are even more concerned that the pendulum is swinging way too far in the other direction. The sad fact is that like in everything else, the huge media companies have much more clout than free speech groups. Remember that Entertainment is the US's largest export industry at a time when we are running a half trillion dollar trade deficit. In other words, Hollywood helps retrieve some of those dollars we spend on made-in-Asia gewgaws.
Can the non-commercial Internet --the great friction-free distribution pipe for uncontrolled bits and bytes -- get road-blocked by this kind of legislation in the name of saving the entertainment industry, the national debt and homeland security?
Well let's just look at a few instances. In testimony a couple of weeks ago, before the committee taking testimony on the INDUCE ACT Mary Beth Peters from the copyright office of the Library of Congress all but claimed that the Supreme Court case (Betamax) that allowed for the VCR was a mistake.
When Disney won its famous "Mickey Mouse law" "the Sonny Bono Copyright Term Extension Act" that extended copyright out again for another 20 years they weren't protecting the widows and kids of dead authors. But they were taking a huge amount of material produced in the 1920's and 30's out of the public domain for Mickey's sake.
The Digital Millennium Copyright Act was passed and signed into law in 1998 to put teeth in antipiracy law. Unsatisfied with what they got there many states are today being pressured by the Motion Picture Association of America (MPAA) to adopt "Super DMCA" (S-DMCA) legislation that would have serious consequences for freedom of speech, encryption, and the public's rights.
The extent of the 1998 US DMCA law has recently hit home in Australia where it came into effect as a result of a trade agreement signed in July. As a result, Aussies are covered by US law in a harsher way than are US citizens who enjoy the concept of "Fair Use" that allows access to copyrighted material for educational and other related purposes. Fair Use provides something of a counterweight to the more draconian provisions of the DMCA.
One of the most visited sites on the web last week, jibjab.com was hit with a lawsuit for copyright when it used, quite clearly, an old Woodie Guthry protest song "This Land" as the basis for some mild political satire.
In Boston, last week DNC attendees suffered information flow crush as they went to a Black Eyed Peas concert at the Avalon in Boston sponsored by the record industry's lobbying group the RIAA. It was reported: "They were met at the doors, with big signs posted everywhere forbidding cameras. As a result, people were sent home after failing cell phone inspection. The choice was to leave your phone / camera behind or leave the concert."
The other day, the FCC voted to certify digital protections on TiVoToGo, which is not yet available but would enable a user to record and send a digital broadcast television -with DRM- show to up to nine other registered people who have a key allowing them to see it. The approval came despite concerns by the Motion Picture Association of America and the National Football League about the risks of "unfettered" distribution.
In the INDUCE ACT new technology that might "induce" a user to infringe could be outlawed before it ever hits the market. In the TIVOToGo ruling, benign as it might have appeared to be, you now have the very disturbing precedent of a federal agency made up of political appointees predetermining what kind of equipment a technology company can or can't design and ship.
To the owners of the narrative, the need to control the flow of information is like peanut butter and jelly. The Internet and technology like RSS (that allows the easy transport and re-transport of content from website to website (take a look at our Cherry Picks column) might just fall into the category of being "inducive" or some other catch phrase. It's one narrative worth watching and certainly, one that we will be paying close attention to here at DW.