Category Archives: Politics

The Net will not be bound or gagged

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I remember seeing Napster in 2000 when I worked for eToys.com and thinking “This isn’t going away. It has too much momentum and we always move forward.” I was wrong. Today I’m wondering about the free Web and whether it will ever go away. Our intuition tells us we always move forward and things will become better, faster, cheaper and more free. But the brief history of the Net has shown that is not always true.

In 1990 the Internet was completely free. It was an academic network, run by universities with almost no commercial involvement. The Web wasn’t invented yet, Archie, FTP, Gopher, IRC and network news (NNTP) were how we got around. Piracy was of course alive and well in the form of files uuencoded, broken into parts and posted on NNTP servers. If you wanted porn, it was really, really hard work just to reassemble a GIF.

When the Web came along, it was just another app layer protocol, like Archie or Gopher. But hyperlinks and the eventual embedding of images into HTML pages is what made it far better than any other app protocol.

There is nothing that prevents us from creating as many protocols riding on TCP/IP as we would like. Gnutella has spent 10 years showing us that distributed content is feasible. Tor has shown us that online anonymity is there for the taking. The Web is just another app layer protocol. DNS is just a phonebook for IP addresses and the Net survived the first 13 years of its life without it.

If governments ever decide to take control of basic Internet infrastructure like DNS, the Net will simply change form. The way we get content may stop being the Web and it may start being a new democratic protocol that provides client and server anonymity as well as massive redundancy against government or institutional interference.

What we think of as the free and open Web today may become a place like CompuServe used to be. A place you go to access large incumbents like Facebook and Google. Then there will be that other place where only tech geeks and people in academia go to interact freely with the rest of the world. Initially bandwidth may be slow and connections may be few, but soon the new protocol will mature, become easier to use and will gradually become mainstream, sparking a firestorm of innovation in a new environment that allows truly free communication.

DARPA built TCP/IP to survive a nuclear war. It may yet survive a worse attack by its creator.

Footnote: This post was inspired by the South African Government passing the “Protection of State Information” act today. It restricts the press from publishing what the government deems a state secret with penalty of 25 years in jail for violating the law. Many journalists in my birth country will now have to choose between a lengthy jail term and doing what is in the public interest.

Does your Representative oppose Job Creation and Support a Warrantless Gag Order? Ask them.

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SOPA is a bill (HR 3261) sponsored by Lamar Smith (R-VA), John Conyers (D-MI), Bob Goodlatte (R-VA), Howard Berman (D-CA) and several co-sponsors. The first hearings on this bill will begin in congress tomorrow, November 16th.

If SOPA is passed, it will give the US Government control of the Domain Name System in order to allow them to “cut off” blacklisted websites. This is tantamount to giving the US government control of major newspapers at the printing press. If an edition is deemed unsuitable, it never leaves the press.

The bill has been branded as a device to protect “our” intellectual property and something that is targeted at software pirates, thieves and criminals.

The reality is that SOPA will give the government control over who has the right to speak.

Print, radio and television are being replaced by Internet delivery systems from streaming music to video on demand, online newspapers and blogs. Every one of these relies on DNS to stay online. If our government has control over our DNS system, it has the ability to issue an instant warrantless gag order to any individual, corporation or organization if it doesn’t approve your message or content.

The World has moved online. If this bill passes and is signed into law, it will go far beyond ending the Free Internet. It will remove the press freedoms we had before the Internet existed.

SOPA’s effects are far reaching and go beyond government control of DNS. The effects will include harming businesses that rely on user generated content and preventing the creation of new businesses like Facebook, WordPress, Twitter, Google’s YouTube and many others. The bill will effectively kill a powerful job creation machine at a time when we need it most.

Use this link to contact your congressman and express your view on SOPA.

You can learn more about SOPA and the destruction it will wreak at:

Why are people in London rioting? (video interview from the BBC)

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This is the other point of view. An interview the BBC probably won’t air again.

I don’t condone violent demonstrations and I think the the looting of small businesses is sad and immoral. But you should understand that sometimes when people hit the streets en masse and make some noise, it has a purpose. It can’t be explained away by labeling them “rioters”.

It happened during apartheid in South African where I grew up and it brought about a peaceful transition of power in the South African government.

Back then we used to call Nelson Mandela a terrorist. Today he is Madiba, one of the most loved humans on Earth.

If you’ve heard the music of Linton Kwesi Johnson (LKJ), you’ll recognize Darcus Howe’s sentiments. Powerful stuff.


Update: Here is LKJ reciting Sonny’s Lettah, live.


How sovereign debt becomes leverage – a lesson from history

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"America Looks at its Neighbors" (political cartoon, 1932).

"America Looks at its Neighbors" (political cartoon, 1932).

I grew up in South Africa and for a time my birth country was the only worthwhile stop on the long sea journey that spice traders would make from Europe to India and back. South Africa was colonized by Europeans for this reason. A guy called Jan Van Riebeeck was ordered to set up camp there by the Dutch East India Company.

In November, 1869 the 10 year construction project on The Highway to India, aka the Suez Canal, was completed and South Africa became just another colony. Since then the Suez has had a colorful history, but there’s one specific teachable moment in the history of the Suez the United States could learn from…

In July 1956 the president of Egypt, Gamal Nasser decided to nationalize the Suez Canal. This irked a few stakeholders and on October 29, 1956, Israel invaded Egypt. The next day Britain and France threw their hats into the ring and started bombing Cairo.

At this point in history, Britain was suffering under a mountain of debt. Here’s a historical graph of Britains debt to GDP ratio to give you some perspective:

British Public Debt from 1900 to 2010

British Public Debt from 1900 to 2010

The United States held much of the debt that Britain was in. Some of the bonds were owed to the US as part of Britains World War II debt to the US government, corporations and individuals and some of them were part of the Marshall Plan to help rebuild Europe post WWII.

The US used this debt to put tremendous pressure on Britain to halt the invasion. Eisenhower ordered Humphrey, secretary of the treasury to prepare to sell part of the US governments sterling bond holdings. His British counterpart advised his prime minister, Anthony Eden, that if the US did sell their bonds, the British pound would devalue to such an extent that they would no longer be able to import what they needed to sustain the islands. Eden announced a cease fire on November 6th.

The US is now at around 90% debt to GDP ratio with a total debt of just over 14 trillion. Around 4 trillion of that is held by other countries, China being our biggest “investor”.

Lets put it this way: It’s hard to not take the call when your single largest investor needs a favor.

Political Marketing and the “Debt Ceiling”

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The phrase “Debt Ceiling” brings to mind phrases like “War on Terror”, “Abortion on Demand”, “Flip-Flop” – or some of the pejoratives used to criticize those wanting to depart from the Vietnam war: nervous nellies, special pleaders and politicians opposing the war were ready to “cut and run”.

The reality is that there is no hard ceiling that is going to be reached this Tuesday. Instead the Federal Government will be forced to make progressively harder and more irresponsible decisions. Creditors and expenses will be put in a long queue and those with the lowest priority and least impact will go delinquent first.

This has already started happening. For example, Geithner has declared a debt suspension period and is currently not putting money in the Civil Service Retirement Fund. They’re deferring payment. [Source: Hennessey's interview on Econtalk]

Come August 2nd with no decision, we will continue to pay back the interest and principal on government debt but Geithner will have to make progressively harder decisions about which payments to defer. At some point the lawyers in the treasury department are going to tell him he’s overstepping the bounds of what he’s able to do. But that will probably be some time after August 2nd.

The Federal Government, the same organization that is asking the American people for more money and for permission to go into more debt, is the one who came up with the date August 2nd and the description of the political stalemate’s impact. They have branded it the “Debt Ceiling”.

I think the date August 2nd is a useful forcing mechanism to inspire political debate and decision making. Movement is always good when it comes to Washington. But one wonders if the phrase “debt ceiling” is Barack Obama’s “War on Terror”.

 

Who created the debt crisis the United States is in?

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This is illuminating to say the least. The Washington Post is reporting on spending under Bush vs Obama. Keep in mind that the Post has been called “Pravda on the Potomac”, so it comes with a healthy pinch of liberal bias. My view is that the budget culture in Washington is broken because a new budget item becomes permanent by default, so spending can never decrease.

Spending under Bush vs Obama

 

Is the budget “crisis” an exercise in self promotion?

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One side effect of the so called “budget criss” is that everyone who never heard of congressman John Boehner, speaker of the house of representatives and representative of Ohio’s 8th congressional district, has now heard of him.

Here’s Google trends showing the rise of Boehner:

Google Trends showing Boehner's popularity

The longer this spectacle continues, the more famous Boehner and everyone else involved in the process becomes. One wonders if this is self promotion at the cost of massive market uncertainty.

It’s hard to believe that Boehner and everyone else in the process doesn’t dream of a scenario where they get maximum publicity until the very last moment and then pull a “solution to this criss” out of the bag on 11:59pm on August 1st.

I doubt he’s crying now.

Obama Campaign comes a calling

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Got another call from the Obama campaign today who I spent a lot of time and energy supporting last election. I don’t support either party currently because I’ve evolved into an economic conservative but still socially liberal which leaves me stuck with no party to support.

So just for the hell of it I tried to convert the volunteer into a Hayekian liberal. After 5 minutes he still wouldn’t bite.

He did mention he’s had a rough day. Surprised, I am not.

What will happen if we default on August 2nd?

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With Greece defaulting – not a “technical default” or “restructuring” as it’s being branded but a real live default – the stage has been well set for August Second if the USA does in fact default on it’s own debt.

I tend to percieve the sky as falling earlier than most because I grew up in an environment of political instability. That said, I worry that we have underestimated the incompetence of our legislators. They may not realize how serious the consequences are if we don’t do something – anything – to solve the issue coming up on August second. They rarely have to solve a problem that is truly time critical because – well hell we’re the United States of America and we set the damn clocks the way we see fit.

The rare instances of time critical decisions required from our lawmakers are usually related to war. Sad and cynical as it sounds, wartime is an incredible opportunity for any government to push through ideological agendas  - like the patriot act – that are enthusiastically adopted by opposing lawmakers and the populace while emotions run high and we’re willing to trade some liberty for some safety and another excuse to wave the flag.

But this isn’t one of those times.

Ideological forces are strongly opposed in our government and any decision is going to leave a bitter taste in everyone’s mouth. So no one wants to make the decision. Which is why I’m worried there may be no decision by August 2nd and we will be well and truly fookered.

What will the consequences of a default on August 2nd be? Here are my bullets and they’re all pure speculation:

  • Interest rates in this country will start to rise and continue for some time. Remember, the Federal Funds rate was over 20% in June 1981.
  • The housing market will start a double collapse due to a rapid rise in mortgage interest rates.
  • In the uncertain environment, housing sales will stall and the terrifying housing data in September, October and November 2011 will have a knock on effect i.e. home sales will completely stall.
  • This will precipitate what should have occurred in 2008 and 2009 had the banks not been bailed out. The assets underlying many of their creative financial products will drop massively in value causing many banks to fail, this time without a bailout.
  • Because the dollar is the world’s reserve currency and many countries are holding Dollars, US debt and dollar denominated debt, a world financial crisis of epic proportions will begin to unfold.
  • If ratings agencies actually downgrade US debt, the effect will be catastrophic. Many banks, countries and other organizations are required to keep a specific mix of risk on their balance sheets. This will force world-wide balance sheet restructuring as countries and companies move away from the US dollar or dollar denominated debt – specifically US government debt.
  • The dollar will increase the rate of it’s current slide.
  • Gold prices will hit $1800 in September/October and $2200 or more by year end.
  • Credit will once again dry up wreaking havoc among businesses and banks.
  • Expect massive layoffs world wide as businesses deal with lack of access to credit and batten down the hatches preparing to weather the storm.
So what good will come of this?
  • With a declining dollar, US exports will earn more money.
  • There will be a massive power restructuring in corporate America as incumbents fail by the hundreds, opening up opportunities for young, innovative businesses.
  • Some wealth will be transferred back from the wealthy holding US dollars to the true innovators in this country as the dollar declines and the value of exports increase.
  • Manufacturing jobs will return to the USA as it becomes cost effective for other countries to use our labor force and base operations in the USA.
  • Our politicians will be exposed as incompetent and old power bases and old boy networks will crumble giving way to new blood, new ideology and possibly a new political party in the United States.
I’d love to hear your  prognostications in the comments, good and bad, of what will happen if we don’t raise the debt ceiling by August 2nd…