I excavated a bit of hacker history from old memories today. Not dead history either, but an important beginning of some large good things.
Here’s how it happened. I got email from a person requesting me to identify a source for the following allegedly famous quote: “All operating systems eventually turn into Unix”.
I told him that I’d never heard that quote as written but that it reminded me of a line by Henry Spencer: “Those who do not understand Unix are condemned to reinvent it, poorly.” This is of course a take on a well-known aphorism by Santayana.
I googled Henry Spencer’s name and some keywords to make sure I had the quote correct. The top hit, from which I verified the quote, was Henry’s Wikipedia page. I read it and something caught my eye – the assertion that Henry wrote his well-known and widely distributed regex package around 1987. And suddenly I remembered something.
Years ago I wrote Eminent Domains: The First Time I Changed History in which I mentioned Henry Spencer’s presence at the conference where I persuaded the NWG not to drop the functional domains in favor of a strict geographic system.
What I just remembered today is something else that happened at that conference that may have been as important, though in a less obvious way. It also pins the date to 1984, because I remember now that anxiety about what AT&T’s recent commercialization of Unix meant to us was very much in the air at that conference (IIRC the big announcement had happened in January or February). We were all worried that this meant the Bell Labs source code would no longer be shared with universities and research labs…as was indeed to become the case.
To fully understand this story you need to know that Henry was already a hugely respected figure in the tiny, not yet very conscious hacker culture of the time (there were, at a guess, somewhere around 500 of us then in the U.S. and Canada – maybe 700 worldwide). I knew him from USENET; I’d seen some of his code, in the relatively small amounts we passed around back then.
It also matters that the GNU Manifesto hadn’t been written yet – wouldn’t be until the following year, though I had some idea what was coming because Richard Stallman had discussed his plans with me at Boskone in February. (That was when I suggested to him that the flagship project for the FSF ought to be Emacs. Duh!) Stallman’s concept of “Free Software” was not yet part of the hacker zeitgeist,
So in October 1984 I was in a crowd of people watching a presentation by a woman from Bell Labs describing the then-new getopt(3) library, written by AT&T as a way to regularize the processing of command-line arguments in C programs. The custom up to then had been to write ad-hoc code for each application, leading to some odd and unpredictable variations in behavior.
Everybody thought this was a fine idea, and several people asked questions probing whether AT&T was going to let anyone else use the getopt code they had written. These questions related to the general anxiety about Unix source code distributions drying up.
Frustration mounted as the woman gave evasive answers which seemed to add up to “No, we refuse to commit to allowing general access to this code.” Which seemed to confirm everyone’s worst fears about what was going to happen to Unix source code access in general.
At which point Henry Spencer stands up and says (not in these exact words) “I will write and share a conforming implementation.” – and got a cheer from the assembled.
If you’re thinking “That’s not a big deal, we do this sort of thing all the time,” my actual point is that in October 1984 this was indeed a big deal. It took an actual imaginative leap for Henry Spencer to, in effect, say “Screw AT&T and its legalisms and evasions, if they’re going to cut off source access we hackers are gonna do it for ourselves.”
Yes, we had DECUS tapes and the Unix sources newsgroups on Unix already; Henry was building on that. But he got an actual cheer exactly because he was pushing forward, exposing the possibility of doing not just small projects and demos and quirky little tools but at competing with the likes of AT&T itself at software production.
Of course RMS was, as I was then one of the very few to already know, thinking along the same lines. But RMS’s was a more personal, ideological vision. Henry didn’t have any grand plan to save the world; he was just being a hacker, seeing where the solution to the problem posed by AT&T’s source-code lockdown had to lie, pointing it out just a bit sooner than anyone else, and putting his own skin and considerable reputation in the game.
So yeah. In retrospect I think this was a historically pivotal moment. A respected elder of our tiny tribe (so tiny that probably a substantial fraction of it was in the room listening) declared his independence from what AT&T chose to do about restricting its code. And they took that possibility home with them.
I’m put in mind of the historian Oswald Spengler’s notion that cultures are born at a moment of what Nietzsche called “transvaluation of all values”. Arguably this was one, rather like the one I semi-accidentally triggered in the late 1990s, at which the hacker culture woke up some – became aware of the possibilities implied by its existing folkways.
And there’s a more direct and personal aspect I had half-forgotten. I was a young, unknown programmer then – just 27, still figuring out what I wanted. I watched Henry make that promise. I heard the cheer, and felt the change in the air as culturally, we realized what the solution to AT&T fscking us over had to be.
And I thought “I want to be like that guy.”
It’s also worth noting that in 1984, the major questions surrounding copyright in software hadn’t been settled yet. Whelan v. Jaslow wouldn’t be decided for another two years, and a final decision in Lotus v. Borland wouldn’t be handed down for eleven. So Spencer could have landed himself in serious legal hot water.
Which makes his gesture all the more ballsy and amazing.
>Which makes his gesture all the more ballsy and amazing.
Not really. You’re assuming a climate of fear that didn’t exist yet, precisely because it wasn’t yet clear even that software could be copyrighted. I mean, we had some vague notion that if AT&T wanted to expend a huge amount of energy on a novel legal theory they might be able to make trouble for him, but it wasn’t like it would be ten years later when that kind of persecution was easy with mechanisms intentionally built into the law for the purpose.
The presenter from AT&T was clearly puzzled, not angry – not “You can’t step on our turf!”, more like “What? Can he do that?”
Fascinating history. We take so much for granted.
I don’t see his name listed as an author on the Linux man page for getopt. So did he ever actually have to write it?
>I don’t see his name listed as an author on the Linux man page for getopt. So did he ever actually have to write it?
Yes, the BSDs still use his version. I don’t know whether the glibc code is descended from it or not.
Henry Spencer’s body of work forms the cornerstone upon which so much has been built. Remarkable.
An astonishing wit, Spencer’s quotes are a legacy unto themselves. My favorite has to do with the inevitable evolution of every application to the point at which it can send mail. (Recall the ‘internet’ was dialup modems at the time!)
>My favorite has to do with the inevitable evolution of every application to the point at which it can send mail.
That’s Zawinski’s Law. Jamie Zawinski.
Back when you could read all of usenet in one sitting, I used to look for his quotes just to see what he came up with. Always witty, sharp, funny and insightful.
He was also very friendly, like many were in those heady, early days.
I’ll have to look him up and see what he’s been doing since then.
This is incorrect. If you had said 1976, the year when Bill Gates wrote his Open Letter to Hobbyists, you would have been onto something. But the Copyright Act was expressly amended to include computer programs in 1980, and Apple won its case against Franklin over copyrighted Apple II ROM code in 1983. So by 1984 it had been established that program text was as copyrightable as literary text. (Source: Wikipedia) What was not so clear was to what degree software was copyrightable in the abstract, in forms of expression not bound to program text. “Licensed, not sold” verbiage and shrinkwrap EULAs, under which you have no rights to the software, not even those expressly granted by law, except as granted by the software developer, began appearing not long after — mid-late 80s. I seem to recall a copy of Microsoft Flight Simulator circa 1986 with a disk envelope that said “By breaking the seal on this envelope you agree to the terms of the End User License Agreement.” As well as a copy of dBASE III whose EULA stipulated that the software had to be returned to Ashton-Tate not later than fifty years from the date of purchase!
So software companies were pulling these tricks, if not in 1984, then very shortly after. Doubtless, in your story, neither Henry Spencer nor the AT&T representative were aware of the exact state of copyright law at that time, and Spencer and other hackers — whose folk knowledge of the law is close enough for hand grenades when it comes to getting things done — probably wouldn’t have given two shits anyway. But the pattern was established, even way back in the 80s.
>What was not so clear was to what degree software was copyrightable in the abstract, in forms of expression not bound to program text
Er, exactly. To the extent we knew of the 1980 amendment, we had no thought that it could be applied to a de novo implementation like Henry’s that wasn’t actually copied from AT&T code, which it wasn’t going to be. The “novel legal theory” would have been that a non-copied implementation still sufficiently resembling AT&T’s was covered by copyright.
And, by the way, as late as SVr1 in 1984 the AT&T source code had no copyrights in it. Which I and probably 75% of the other people in the room knew through having seen it.
“All operating systems eventually turn into Unix”
And it apparently has come to pass; you may not realize it, but pretty much every operating system in common use today that is not either Windows, or some mainframe dinosaur relic, is Unix.
macOS is, of course, a Unix. And iOS and tvOS are both derived from macOS.
Linux (GNU/Linux, if you’re a Stallmanite) isn’t explicitly a Unix, but it’s close enough for most purposes. And Android and ChromeOS both use Linux.
FreeBSD/NetBSD/OpenBSD are all Unix. And CellOS, used on the PlayStation 3, and Orbis OS, on the PlayStation 4, are both BSD derivatives.
QNX is a Unix used in many embedded applications, such as cars. And Blackberry OS is based on QNX.
Even on those mainframe dinosaurs, IBM z/OS has been certified as Unix-compliant, and the i.PAR and z/VM hypervisors support Linux as a client OS. And even Windows 10 itself is supporting a Linux runtime environment these days. So those two exclusions I made above may not be exclusions forever…
(Note: I just started my name change process, so I’m using what will be my legal name now.)
That would make a great scene in a movie I’d pay money to see.
> Linux (GNU/Linux, if you’re a Stallmanite) isn’t explicitly a Unix, but it’s close enough for most purposes. And Android and ChromeOS both use Linux.
In this context Stallmanites would not insist that you say “GNU/Linux”, because you’re talking about a case in which you don’t have the GNU userland running on top of the kernel by default (Android).
Unfortunately, Android is somewhat of a Pyrrhic victory for FOSS. Yeah, the kernel is open, and the userland is nominally open, but the firmware is invariably a nightmare and getting root is an uphill battle. And Google managed to recapture the platform with the proprietary Google Play middleware layer in the way that IBM never recaptured the PC. FOSS will likely continue to exist, but only on the desktop: mobile is closed to us in every meaningful way for the foreseeable future.
>. FOSS will likely continue to exist, but only on the desktop: mobile is closed to us in every meaningful way for the foreseeable future.
Um…my CyanogenMOD phone has the Play Store. So, not true by example.
> And, by the way, as late as SVr1 in 1984 the AT&T source code had no copyrights in it. Which I and probably 75% of the other people in the room knew through having seen it.
And just as significantly, the US was not yet party to the Berne Convention (may it be Berned!), so the lack of copyright notices in the code still meant something.
As an aside, it is my opinion that the copyright terms demanded by the Berne Convention, while technically compliant with the US Constitution, violate the intent of the founders in including the “for limited times” verbiage, and that the federal government is thus obligated to withdraw from the Berne Convention. “Life of the author, plus 70 years” is effectively forever as far as an author’s contemporaries, or his children’s contemporaries, are concerned, and even his grandchildren will be in old age before his work comes out of copyright.
But good luck getting a court to see it that way…
>And just as significantly, the US was not yet party to the Berne Convention (may it be Berned!), so the lack of copyright notices in the code still meant something.
Not only is that true (the Berne Convention wasn’t adopted in the U.S. until 1987) but as I read the law the copyright status of SVr1 remains dubious even today.
Yeah, it would have been interesting to see how much of Unix would have been ruled public domain had USL v. Regents of the University of California not been settled.
“Not only is that true (the Berne Convention wasn’t adopted in the U.S. until 1987) but as I read the law the copyright status of SVr1 remains dubious even today.”
This is why MVS 3.8 is still freely distributable: it was published before 1987, and contained no copyright notices. IBM grumbles about it, but their lawyers don’t press the issue.
Once upon a time, the guy who rescued OS/360 from the dustbin of history, Rick Fochtman, got a letter from IBM that said that he could indeed distribute it. Sadly, he no longer has the letter, and when I attempted to get one of my own, IBM declined.
>I don’t see his name listed as an author on the Linux man page for getopt. So did he ever actually have to write it?
From man getopt on Mac OS X:
“Written by Henry Spencer, working from a Bell Labs manual page. Behavior believed identical to the Bell version.”
Somewhere around here I have a paper bag from some long-ago conference, inscribed “Henry Spencer died for our sins.”
> > My favorite has to do with the inevitable evolution of every application to the point at which it can send mail.
> That’s Zawinski’s Law. Jamie Zawinski.
And (at least in the late 90s) there was an addendum. “Except Exchange”.
It may be worth mentioning that the AT&T implementation was ultimately made available as public domain, in 1985. Google Groups link, Message-Id: 3352@ut-sally.UUCP.
Though, as the follow-up post mentions, there was some confusion on AT&T’s part as to the legal status of the code, it did make it out into the wild. (And if you google the first sentence or so of the article text, you can find several projects it was incorporated to with the article attached as a comment).
> And, by the way, as late as SVr1 in 1984 the AT&T source code had no copyrights in it. Which I and probably 75% of the other people in the room knew through having seen it.
There’s a substantial amount of evidence, including anecdotes from key Bell Labs figures (I think DMR himself mentioned it once), that there was a deliberate choice at one point in the v6-v7 era to not include copyright notices in support of a theory that the source code was “unpublished” and therefore a trade secret. This eventually gave way to the confused-sounding “The copyright notice above does not evidence any actual or intended publication of such source code” notices.
>Um…my CyanogenMOD phone has the Play Store. So, not true by example.
Bad example. ;)
Thanks to the Cyanogen, Inc. shit show, CyanogenMod is dead – can’t use the name, old infrastructure gone. There’s an ongoing attempt to fork it and bring it back to life under a new name, Lineage OS. I haven’t been keeping close enough track to know how that’s going, but I might want to soon. (Both my personal devices, phone and tablet, run CM.)
Saying “QNX is a Unix” is a bit like saying “BeOS/Haiku is a Unix”. (Or, for that matter, Windows with Microsoft’s new Linux compatibility shim.) It is a completely different kernel on the inside with a POSIX compatibility layer on top.
The fact that “every OS eventually becomes Unix” is one of the great tragedies of our time because Unix is such a dumbed down design. Quite frankly, I can’t wait for the day when we take POSIX as seriously as MS-DOS. So much wrong practice has become entrenched as standard for “compatibility” reasons just as it was with DOS. (Signals = fail! Readiness-based instead of completion-based I/O = fail! CPUs have IRQs for a reason, people, come on!) The NT kernel has far more interesting, and correct, notions of how to do I/O, IPC, and threading than any Unix except maybe Solaris.
LineageOS is in the “and nothing of value was lost” stage, near as I can tell. The same old crew just put out a release and are actively developing, with no real change except the name.
> …Lineage OS. I haven’t been keeping close enough track to know how that’s going…
The project is on its feet and active. I’ve been using LineageOS for several months now.
You had to pirate the Play Store app and Google Play Services framework to get that to work. So it doesn’t really count.
Google is moving more and more of the Android platform into Play Services, precisely to break apps being compatible with AOSP and make vendors more dependent on Google. The “Android” of today really isn’t open source — and even if it were, mobile platforms are almost all completely tivoized.
Add to the fact that if you care anything about privacy and security, your best choice is… well it’s no mobile phone at all, but iOS is a distant second and Android doesn’t even finish. To choose the Android platform is to join the massive security bug of the month club. DuckDuckGo for “cloak & dagger android” and ph33r.
>LineageOS is in the “and nothing of value was lost” stage, near as I can tell. The same old crew just put out a release and are actively developing, with no real change except the name.
Near as I can tell, they have no available builds other than 14.1 dailies.
If you know of any way to find a stable build of an older release, say 13, I’d love to hear how. :(
Great story! that brings back some memories. AT&T ended up releasing their getup source as public domain in 1985. A lot of people were mad at the time when they standardized on – instead of + for the flag prefix.
@Masked and Anonymous – wait, what? Unix tools had used – as option flags (except a handful that used no character) for a decade by then, they just didn’t have a standardized library function for parsing them, and were inconsistent in handling (some requiring them to all be in one argument, some requiring them to all be separate)
+ was on a shifted key, and had already acquired a meaning of “turn off the given option” by then. Unless you mean that people were mad that the ability to parse that for that purpose was not standardized.
“The NT kernel has far more interesting, and correct, notions of how to do I/O, IPC, and threading than any Unix except maybe Solaris.”
Too bad you have to run Windows to get it.
Technically speaking, you don’t.
Early version of GNU’s getopt_long used + instead of — as the long-option prefix. Not sure when they switched over, but this was in a version (c) 1990:
> Long-named options begin with `+’ instead of `-‘.
I’m not sure what that has to do with AT&T getopt, which doesn’t support long options at all, or anything that happened in 1985.
Some of the same benefits could be had with OpenVMS…
Anyway, aren’t you the guy with a well-documented fondness for mainframe OS’s? Much like the mainframe, some enterprise developers are willing to put up with the drawbacks of Windows if it means they can reap the benefits.
Yes, I like mainframe OSes – in their place. That place is not the desktop, just as Windows’s place is not the server.
“The NT kernel has far more interesting, and correct, notions of how to do I/O, IPC, and threading than any Unix except maybe Solaris.”
Interesting. I was a device driver guy about the time NT came out and I recall comparing its IRQ and I/O handling with Netware.
On Netware if the client request was for a file already cached in memory the Netware stack could create the reply with the correct data in something like 50-60 x86 instructions before handing off the result to the network drive to send the reply. I know that because at the time I was debugging token-ring drivers for Madge and we made a distinct effort to make sure that the entire process from the IRQ announcing the DMA completion of the received packet to the triggering of the outbound DMA to send the response was under 100 instructions.
By contrast I recall that NT took over 100 machine instructions to simply get around to calling our driver to figure out what had happened and there was IIRC a complex situation where you called one entry point to discover if this was the right device signalling and a second one to actually get the data. It took over 10 times as many instructions to actually send the reply in the same situation of cached data and IIRC there was a required async event hand off that meant that the actual number of instructions taken was indeterminate and depended on what else the server was doing.
(I don’t recall the stats for non-cached data but I do recall that I could step through the disk IO and see it do its job in Netware whereas in NT the whole thing was orders of magnitude more complex)
At the time I thought the Netware design was superior – synchronous, predictable, and blazingly fast. Subsequently I’ve come to see that the NT design and it’s event-handling concept is actually more generally scalable even if it doesn’t result in the best overall performance in certain optimum conditions.
Well, as NTimplementations go, there is ReactOS, too.
“The NT kernel has far more interesting, and correct, notions of how to do I/O, IPC, and threading than any Unix except maybe Solaris.”
Care to elaborate on this (if it’s not too off-topic)? I tried to look into it myself the last time it was brought up on this blog, but there doesn’t seem to be a wealth of accessible high-level summaries of the NT kernel design on the net, at least compared to all the “on Unix everything is a file and poll(2) returns when you can read one” tutorials you can find with cursory Googling. (Though how Solaris distinguishes itself in this field interests me too.)
>tiny, not yet very conscious hacker culture of the time (there were, at a guess, somewhere around 500 of us then in the U.S. and Canada – maybe 700 worldwide)
Many of them from Berkeley, right? And yet, it is curious how isolated Unix hacker culture from the microcomputer world and the entirely different directions they worked towards.
Brian Dougherty founded Berkeley Softworks in 1983. By 1986, their flagship product, the GeOS operating system for the Commodore 64 was out. http://www.commodore.ca/history/company/turks_geos.htm
I am sure several hackers on that conference came from Berkeley. But it is really weird how the two cultures don’t overlap and they hardly knew about each other.
Micros had the “you have a tiny RAM to work with, use too-smart black magic to stuff features into it”. Hackers had a “make it readable, maintainable, not too clever, doesn’t matter if Eight Megs And Constantly Swapping” culture.
In hindsight, hackers were right. Hardware is a cheap commodity, the time and attention of high-IQ professionals is not. Yet, I hope the artistry of the micro guys will not be forgotten just for the sheer ingenuity of it.
“Hardware is a cheap commodity, the time and attention of high-IQ professionals is not.”
Not entirely. Embedded systems are very much a thing, and getting more ubiquitous as the IoT spreads. There’s plenty of room for artistry when you’re working with half a meg of ROM and 128K of RAM.
GNU “getopt” considered harmful:
1) Old-style Fortran considered blanks as insignificant (This has long been recognized as a defect in the language, and this is no longer true for Fortran-90-and-later “free” source format.)
2) Traditionally, compilers have recognized the option “-openmp” as the directive to enable OpenMP parallelism. (“-o penmp” is a two-token option dictating “call the output file ‘pemp'”.)
3) According to POSIX, “-openmp” should be one token, not two.
Problem: GNU getopt() fails to learn from the lesson of 1950’s Fortran, ignores the significant blank, and regards “-openmp” as identical to the two-token option “-o penmp”. As a result, “Makefiles” that would work with all other existing compilers would suddenly and silently fail, instead generating this obscure and misnamed object file “penmp”.
@Carlie J. Coats, Jr., Ph.D.
First of all, you can’t blame GNU for this. POSIX does specify this behavior for getopt, though most of its examples use the two-token form and most commands are not formally specified to use the getopt behavior.
Compilers do not anyway, in general, use getopt or a style of option syntax compatible with it. And GCC is no exception. They do have the single-token-vs-two-token equivalence in some cases (e.g. “-lm” is equivalent to “-l m”, and as you noted the unfortunate -o), but not for others even where it would appear to make sense (“-f openmp” is not acceptable, only “-fopenmp” as one token).
Also, compiler options are not (except for a handful in the POSIX “c99” tool) standardized anywhere. And GCC is and has been for quite some time a leader (imitated by other compilers such as clang and icc) rather than a follower. I don’t even know what other compilers you are referring to that support “-openmp”, or why you think it should be considered good practice to hardcode non-standard compiler options.
The idea that this is somehow fortran-influenced is also incorrect. The reason for supporting an option and its argument is a single token is for consistency with tools where the argument is not required and therefore must be in a single token – i.e. “-xyz” is the ‘x’ option with an argument of ‘yz’, whereas “-x yz” is the ‘x’ option with no argument, followed by an unrelated parameter ‘yz’. Compilers use this style for some options too, e.g. -O vs -O0, -O3, -Os, etc; -g vs -ggdb… POSIX does recognize this style, even though POSIX getopt provides no way to parse it. Not many POSIX utilities use this syntax – as far as I can tell only “pr” and some SCCS tools have options that work this way – but it is allowed by the utility syntax guidelines.
“I don’t even know what other compilers…”
Sun. SGI. IBM. DEC. HP. I’m not sure about Cray, but I think it’s on the list, too.
Windows not only has kernel-deep support for asynchronous I/O, it also supports I/O completion ports. Multiple threads may share a single port, and a single port can be associated with multiple file or socket handles. Async I/O requests can then be made on those handles and when they complete, a message will be written to the port which will wake up any threads sleeping on that port and allow them to process the I/O event. This confers many advantages: there is no need to buzz in a select/poll/epoll loop, which saves precious CPU time and battery life; and a file handle can be checked for completion and the input data (if any) returned in a single system call.
Note that under Linux, all I/O is synchronous. The closest you can get in a well-supported manner to async is “nonblocking I/O”, which a) is still synchronous, but operations on fds that aren’t “ready” will return immediately rather than block; and b) only works with certain kinds of file descriptors. An accident of the Unix I/O model holds that disks are “fast” while terminals and network sockets are “slow”, so I/O operations to disk will always block. There’s an ill-supported kernel-level async I/O API which nobody uses. There is also POSIX AIO, which nobody uses and which under Linux, is implemented by simply spawning a new I/O process that does synchronous I/O.
Compared to other operating systems, the Unix I/O model, which Linux adheres closely to, is very simplistic. Dave Cutler — the architect of VMS and Windows NT — described it as “get a byte, get a byte, get a byte, byte, byte” (to the tune of the William Tell Overture). This is because early Unix was designed to make things easy for hackers — not to handle production workloads. Unix was pressed into service in the enterprise for the same reason Java would be a couple of decades later: its wide distribution and reasonable licensing terms ensured that plenty of college students would be familiar with it upon graduation and entering the workforce.
Threads also interact poorly with POSIX signals, requiring contortions in order to get proper handling of signals in a thread-safe manner.
The closest equivalent is “on Windows everything is a handle, and you use the WaitForSingleObject and WaitForMultipleObjects APIs to sleep and wait for events on these handles”. Handles include I/O handles, mutices, semaphores, and even threads themselves (where you can wait on their termination). The consistency with which handles can be used under Windows is much greater than the consistency of fds under Unix.
“on Windows everything is a handle, and you use the WaitForSingleObject and WaitForMultipleObjects APIs to sleep and wait for events on these handles”
This week, perhaps. How long till Microsoft overhauls the API again and obsoletes all the code you got COBOL fingers writing?
And it’s also worth noting that hte Windows API is nowhere near as compact and eas to hold in your mind as the POSIX one. The number of system calls is mind-boggling.
Microsoft plays API-of-the-week with a lot of stuff above the OS layer. And even when they introduce a new API their backwards compatibility with the old stuff is legendary. The latest version of Windows 10 can run Win32 programs that are more than two decades old. You can’t say the same about Linux!
Yes, and? Doing I/O correctly is hard, and requires a certain level of API complexity. Besides, this isn’t 1980 anymore and most developers don’t care about holding entire APIs in their head. They’ve got IDEs with IntelliSense to help them recall the details, and multiple monitors with a browser open full-screen on one of them. They could look it up, and MSDN’s API documentation is among the most comprehensive and well-written there is.
In 1997 my father was looking pretty hard for a 1968 1/2 Pontiac Lemons Tempest http://momentcar.com/images/1968-tempest-2.jpg
This is relevant later on.
> The latest version of Windows 10 can run Win32 programs that are more than two decades old.
And yet there are (or were about 2 years ago) tons of XP desktops and Win2003 Server instances in production because newer version of the OS broke applications.
> You can’t say the same about Linux!
I suspect with WINE you can run most about as many of them under Linux as you can on Win10. Other than that I don’t know why you’d expect to be able to run 20 year old Win32 apps on linux.
OTOH, Under Linux it is MUCH more likely that I have access to the source code and can recompile against contemporary libraries. I have seen decades old *shell* scripts that run just fine. Admittedly those are breaking now with the ifconfig -> ip changes etc..
I’m not going to say that Linux–and the Linux ecosystem doesn’t suck–it does, in lots of ways for lots of jobs and workloads. In many ways the Windows ecosystem sucks worse.
We need *more* OSs out there that do more things in more ways. More competition, more experimentation and more fragmentation.
No, I’m not kidding. Right now our software and hardware infrastructure is brittle and insecure. It needs to be more resilient, robust and responsive.
I *really* like Linux. It’s paid my bills in one way or another for most of the time since about 1998/99. It’s a *good* operating system. It’s like that 1968 Tempest.
Great looking car right?
And, in stock form will get flat out *STOMPED* in anything except the meanest econobox on the market (here in the US. There’s things sold as “cars” in the EU that…ewww), and will get stomped while using MORE gas, handling worse, being louder, putting out more pollution (non-CO2, REAL pollution) and being less comfortable inside.
Because between 1967, and 1997 (two decades) we learned a crap load about just about everything that went into car design, and between 1997 and today we’ve learned more.
I like old cars–I’ve got a 1984 Land Cruiser sitting out front. I’ve got a 1984 Land Cruiser out front that as soon as I can get the extra cash to rebuild the fuel injector pump seals (and probably a few more seals) I’ll be my daily driver again. But I’m under NO impression that it’s as good as a modern car in *any* way other than aesthetically.
But our entire modern electronic infrastructure is not only *still* riding on architectures that were being hashed out two generations ago (Windows is a lot of VMSness under the hood, and Unix is Unix), but we’re building out most of the IoT on it, which is, to use one of my fathers sayings, about as dumb as drinking your own bath water.
We can do better, and we should.
This is way off topic, but Land Cruiser’s are superior to modern cars in almost every aspect that matters (“safety” and economy don’t). What market FJ do you have that had fuel injection in ’84? North American Cruiser’s were carbed until 1988 unless you’re talking an unobtanium, north of the border diesel.
…now that we are FINALLY off code and on to cars, a LS1 swap, coil overs and sticky tires for that LaMans brings the modern age to a classic.
…kind of like running a type 1 hypervisor and then having all the client OS VMs you want! I have seen Symbolics Genera in a VM!
@William O’Blivion the advantge of old cars is often th sheer joy of driving due to the raw feedback they give, thinking about something like a BMW E30.
About EU cars, let’s get realistic: near everybody with sense drives the same Japanese and Korean cars in both the US and EU because there are hardly any reasons to buy General Motors or Renault. Whether it is something little and fun like the Miata or the small and racey feeling well under the speed limit Mazda 2 (likely my next car), a boring commuter like the Corolla, a hybrid for the tax advantages, or up and coming Kia and Hyundai cars with long warranties, they are pretty much the present and the future.
I think it is largely because Asia simply sticks to basic common sense and actualy customer priorities in car production. The European car industry tends to signal progressiveness far more than actually making good cars at affordable prices, the American one seems to be just plain simply awkward and inept with a few exceptions.
“near everybody with sense drives the same Japanese and Korean cars in both the US and EU because there are hardly any reasons to buy General Motors or Renault.”
1) My own 2008 Mercedes ML320CDI. There are very few ways to get an SUV with 4WD and diesel efficiency, even fewer that aren’t full sized land yachts, and pretty much all of them wear a three-pointed star – and all of them come from Germany. (The Grand Cherokee CRD you could get for a year or two was built on the same platform with the same engine.)
2) A friend in Germany has a SsangYong Actyon Sports…pickup truck. Yes, it’s Korean. No, it’s not the same old thing. Apparently, his is quite rare, and had to be special ordered.
In 2000 Wizards of the Coast released the d20 System Reference Document under the Open Game License to allow publisher access to the mechanics of Dungeons & Dragons 3.0 to publisher third party supplements. While it didn’t including everything in D&D 3.0 there was enough that with a few bits of original content one could release their own RPG to compete D&D.
Along with this the ease of communications Internet enabled allowed fans of the original 1974 release of D&D, Advanced D&D 1st edition, and other classic edition to meet, and discuss their favorite edition. This also included producing fan material like adventures to be shared. But because there was no open content or licenses for those editions there was little in the way anything elaborate commercially or non-commercially.
Then in 2004 Troll Lord Games produces a RPG based off the d20 SRD called Castle and Crusades. It was a stripped down version that was compatible with AD&D 1st edition adventures like Tomb of Horrors and Village of Hommlet. At first many fans of classic editions hoped that it would be AD&D 1st reborn, but Troll Lords got cold feet and opted to make something that worked with AD&D supplement but used it own mechanics to produce the same balance.
Then three individual Matt Finch, Stuart Marshall, and Chris Gonnerman, realized that if the d20 System Reference Document was stripped of newer mechanics like feats and skills what was left was sufficient to replicate a lot of the mechanics of a classic edition. Finch and Marshall worked together to produce OSRIC a clone of AD&D 1st, and Gonnerman wrote Basic Fantasy a clone of the Moldavy/Cook version of D&D.
What these three individuals did for fans of classic D&D is very similar to what Henry Spencer. Their trailblazing allow dozens of others, including myself, to start writing classic D&D material and in doing so brought several out of printed editions back to life. Today there are hundreds of products supporting various classic edition of D&D and the idea has spread to other classic tabletop RPGs like Runequest and Traveller.
All one has to do see the diversity of effort is look at this list of PDFs and books being sold
All this fueled by the creativity unleashed by the use of open content.
Safety and economy are pretty important to me; as someone who uses a car to “do things” rather than as an end in and of itself. The one means I’m going to walk away from an incident of stupidity or mechanical failure on my own or someone else’s part (even if the car itself is a writeoff because it absorbed the energy in the crash rather than passing it inward to the occupants). There’s just a stupid large amount of kinetic energy even in low-speed automobile crashes, as I had rather graphically demonstrated to me last year, when someone ran a red in front of me as I came off the line. Even though I was starting from 0, the end result was 3 wrecked cars (I t-boned the red-light-runner and spun his car around to clobber the left front quarter of the car in the left-hand turn lane of the opposite direction, smashing their left front wheel in), but everyone walked it off. My seat belt didn’t even lock up. (I was moderately pissed at the guy who caused the accident, and rather hope the prosecutor threw the book at him).
And efficiency means I save money over the lifetime of the car. Quite a lot of money, in fact.
That having been said, the “core” of modern automobiles hasn’t been updated since fuel injection on gasoline engines because common. The “UI” and “UX” have improved, quite a lot, but the underlying engine is still the same as it was around 20 years ago, and it’s running on a network whose protocols are a century old (the road net). I mean, we’ve had diesel for as long as we’ve had modern automobiles, and recently you see the hybrids and electrics, but nothing has yet seriously challenged the gasoline internal-combustion engine in consumer-vehicle applications. (Diesel rules the commercial-vehicle application, and if you like you could draw some comparisons there).
That’s Zawinski’s Law. Jamie Zawinski.
“All sufficiently witty software development quotes are inevitably attributed to me.” — Henry “the Zawinski” Spencer
And (at least in the late 90s) there was an addendum. “Except Exchange”.
Oh, that’s delicious.
William, I’m not going to disagree with any of your points; as I said upthread, I think the fact that “every OS is now a Unix” is a great tragedy. Unix has become an albatross around our necks and a hindrance to OS evolution. NT was the more advanced design that survived, being state-of-the-art for the early 1990s (it is not, in any appreciable sense a VMS clone or derivative despite borrowing from VMS), but that design is now a quarter-century old.
Maybe Google’s Fuchsia efforts will bear fruit here.
Safety doesn’t matter until you’re in a stretcher — or dead — because your car lacks the safety features that modern cars have. There are reasons why the government now mandates things like crumple zones and airbags.
I should note that I would prefer that automobile standards be developed by an Underwriters Laboratory’s type organization than the government, but I’m not displeased that someone is doing so.
Also, that the UI/UX of controls has been rather more standardized since the days of my youth. If I get into a modern automobile, I can find not only the major controls (gas, brake, steering), but the minor ones (headlights, wipers, turn signals) in the dark in an entirely unfamiliar vehicle without too much difficulty.
The problem with UL type organizations is that industries do not want to submit to safety certifications. UL itself was established before the turn of the 20th century; if you proposed a similar organization today, funded by the auto manufacturers as UL is funded by appliance manufacturers, the auto manufacturers will tell you where you can stick it because that money is better spent on publishing fake science establishing that their unsafe cars are safe.
You think “Underwriters” means “Manufacturers?” Really? Because that’s not at all what that means. Underwriters are the insurance companies, they fund UL because it means they have to pay out less often if their policies can say “if you’re not using UL, we don’t have to pay.”
The auto manufacturers would have nothing to do with it – but the automobile insurance companies absolutely would.
“Underwriters Laboratories is a non-profit organization that is funded by the fees it charges manufacturers of products that are submitted for certification.”
Hunh. I had been under the impression that it was founded by the house insurance companies. It appears to have been founded by some guy who said “let me tell the public your stuff is safe, and you should pay me to do that.”
Which, I’ll agree, simply wouldn’t happen today.
OTOH, the Insurance Institute of Highway Safety does appear to function as I thought UL did.
UL was originally founded by a guy with an insurance background. But it has largely succumbed to the private equivalent of regulatory capture.
In an effort to not derail this thread too much further, the “safety” comment was obviously (I thought) tongue-in-cheek, but do I really need crumple zones if the car that hits me has them (I can’t go fast enough to hit anyone else…)?
> the advantage of old cars is often the sheer joy of driving due to the raw feedback they give, thinking about something like a BMW E30.
> efficiency means I save money over the lifetime of the car. Quite a lot of money, in fact.
Depends on your perspective/situation.
I’ve put around 15,000 miles on my dinosaur in the last 5 years (don’t know exactly how many due to the larger tires). Figure a rough (high) average of $3 per gallon of fuel at 15 mpg, $50 of insurance each month, $75 registration each year, $2,000 in parts, $750 purchase price (that’s one time cost, not per month like a new vehicle), and you’re only looking at $9,125 total for 5 years. That’s just over $150 per month. I’ve had new cars that cost more than that in insurance each month. I have admittedly poured what some may consider to be an inordinate amount of time into maintenance, but I count that as a wash because I enjoy doing it. More importantly, I get to spend the time teaching my children how to do it as well.
Back on topic, I had never heard of Henry Spencer before this. Where can I find more relevant info on his contributions? Wikipedia was unsatisfyingly short, and my googling keeps predominantly turning up the actor.
” but do I really need crumple zones if the car that hits me has them (I can’t go fast enough to hit anyone else…)”
This was more or less the safety plan of the Smart Fortwo I owned, hope the other car had crumple zones. I will also note the red-light-runner I broadsided did not have terribly soft crumple zones over the left rear quarter (where I hit him), so it was down to my crumple zones functioning as-designed. Neither do roadside trees, concrete abutments, or a host of other things that are possible to hit at speed.
3k miles a year is an extreme outlier for annual mileage – the rule of thumb is 12k miles a year, and most years I’ve done more. You are not anywhere close to the “average” car owner (particularly if you enjoy pulling your own maintenance – I can and have changed my own oil and even done a drum brake job; but it’s never been interesting to me).
> What market FJ do you have that had fuel injection in ’84? North American Cruiser’s
> were carbed until 1988 unless you’re talking an unobtanium, north of the border diesel.
Australian HJ60. I lived there a couple years and brought it back as souvenir. It’s currently not tagged because it won’t pass emissions here in Colorado (needs those seals, or a 12HT :) )
> This is way off topic, but Land Cruiser’s are superior to modern cars in almost every
> aspect that matters (“safety” and economy don’t).
No, they aren’t. I also have a 2004 Lexus GX470, and other than “fun to drive” the GX (aka “Land Cruiser Prado”) is a better vehicle. It’s quieter. It’s more comfortable. It will go at least as many places. It’s not diesel (but you can get diesel Prados in other countries, at least IIRC), so the cruise control is better than the throttle lock (I one time locked the throttle on a highway in Australia and rolled for about a half an hour like that). It handles better, it starts better on a cold day (even allowing for Diesel v.s. Gasoline). It is likely that my Lexus will, with good maintenance will go over 300k miles and be in better shape than my Land Cruiser.
Modern cars accelerate quicker, start easier, run smoother, need *less* maintenance, handle better etc. In every metric other than “how it makes me feel inside” they are better.
The Lexus isn’t *as cool* as the LC, but it’s a better car.
However I’m saving my money to spend 4k on a 35 year old truck (or 12k for a 12HT swap) because it’s more fun to drive, and I *can*.
Oh, and economy DOES count. I ran out of fuel about 10km south of the next fuel point just south of Tennant Creek one day because I had more of a headwind than I’d accounted for.
Re-priming the fuel injectors with the hand pump on an engine that had been running more or less flat out for 4 hours is not fun.
“About EU cars, let’s get realistic: near everybody with sense drives the same Japanese and Korean cars in both the US and EU because there are hardly any reasons to buy General Motors or Renault.”
Volkswagen from Germany is the largest car manufacturer in the world.
@William O. B’Livion
> But our entire modern electronic infrastructure is not only *still* riding on architectures that were
> being hashed out two generations ago (Windows is a lot of VMSness under the hood, and Unix > is Unix), but we’re building out most of the IoT on it, which is, to use one of my fathers sayings,
> about as dumb as drinking your own bath water.
> We can do better, and we should.
The problem with doing better is cost; cost of other people’s/organization’s time and other people’s/organization’s money.
I worked in Investment Banking from 2001 to 2015. In that time, I generally used IBM CICS applications written in the late 60’s through the early 80’s. In fact, one major application I used to manage $1 Billion+ dollars of assets was originally written in Fortran-77 for a lovely machine some here might remember; a VAX 11/780 on VMS. I remember with humor everyone in my group asking me “Why is it that there are only F1 to F4 keys in the program”. I showed them the VT100 keyboard and their reaction was “What is that?”.
Another company I worked for did a cost benefit study to merge capabilities of two CISC applications with similar functionality under a single system. Cost = $1.1 Billion dollars with a payoff of 15 years. Naturally, the project never moved forward.
I’ve been a happy Linux user since 1997 and have never looked back. Despite its foibles, it works and scales very well. This is why it continues to have a major presence in the corporate space. And unless something changes to reduce production costs, time to market and quality code, it will continue.
I’m interested to see what AI will bring to software development…..
> The problem with doing better is cost; cost of other people’s/organization’s time
> and other people’s/organization’s money.
The cost of *not* doing better is a million wasted man hours a day.
The cost of *not* doing better is the chance that some griefer clan nukes civilization.
The mindset of only counting costs on one side (and not the cost of doing nothing) is like politicians who can always find money planting flowers and paying social welfare but not enough for fixing roads, because it “costs”.
They wind up transferring the cost to drivers in the form of increased entropy on vehicles.
There is a…let’s call it a .mil project because it isn’t that is buying spare parts on the used market because the stuff they run some seriously mission critical systems on is long dead and the project to replace it ran off the rails twice because Linux *can’t* do the job. Well, I expect Linux can, but the folks working on it for .mil are old school Defense Contractors. They’re doing things like swapping *logic boards* on hard drives to keep the old stuff up. Because 15 years ago someone did a cost analysis and said “nah, we don’t need to do that yet”.
> 3k miles a year is an extreme outlier for annual mileage – the rule of thumb is 12k
> miles a year, and most years I’ve done more. You are not anywhere close to the
> “average” car owner
Note he said *on the Dinosaur*. I suspect, like me, he’s got at least 1 other vehicle (I’ve got the Lexus and a motorcycle) that is a “daily driver”.
OTOH, I work from home about 75% of the time, and the other 25% I’m in a hotel within walking distance of the office.
.mil projects can be crazy-go-nuts. There is a defense contractor which specializes in, I shit you not, reballing ICs with leaded solder balls. Because the RoHS stuff is flaky and we’re the military Goddamnit; it HAS to work in the field and fuck the environment. We fire depleted-uranium rounds into the mountainside; who gives a shit about a little lead in the water?
William O. B’Livion:
> The cost of *not* doing better is a million wasted man hours a day.
The American Free Enterprise Industrial Capitalist System doesn’t concern itself with wasted man-hours unless those hours directly belong to them.
> The cost of *not* doing better is the chance that some griefer clan nukes civilization.
The threat of nuclear was has always been considered, but has never reached the point that good money should thrown at it by corporations; that is the responsibility of government – for which they receive corporate taxes.
> The mindset of only counting costs on one side (and not the cost of doing nothing) is like
> politicians who can always find money planting flowers and paying social welfare but not
> enough for fixing roads, because it “costs”.
Politicians walk a fine line between what their corporate masters tell them / pay them to do and the larger momentum of the public who choose to vote in any given election. Our current drama playing out in Washington is a great example of this real time.
Whether or not it is fair is a philosophical question… corporations who have money make choices all the time to maximize their shareholders (aka their owners) value and always negotiate for the best outcome that benefits them. This isn’t new nor is it original. As my good friend in PA observed “American Companies Plan for the Weekend”. Welcome to the American Free Enterprise Industrial Capitalist System.
Aw blimey, look what the cat dragged in!
With the mentions of Microsoft, and the mention of Unix going closed-source back in the mid-80’s thanks to AT&T breaking from Bell Labs, does anyone have any thoughts on Xenix?
From what I’ve read (never having a chance to work with it), it was a licensed Unix that Microsoft worked on for microcomputers. And it was, at the time, their view of the future. That is, until AT&T went commercial with Unix and Microsoft believed they couldn’t compete with the actual owner and developer. So they switched over to working on a different system with IBM (OS/2), and then yet another system (NT) when that fell through.
Jeff Read on 2017-05-31 at 16:14:56 said:
> .mil projects can be crazy-go-nuts.
I have been in 3 branches of the military across 3 different decades, I’ve been close enough to rocket attacks to feel the blast and I’ve held a TS clearance and worked in buildings that some congressmen on the Armed Services committee weren’t allowed to know about because *THEY* didn’t have the clearance.
I’m well aware of how bug f*k nuts some “.mil” programs are. This is why I won’t work for most of the mid to large sized defense contractors in the US. They’re dirtbags.
> There is a defense contractor which specializes in, I shit you not, reballing ICs with
> leaded solder balls. Because the RoHS stuff is flaky and we’re the military Goddamnit; it
> HAS to work in the field and fuck the environment.
You get your power from a coal plant?
> We fire depleted-uranium rounds into the mountainside; who gives a shit about a little lead
> in the water?
Given 200 years of burning coal for heat and power, the residue from DU rounds is massively insignificant.
Heck if I know. The power company generates from diverse sources including coal, oil, gas, and even wood chips (?!) mixes up the power and distributes it all where needed. I can’t tell which of my electrons come from Horrid Coal and which come from Not-Quite-As-Horrid Other Fuel Sources.
Whatever the case it’s a damn shame. Solar and wind are cheap now. We need a conversion project for our entire electric power grid yesterday
(Trump pulling out of the Paris climate deal and putting the USA on equal footing with such forward-thinking nations as Syria and Nicaragua — literally the only two other non-signatories to the Paris pact — won’t help us along.)
Xenix was where I learned how to Unix. My father had a Tandy computer that ran it. The version I used would be quite unfamiliar to hackers today; as it was derived from Version 7 and lacked the SysV-isms and BSD-isms that have accreted in Unix derivatives since. Mainly because of my Xenix exposure, I may be a member of one of the last generations to see and use green-screen terminals.
When, years and years hence in college, I would hear that you could download a Unix to run on your 386-class PC, for free, I was on that like white on rice.
>With the mentions of Microsoft, and the mention of Unix going closed-source back in the mid-80’s thanks to AT&T breaking from Bell Labs, does anyone have any thoughts on Xenix?
AT&T Unix was never open-source (until the sources for research Unix were released well after Linux and BSD were already on the scene). It was under a relatively liberal proprietary license under which licensees got to see the source code. And what happened in the 80’s wasn’t AT&T breaking from Bell Labs (they owned Bell Labs). What happened was AT&T getting out from under a consent decree that disallowed them from selling products and services not directly related to telecommunications, and deciding, given the popularity of Unix, to tighten up the licensing terms and sell it as a commercial product.
> So they switched over to working on a different system with IBM (OS/2), and then yet another system (NT) when that fell through.
Not exactly. NT started life as an extension of OS/2, but when DOS-kernel Windows turned out to be wildly successful, Microsoft decided that they wanted the primary API for NT to be the Windows API, not OS/2. IBM wasn’t happy with that, so the partnership broke up and the two systems diverged.
I think part of the problem was that OS/2 was predicated on the 80286, because of IBM’s commitments to its customers, and that made making it useful difficult. Windows/386 would multitask DOS and make use of larger amounts of memory even before the Windows bit became popular with the arrival of 3.1.
NT was a clean start, always intended to be cross-platform and to be capable of hosting a range of APIs, so Posix, OS/2 and the new Win32 when it first arrived. IIRC NT supported a range of filesystems, FAT, HPFS from OS/2 and the new NTFS from the outset.
Long time ago now. I remember how serious OS/2 2.0 users were, all that formatting floppies while downloading email.
>Mainly because of my Xenix exposure, I may be a member of one of the last generations to see and use green-screen terminals.
One thing that’s funny to me is, some of the last people to actually USE green-screen terminals are likely retail workers.
My first full-time job was for a small business that ran said business off of one SCO Unix server and a number of green-screen terminals. I already had quite a bit of Unix exposure, and they were glad to at least find someone comfortable with being in the same room as the server. :) (Man pages still said ‘Xenix’ like every third word.)
For years after, I would still see green-screens scattered around stores (box stores, and certain types of small business). All those terminals seem to be PCs now, but you still often see TUI apps for business functions.
Yep, rinky-dink (compared to Sun, IBM, or HP iron) PCs serving multiple users off terminals in mom-and-pop auto garages and the like was pretty much the canonical use case for Xenix.
The last place I actually saw a terminal was in a Pizza Hut in 2012. It was displaying some POS (in both senses, likely) application and were I to hazard a guess I’d say the OS being run on the doddering old back-office computer driving it was Xenix. Or SCO OpenServer or whatever the successor was called.
> Trump pulling out of the Paris climate deal
The projected difference 80+ years out between the world *with* the Paris Accords and without the Paris accords is trivial, and during the early part of that time the US would be expected to shovel billions of dollars at “developing” nations to build clean energy plants.
Honestly Mr. Read, where do you think the billion dollars the Oblamo administration sent to the second and third worlds for “clean energy” went?
Secondly, the Paris Accords let India and China do whatever they want for the next decade and a half. Now, China is doing some interesting stuff with nukes (or at least testing), but given China’s (and India’s) normal QA/QC that’s a *little* nervous making, but even the clean coal plants their building will still leave coal ash around–maybe not as much in the air, but do you REALLY think that residue would be disposed of properly? You do know that coal contains a c*p load of heavy metals and radio active materials, right? (Yeah, I’m a libertarian conservative and HATE that we’re burning coal. F*k the CO2, that stuff is good for plants. The OTHER stuff is nasty).
Third, Germany is shutting down it’s nuke plants and switching BACK to coal (and natural gas, but coal is big in the mix). The fruitcake that Macron wants as his energy minister is anti-nuke as anti-nuke as they come. There is NO WAY that with the two biggest economies in Europe moving *away* from low-carbon energy that the EU would be able to meet *it’s* targets. This is assuming they even tried. During the Kyoto period the only industrial nation that lowered it’s CO2 output at all was the one–the US–that refused to sign on, and most of that was because we had a recession and during the recovery moved much of that production to China.
Finally it didn’t matter whether Trump pulled out or not, there was no treaty and hence the accord was NOT binding on the USG. No president would have been able–without Congress–to force any real changes in energy production and consumption. They might have been able to issue Executive Orders, but those don’t have the force of law unless Congress says so.
Europe is wrecking itself economically with their implementation of “Green Energy”. They’re cutting down trees faster than they grow so they can claim to be using “renewable” resources. Wind and solar aren’t carrying as much as was claimed they would, and if they’re really concerned about “catastrophic global climate change” you’d think they’d do something *personally* to reduce it. Like maybe stop flying fleets of jets everywhere. (Do note that HRM Queen Clinton insisted on flying on a *separate* plane from the future president Michelle Obama to some overseas shindig. When *they* act like there’s a problem then I’ll start to think about worrying).
The Paris Accords had 2 unspoken goals: Hobble the US economy to keep Europes from looking like s*t, and transfer lots of money to “Developing” nations, and from there to political connected contractors and despots.
And the UN bureaucrats have let slip publicly that the whole CAGW thing is really about transferring wealth from developed nations to less developed ones.
Fuck that noise. If you want to redistribute wealth, come out and argue for it as your true goal. Don’t destroy the credibility of science itself by perverting it to push that agenda.
@William O. B’Livion
You (and the Republicans) misrepresent the Paris accord. Macron has a nice answer to each of your points:
But it is already clear. Nothing, really nothing, Trump says is related to reality. I think that in future times “Trump” will be synonymous to “fake news”.
What is surprising, though, is that Trump is able to implement policies that are opposed by everyone involved, outside of Washington, be it health care or climate policy. Every industry or pratitioner involved is against it. Except those that already failed decades ago and hope to return to tge 1980s.
Trump also is the biggest boost to Chinese foreign policy influnces. We do not have to wait 30 years for the Chinese economy to outgrow the US. They can reap the awards today.
Nothing, really nothing, Trump says is related to reality.
Trump says the USG should put the interests of American citizens above all others. That’s the most reality-based statement uttered by a US official in the last half century. And it’s the only one that actually matters, all else are details.
Trump is able to implement policies that are opposed by everyone involved,
Everyone? Tens of millions of American citizens voted for him and still support him. Do they not matter?
We do not have to wait 30 years for the Chinese economy to outgrow the US.
Reports are that such already happened under the Obama administration. And how would continuing the current failed policies have changed that outcome?
“And the UN bureaucrats have let slip publicly that the whole CAGW thing is really about transferring wealth from developed nations to less developed ones.”
Your understanding if the Paris accord strongly reminds me of Scrooge and Christmas.
For a more comprehensive view, see the explanations of Macron in the link above.
Quick, name the worst CO2 polluter in history.
It’s the United States of America.
The mighty US economy was built by despoiling the environment. Any climate accord which does not drop the hammer on the US specifically is not adequately addressing the issue. Wealth transfer from the U.S. to fund other countries’ green-energy efforts is merely reinternalizing some of the negative externalities.
Macron’s trying to sell the American public on adopting the very programs he wants us to. That doesn’t change in the slightest the reality that those programs are about naked transfers of wealth, nothing more; the “science” is a smokescreen that’s rapidly blowing away in the winds of reality.
Quick, name the worst CO2 polluter in history.
China is the largest producer of CO2.
And CO2 is not a pollutant, it’s plant food.
Any climate accord which does not drop the hammer on the US specifically is not adequately addressing the issue. Wealth transfer from the U.S. to fund other countries’ green-energy efforts is merely reinternalizing some of the negative externalities.
Ah, a rare moment of honesty … it’s all about retribution.
Jeff: <Reagan>Well, there you go again.</Reagan>
If you’re going to fix the “climate problem”, you need to go after the biggest emitters.
That does not include the US.
And no, dropping the hammer on the US specifically won’t fix the “problem”…what we’ve emitted in the past can’t be un-emitted.
But I have come to expect nothing from you but blame-America-first policies, and this one’s no different.
Oh, and give up on the “negative externalities” already. We see through that; it’s the Left’s favorite way of making their punitive, confiscatory taxation and wealth transfer policies sound like they make economic sense.
Free Markets at its best: I keep the profits, you clean up the mess.
The current problems with the climate were not caused by China and India, but by the “West”. Still, these countries are working hard to convert their economies. A much more difficult effort for a country that is still struggling to deliver electricity to every home than for a country that uses airco to cool their garages.
“That doesn’t change in the slightest the reality that those programs are about naked transfers of wealth, nothing more; the “science” is a smokescreen that’s rapidly blowing away in the winds of reality.”
Actually, in its current incarnation, the science is 50 years “old” this 1 May (the science originated more like 150 years old). Not much blowing away, is it?
What seems to be blowing away is the deniers. Even Trump admits climate change exists and is caused by humans.
Your “naked transfers of wealth” is only $100B. For comparison, the annual solar panel market is currently worth $65B and that of wind turbines is $76B. Current annual development aid is $125B. All trade, investment, and aid add up to $1.3T annually (for which more than $3.3T is paid back annually to the rich world). $100B is peanuts, a rounding error.
Really, all the resistance to climate change comes down to whining about $100B of which the US is paying only a part.
“Trump says the USG should put the interests of American citizens above all others. That’s the most reality-based statement uttered by a US official in the last half century. And it’s the only one that actually matters, all else are details.”
What is the most stupidest thing you can say to friends and clients? That you will always put your own interests before theirs. Because, after this, you will have no friends and clients anymore. We see this happening already for the USA.
This might have worked in the 1950s, when the USA dominated global industrial and economic output. Nowadays, the US is not that dominating. You say “Innovation”? All these innovators are against Trump’s policies. If the USA succeeds to drive the rest of the world to team up against them, what options are left? War?
And Trump’s voters? The economic power of Republican voting districts is that of a developing country. Trump’s victory is literally the economic losers trying to impose their incompetence onto those who were successful.
“And in relation to carbon dioxide, I thought everybody who’d ever bothered to read astronomy while in high school, knew that carbon dioxide in high quantities, retained heat. ”
Yes, but that is science. The problem is not with the science, but with the fact that Climate Change cannot be solved by free markets without the involvement of governments. Anything that cannot be solved by Free Markets alone cannot be admitted to be a problem*, at any cost. See the US health care system.
(*the exceptions are guns and armies)
“Really, all the resistance to climate change comes down to whining about $100B of which the US is paying only a part.”
No, Winter. The resistance to the CAGW cult is based in part on the fact that the “science” relies heavily on modeling that’s been thoroughly busted, and in part on the fact that the only solutions presented are the same old tired leftist goals of total government control of economies. It’s the same song, the 47386th verse, and we see it for what it is.
What is the most stupidest thing you can say to friends and clients?
You’re fundamentally dishonest, Winter. We’re not talking about clients and friends. We’re talking about sovereign nations. There are things that work at the level of family, friends, tribe, business partners that all know each other well – but those things don’t scale.
You say “Innovation”?
No, I didn’t. It’s your dishonesty showing again. Don’t put words in my mouth.
what options are left? War?
The war is already upon us – just like it is for Europe – because our leaders didn’t put their own people above all else.
Trump’s victory is literally the economic losers trying to impose their incompetence onto those who were successful.
Because the ethics and morals of SF are the highest ideals we should aim for?
I thought communists weren’t supposed to be elitists. Just more of the same dishonesty, I suppose.
The real incompetence are those who think they can ignore the lessons of history while re-wiring human nature.
“We’re not talking about clients and friends. We’re talking about sovereign nations.”
Many of which are/were populated by your friends. Friends who are scratching their heads on what to do with you. Sovereign Nations are symbolic, imaginary entities that indeed have “friends” of sorts.
“Don’t put words in my mouth.”
I was anticipating an answer I have received many times. But if you do not want to say it, then that is OK.
“The war is already upon us – just like it is for Europe – because our leaders didn’t put their own people above all else.”
War is never inevitable and there are never winners, only losers.
“Because the ethics and morals of SF are the highest ideals we should aim for?”
I can distinguish economic success from economic disaster. In the end, all economic growth comes from innovation. This is amoral. There is a lot of growth left in ICT and renewables. Not much in coal mining.
“The real incompetence are those who think they can ignore the lessons of history while re-wiring human nature.”
The lessons of history are that innovation leads to growth, war to poverty, and all wealth comes from trade. Also, isolationism has never brought riches or happiness. And the biggest lesson from history is that the moral outrage of today is the laughing stock of tomorrow.
And really, I seriously doubt your deep understanding of human nature’s wiring.
It is sad to see Jeff Read and Winter slipping off the cliff of Trump Derangement Syndrome. Despite their lunatic ideas they were always at least interesting.
At least they aren’t screeching, yet.
Friends who are scratching their heads on what to do with you.
If we stand alone in the battle for Western Civilization, so be it. Maybe the roll-over-and-play-dead countries will learn from our example.
Sovereign Nations are symbolic, imaginary entities
And so you identify as a freedom-hating pollyanna globalist.
Nations are people with a shared culture, history and usually religion. They’re not accidental, they are concrete things that serve a necessary purpose. Nations are organic; your beloved global tyranny is hierarchical, rigid, and imposed from above. You can keep your Cathedral.
War is never inevitable
Stop putting words in my mouth. I said it is already here, not that it is inevitable. Whether it can be forestalled after you globalists finish trouncing about remains to be seen.
I can distinguish economic success from economic disaster.
And you have made no case for either.
And the biggest lesson from history is that the moral outrage of today is the laughing stock of tomorrow.
Thank you for making my point for me. But why wait, we’re already laughing.
And really, I seriously doubt your deep understanding of human nature’s wiring.
I tried explaining Calculus to my dog, but he had a very doubtful look on his face.
Winter: “What is the most stupidest thing you can say to friends and clients? That you will always put your own interests before theirs. Because, after this, you will have no friends and clients anymore. We see this happening already for the USA.”
Why are the people of the Netherlands obliged to be loyal to, and follow the laws of, the state of the Netherlands? Because the state is or claims to be responsible for their interests, putting those interests before all others. That has been the legal principle of the European state system since at least 1815. If the state of the Netherlands ever announced that it would subordinate its citizens’ interests to those of a foreign country, or of the world at large, it would by that act lose its authority over its citizens, and unmake itself as a legal entity.
Put simply: if a state demands my allegiance, but declares that it will treat me exactly the same whether I pledge to it or not, why on earth should I agree to its demand? Why pay it any heed at all?
I realize that the European political class has forgotten the principle that justifies their existence and authority, and are terribly shocked when Donald Trump applies it to his country. But that’s their problem, not Trump’s or America’s.
>That has been the legal principle of the European state system since at least 1815.
Peace of Westphalia, 1648. Particularly applicable here because the treaty ratified the existence of the Dutch Republic, which may have been the first polity since classical times to base its claim to sovereignty primarily on the exact principle that it represented the interests of its citizens and no other thing (there are some arguable precedents in Renaissance Northern Italy and Switzerland).
Michael Brazier on 2017-06-05 at 17:42:34 said:
> Why are the people of the Netherlands obliged to be loyal to, and follow the laws of, the
> state of the Netherlands? Because the state is or claims to be responsible for their
> interests, putting those interests before all others. That has been the legal principle of the
> European state system since at least 1815. If the state of the Netherlands ever announced
> that it would subordinate its citizens’ interests to those of a foreign country, or of the world
> at large, it would by that act lose its authority over its citizens, and unmake itself as
> a legal entity.
Isn’t that pretty much what the EU is about?
And, basically, the Why of Brexit?
> Put simply: if a state demands my allegiance, but declares that it will treat me exactly the
> same whether I pledge to it or not, why on earth should I agree to its demand?
It’s not whether it will treat you the same whether you agree or not, it’s whether that state will treat those that DO NOT owe it or you allegiance better than it treats those who aren’t part of it.
Right now “criminal immigrants” are treated better by the many state and local governments than people born here.
> Why pay it any heed at all?
Raw Naked Force.
> I realize that the European political class has forgotten the principle that justifies their
> existence and authority,
Their existence is their authority, peasant.
“it represented the interests of its citizens and no other thing”
The best way to represent the interests of the citizens of a nation is to recognize the interests of others. Telling everyone that you will not recognize their interests is nothing short of telling them you are their adversary. Trump’s America First speeches are telling the world that his government will trample on the interests of every non-American.
Russia, China, and France are pure power diplomatic powerhouses that have pursued their national interests ruthlessly. They were never so stupid as to flatly ignore the interests of others and never ever told their allies they would trample on their interests on the first opportunity.
As a great philosopher has said: Stupid is as stupid does.
>The best way to represent the interests of the citizens of a nation is to recognize the interests of others
“Recognize” is not the same as “defer to”.
““Recognize” is not the same as “defer to”.”
In the context of Trump’s rampage, this is an idiotic statement. Let us take the French as an example.
When have the French “deferred to” the interests of others?
When did they tell their allies and friends they would trample on their interests at every opportunity?
(same questions for Russia and China)
There is a very broad and clear line dividing honesty and stupidity. Trump crossed it by a wide margin. But I must admit, the Republicans seem to back him on this wholeheartedly.
When the interests of your citizens are best served by cultivating the good will of other nations, as is almost always the case in today’s modern, interconnected, global society, then at a very minimum not flipping them the bird when they make their interests known is called for. Trump is squandering the good will not only of others in nations abroad, but of the rank and file below him right here at home because he does his own thing without any regard for others. And that is not how the leader of a civilized nation should act.
“Put simply: if a state demands my allegiance, but declares that it will treat me exactly the same whether I pledge to it or not, why on earth should I agree to its demand? Why pay it any heed at all?”
If a state demands my allegiance, but declares it will trample over the rights of other humans at every opportunity, why on earth should I trust it to not trample on my rights?
And why would I be so stupid to think that forcing money out of other people today will not be extremely bad for me in the future? Since when has “beggar thy neighbor” started to become a good long term strategy?
@Winter: When did they tell their allies and friends they would trample on their interests at every opportunity?
(same questions for Russia and China)
They didn’t tell them, they just went ahead and did it. For example, Russia didn’t tell the Ukraine it was going to trample on its interests by invading the Crimea, it just did it. That’s what countries who are going to trample on the interests of others do.
The US, on the other hand, prefers to warn others when they are doing things that are likely to conflict with our interests, to give them a chance to change their behavior. That, btw, is not something that just started with Trump. If anything, it’s a return to normal procedure, after a period when, for example, the Obama Administration warned Syria about using chemical weapons, and then did absolutely nothing when Syria used them.
When did Trump tell America’s allies that he would “trample on their interests at every opportunity”? Not, certainly, when he announced the USA’s withdrawal from the Paris accord. What he said was that the Paris accord would do no good for the world, and a great deal of harm to American citizens; and, that it wasn’t his job to sacrifice the interests of Americans to indulge the fantasies of European politicians.
Macron’s remarks, by the way, were an instance of the “politician’s fallacy”: we must do something about CO2 emissions, the Paris accord is something, therefore we must do it. He didn’t even address the issue that the Paris accord wouldn’t restrict CO2 emissions, just transfer them from the US (and EU) to other parts of the world, principally China.
What Trump has trampled on by this action is the reputation of European politicians. He has called their judgement into question; he has told the world that they were taken in by a swindle, that they are incompetent stewards for their nations’ interests. IOW he has impudently announced that the emperors leading the grand parade have no clothes on. The denunciations from the EU are nothing more than the emperors saving face by saying that Trump is a double-dyed villain, and that’s the only reason why he can’t see their magnificent court dress that cost so much money to make.
Winter: “And why would I be so stupid to think that forcing money out of other people today will not be extremely bad for me in the future? Since when has “beggar thy neighbor” started to become a good long term strategy?”
That question is better put to Macron than to Trump, since it’s Macron who wants other people (namely the USA) to spend billions of dollars on boondoggles in the Third World. AFAIK Trump isn’t trying to force money out of anyone.
Unless you’re referring to Trump reminding France and Germany of their obligation as NATO members to maintain actual armies capable of fighting a serious war? But not only is that a treaty France and Germany actually signed, it’s something those nations ought to have done in their own interests, regardless of the treaty. Do the Europeans think America will protect them gratis for ever?
>Do the Europeans think America will protect them gratis for ever?
Not only do they think that, they think they can count on us to spend blood and treasure to protect them (subsidizing their welfare states) while sneering at us and denouncing us as militaristic barbarians. They have some grounds for this, having gotten away with it since WWII.
If Donald Trump does nothing else right, informing them that the U.S. will no longer put up with this shit will still count as a major good deed.
Ah yes. “Making mock of uniforms that guard you while you sleep”.
(ESR, there should be another message from me in your moderation queue.)
Meh, not just Europe; US military haven been active all over the globe since WWII
And it would be naive to think this was not motivated by US interests.
No one in their right mind is denying that: the US is an economic superpower. It is in our interest to not have people kicking over the table every time they feel like having a tantrum.
There are of course many other reasons, but that one will do for a start.
“And it would be naive to think this was not motivated by US interests.”
tl;dr: The protection by its armed forces is a very lucrative business for the US.
The fact that oil is traded in dollars as well as that the dollar is the world’s reserve currency, makes that the US can “print” more dollars than they are actually worth. Other countries, especially those under the protection of the USA, are “invited” to keep a lot of money on US soil. Together this means that a sizeable fraction of the US GDP is produced outside of the USA and “donated” to the US economy. In the 1990s I saw numbers that said ~7% of US GDP was foreign support.
Here is some recent info about the dollar
Now and then, there are governments that attempt to change reduce the standing of the dollar. So, around 2000, Saddam Husein decided to sell oil in euros. Events prevented this shift. In fact, every attempt to change the status of the dollar leads to very unfortunate events, often involving the US armed forces.
Around 2000, there was an enormous interest in the Roman Empire in the USA. Some called the USA the new Roman Empire. I do not think it was a coincidence. The Roman Empire too was a means to funnel money from “allies” and provinces into the coffers of Rome in ways that look a lot like the historical analogues of how the US empire is financed.
“When did Trump tell America’s allies that he would “trample on their interests at every opportunity”?”
Here is the reaction of a large part of the world to the “America First” speeches:
Who wants to be second?
Zoom in on the Dutch and German contributions. I think they are the best. The Swiss is very good too.
It’s like I said, never trust the narrative of the U.S. government when it comes to who is a “tyrant” or a “brutal dictator”. The application of those labels is less a function of actual brutality and tyranny than it is of who goes along with the American economic agenda and who decides to become independent of it, as — to name just one example — the unfortunate citizens of Chile discovered in 1973.
Winter: “Here is the reaction of a large part of the world to the “America First” speeches:”
Again. When did Trump tell America’s allies that he would “trample on their interests at every opportunity”? What European politicians claim he said means less than nothing. Quote the man himself, or admit you’re wrong.
As for your other remarks, America will not reach the level of the Roman Empire until the US military is routinely levying taxes on foreign countries – because that was how Rome became the richest city in the Mediterranean. People have been comparing the USA to Rome since the first hour of its existence, almost always as a warning; there’s nothing new in that. The stuff you’re complaining about doesn’t even reach the level of how Athens treated the Delian League.
“When did Trump tell America’s allies that he would “trample on their interests at every opportunity”?”
Forcing Mexico to pay for a wall it does not want.
Reneging on trade agreements. Trump has said he will cancel about every trade treaty the US signed.
Threathening to not honor the Nato treaty.
Denying people with a valid visum entry into the US without warning.
Trump has threathened to default on US debt.
“When did Trump tell America’s allies that he would “trample on their interests at every opportunity”?”
It is not just your words, but also how they are understood. Here is how the world understands The Donald in Action:
EU leaders attack Donald Trump saying ‘we won’t be trampled on’ and warn of impact on the bloc’s future relations with US
Donald Trump Is Alienating His Most Valuable Allies
There is now considerable doubt as to whether Trump will even put the interests of Americans first. Putin scratched his back, and will probably come around to collect the back scratching he is owed.
And before you say “Where is your evidence?” take a good hard look: bad things happen to the careers and lives of anyone who gets near the evidence and is in jeopardy of exposing it, including James Comey and Reality Winner.
Winter: “It is not just your words, but also how they are understood.”
This is the logic that led certain people to claim that “niggardly” is an ethnic slur.
Look. Trump is saying that large parts of the post-WWII diplomatic settlement no longer serve America’s national interest and should be revised. This is deeply shocking to people who have believed all their lives that America has no national interest that can be separated from the general good of the world, and that the post-WWII diplomatic settlement is exactly what the world needs. But shocking people is not an injury to them, or even a threat. Sometimes it’s salutary.
Take NATO. It’s the simple truth that the states of Western Europe lack the ability to defend themselves from foreign invasion (never mind mounting a military expedition of their own) and are relying on America to fight for them should a war occur. They are, therefore, a liability to the American alliance system; they impose an obligation on America that far exceeds what they contribute. If it takes Trump saying that the obligation might not be honored to spur Europe to prepare for its own defense, then not only can he say that, he should. (Note that America’s allies outside Europe don’t rely on us for basic self-defense. Only Europe has reached that degree of fecklessness.)
“Trump is saying that large parts of the post-WWII diplomatic settlement no longer serve America’s national interest and should be revised”
Not quite. He says he will renege on earlier promises and unilaterally withdraw from treaties. And he will force Mexico to pay billions to the US.
It is like he did with his contracters: Simply not honor his part of the contract.
There must be a word in the US for people who refuse to pay their dues because they can.
Jeff, read this: Chris Matthews: Trump-Russia collusion theory ‘came apart’ with Comey testimony.
The idea that Putin engineered the 2016 election in Trump’s favor is a conspiracy theory with the same level of credibility as the idea that Barack Obama was not born an American citizen.
Ler’s wait for the FBI investigation. There are already two suspected federal crimes in relation to the election: The DNC hack and an aid of Trump negotiating with a Russian official.
In both cases the Russian government is strongly suspected to be involved. And both would imply collusion between the Trump campaign and Russian officials.
Trump himself is not helping when he tells outsiders he fired the director of the FBI because of the investigation of this collusion.
Btw, the whole handling of firing Comey is a new testimony of his complete incompetence.
>Not quite. He says he will renege on earlier promises and unilaterally withdraw from treaties. And he will force Mexico to pay billions to the US.
You seem unclear on what constitutes a treaty.
Hint: Paris ain’t it.
The people upset that Trump can unilaterally (heh) withdraw us from a ‘treaty’ that is in fact no such thing, should have been upset at Obama for attempting to unilaterally commit us to such a ‘treaty’.
Except that acting within the bounds of the law is bad when the action taken is something they disagree with, while breaking the law is fine if the action taken is one they agree with. That goes double if the law was broken specifically to allow the action to succeed.
If not for double standards, the American political left would have no standards at all.
If you don’t understand any of that, ask how the US was party to the Paris climate agreement in the first place. Because in the US, the law requires the Senate to ratify treaties. That never happened, because the then President knew it wouldn’t pass….
Not the only time he did that, either.
To amplify Greg’s statement: This is Constitution 101. For the US to be a formal party to a treaty and be bound to it, it must be signed by the President or his designee, and then ratified by a two thirds vote in the Senate. If the Senate doesn’t ratify it, we are not bound by it.
Indeed, I’m persuaded that Trump screwed up. What he should have done is declare the entire UNFCCC framework not binding on the US, because it has never been ratified by the Senate. Why? Because it would never pass. That’s the reason we were never bound by Kyoto, as well: the President knew it had zero chance of ratification.
We can act in accordance with a treaty we have signed, but unless it is ratified, it does not bind the United States government, and a later President can revoke our signing of it. That the other countries of the world may not like that much is completely immaterial. The President does not have the power to bind the government of the United States to a treaty, period. Any attempt to do so is unconstitutional, and under long-standing Supreme Court jurisprudence, an unconstitutional act is as invalid as if it had never been done in the first place.
@Greg and Jay
I was not talking about Paris. I was talking about Nafta, and Nato and all the other treaties Trump has said he would unilaterally withdraw from.
Trump wanted to welch on the NATO treaty too, but it looks like he’s walked his position back on that — because he knows he can’t get away with it.
>Trump wanted to welch on the NATO treaty too, but it looks like he’s walked his position back on that — because he knows he can’t get away with it.
NATO is one big example of the free rider problem. Always has been. Trump has attempted to address that.
Euros might consider heeding the Orange One on this one. You don’t like the overbearing US bullying people with its excess of power? If the US were as humbled as you wish it would be, what would you hide behind? Good luck with that.
Hint: The little Leopard 2 renaissance happening right now is a drop in the bucket. If nobody understands that…. At the height of the Cold War, West Germany developed a tank, the Leopard 2, as good (better in some ways) as the M1 and bought several thousand of them. When the Cold War ended, Germany put most of them into storage and has been selling them off a little bit at a time ever since. Recently demand for leftover examples has gone up, and everybody is in a hurry to upgrade and modernize what they have. Germany has even put a few extra back into service, though IIRC they still have fewer than 10% as many in service as in the 80’s.
“NATO is one big example of the free rider problem.”
The US did not want Europe to rearm. Tgey wanted Europe to pay the US directly. European countries have “invested” and “lend” enormous amounts of money to the US. Much of which never returned.
And here are the numbers of the inbalance:
“Trump has attempted to address that.”
No, he said he would not honor the treaty.
Winter: “European countries have “invested” and “lend” enormous amounts of money to the US. Much of which never returned.”
The governments of Europe have bought US Treasury bonds in great quantities, which have not been repaid? You are seriously claiming the USA has already defaulted on its debt? What wonderland are you posting from?
… oh. No, you’re talking about investments by European citizens in American companies. As if what private persons do with their own property is somehow a decision made by their rulers, not by them.
Are you seriously proposing that the international markets in stocks and bonds should be shut down, and everyone forced to invest only within their own countries? That goes much farther than anything Trump has ever suggested.
“The US did not want Europe to rearm. Tgey wanted Europe to pay the US directly.”
If you think the USA asked for European states to pay for the soldiers we station on their soil, you’ve been smoking some serious drugs. And it’s a matter of record that the USA has repeatedly asked the other NATO members to arm themselves. So, you are imagining that the USA wants something of Europe it has never asked for, and has asked for something it doesn’t want. To which I say only – stop fantasizing!
>If you think the USA asked for European states to pay for the soldiers we station on their soil, you’ve been smoking some serious drugs. And it’s a matter of record that the USA has repeatedly asked the other NATO members to arm themselves. So, you are imagining that the USA wants something of Europe it has never asked for, and has asked for something it doesn’t want. To which I say only – stop fantasizing!
It’s even worse than that.
Not only has the US been providing most of Western Europe’s defense, but we’ve been actively subsidizing (as in buying for them, or simply donating ours) many of the weapons that the Western Europeans *have* fielded. Things like the Military Assistance Program, which among other things enabled minor NATO allies to field modern equipment.
Truly they will never forgive us for saving them. Then paying to rebuild their economies. Then saving them again.
“… oh. No, you’re talking about investments by European citizens in American companies.”
Investments made “profitable” by government policies that prop up the value of the dollar and stimulate investments in the US. Like buying oil in dollars and keeping large reserves of dollars (and store their gold reserves in the US). And investments and loans will be repaid, as long as they are replaced with more investments and loans.
Whenever the roll over loans and investments are threathened, bad things are on the horizon. Trump’s threat to default was a very clumsy response. Mostly, the foreign office has subtler methods to get countries in line. Devaluing the dollar is always an option. But messing with a country’s foreign trade is much easier (e.g., through the IMF and World Bank, credit rating companies, international banks, OPEC countries etc.).
Note that all the oil dollars end up in the US anyway, one way or another.
“Truly they will never forgive us for saving them.”
In 2006, the UK finally repaid their war debt to the US.
All in all, the “investment” of the US in Europe during and after the wars have repaid handsome profits to the US. In all kinds of ways (but not the meagre 2% of the above loan).
I am not one to deny them these profits. But I am not alone in objecting to being treated like one of Trump’s contractors. If the Americans really want to extract every last penny out of our friendship, this friendship might be over fast.
Winter, if the USA had the control over the world economy that you’re supposing, OPEC would have disintegrated soon after the first oil shocks, and Saudi Arabia would be impoverished today. Instead the cartel held together for four decades, and is failing now only because the US found a new supply of oil. The wealth of the Arabs refutes you.
You are set on believing that, if the whole world prefers to do business in dollars over euros, it’s not because the dollar is objectively better as a currency than the euro, it’s because those wicked Americans are cheating somehow. But your only evidence that the USA is rigging the market is … people using dollars more than euros.
I mean, if you want a case study of large-scale currency manipulations causing financial havoc, look at the euro! That’s what the quarrel between Germany and Greece is about. A lot of German banks got rich by servicing the Greek national debt, which Greece ran up because the euro made them look like good credit risks, and now that Greece can’t pay the banks are looking for a way to sell the debt to the EU and recoup their losses from the inevitable default. That’s the kind of thing that happens when finance becomes an instrument of state policy.
“it’s not because the dollar is objectively better as a currency than the euro, it’s because those wicked Americans are cheating somehow.”
You give me too much honor when you think I came up with this idea myself. It is what every economist in the world thinks.
In addition to my links above I would like to add:
Personally, I do not believe any of the predictions about the imminent end of the reign of the dollar. But who knows?
Wow, what is this place, Usenet semi-revived? :-)
I think it’s worth mentioning (even now after all the break-off threads have themselves split a dozen times over), that Henry was undoubtably quite well aware of his status as a Canadian citizen, which gave him some, if not considerable (especially at the time), protections from most legal issues that might arise from a U.S.A.-centric take on the copyright (and trade secret) related implications of re-implementing some hunk of proprietary code just from the documentation.
>>“Truly they will never forgive us for saving them.”
>In 2006, the UK finally repaid their war debt to the US.
>All in all, the “investment” of the US in Europe during and after the wars have repaid >handsome profits to the US. In all kinds of ways (but not the meagre 2% of the above loan).
Note, 17% of ALL our WW2 expenditures was just for giving stuff away. And starting off Roosevelt had to flout the law (both domestic and international) to do it. But we’re just like that when it comes to helping out a friend.
>I am not one to deny them these profits. But I am not alone in objecting to being treated like >one of Trump’s contractors. If the Americans really want to extract every last penny out of our >friendship, this friendship might be over fast.
That’s just the sort of ‘it’s delusional but it passes for CW’ that explains why Trump was elected, and that’s why Trump is trying to renegotiate the deal, to encourage Europe to GROW THE FUCK UP. Because you need to, if you’re going to survive.
>In 2006, the UK finally repaid their war debt to the US.
Actually, this on its own deserves a more thorough reply.
It seems the loan was ‘necessary’ because of the sudden ‘unexpected’ (that word again, comes up a lot when leftist presumptions don’t pan out) end of Lend-Lease. At the end of the war. Which ignores the purpose of Lend-Lease, which was to enable our allies to fight and win the war, not for them to receive permanent subsidies forever.
Dare I make one observation- “money is fungible”.
The loan enabled Britain to ‘buy’ (at absurdly discounted rates) equipment that we had loaned them, for free, for the war’s duration. And to buy food for the starving children, because while we had been happy to feed them for you during the war, the war was OVER so maybe you could feed your own people? Maybe?
But post-war Britain was tired of hardship, and demanded socialism. And as every keen observer knows, socialism is expensive. So what money Britain did have needed to be spent on domestic social programs, and not on any of those other trivial duties of a sovereign state.
See, this was just one of the first instances of the US enabling European infantalization. And somehow it is supposed to be evidence of how we are vicious exploiters. Sure.
How does that work? Once we start supporting you and providing for your needs that you should be providing yourself, you become dependents and we…. Continue providing for your needs. (Most obviously defense. And defense from Soviet aggression is only part of it. Defense of ALL overseas trade adds up, too.) I’m not sure where ‘we keep paying for your needs’ == ‘we profit’.
But I’m a little slow that way.
1) OPEC still trades oil in dollars. Were they to start trading in a currency independent of the dollar-based system, they would be punished — as Saddam was.
2) The structure of the world financial system, with the U.S. dollar as the world reserve currency, means that the United States does not pay for the defense of Europe. Quite the opposite, in fact. Foreign central banks are required to hold reserves in dollar-denominated Treasury bonds. Misguided American military adventures like the 2003 Iraq war were funded, in large part, by such foreign holders of U.S. securities.
3) I thought Reddit was the modern Usenet? We have a lot of libertarians and conservatives here, which means a level of political thinking and discourse not far above “Asperger’s-afflicted university undergrad” (the stereotypical libertarian demographic, in fact). When someone who actually knows how the world really works starts coming in and talking politics, it’s bound to challenge the dearly-held axioms of said libertarian and conservative contingent, and provoke a profound case of backfire effect.
Well if it had been intentional that would have been incredibly vicious.
If that is going to be an acceptable argument then let’s bring in JAD to give us his Unified Theory of Blacks and Women.
Yeah, didn’t think so. Just another leftist hypocrite.
The war effort and subsequent economic aid made the USA the global world power that could dictate the financial “world order”. As a result, the USA have run a trade and investment deficite for decades. As a result, literally trillions of foreign dollars are invested on USA soil.
Quite good return on investment.
That is just one way how this world order finances the USA economy. It is pretty difficult to claw back these investments as the 2008 financial meltdown has shown. Also illustrated well by the protracted efforts Germany needed to get part of their gold back from NY.
Jeff: “1) OPEC still trades oil in dollars. Were they to start trading in a currency independent of the dollar-based system, they would be punished — as Saddam was.”
Post hoc, non est propter hoc. Saddam Hussein offered many provocations to the USA, most of greater import than selling oil for euros – for instance, he ejected UN inspectors who were there to enforce the terms of the armistice that ended the first Iraq War. Treating his attempt to sell oil for euros as the only casus belli is idiotic or disingenuous.
“2) The structure of the world financial system, with the U.S. dollar as the world reserve currency, means that the United States does not pay for the defense of Europe.”
Piffle. Every penny spent on the equipment and personnel the USA stations in Europe comes out of the US federal budget, and will have to be paid for by US tax revenues, past, present or future. Unless the Treasury defaults, holders of US securities haven’t paid for anything the US government has bought. The correct description of the arrangement you’re talking about is that the USA has gone into debt to European central banks to supply the defense of Europe. (As Bill Buckley once put it, “We are paying Spain for the privilege of protecting Spain, such are the burdens of great nations.”)
Ultimately, the dollar is the world’s reserve currency because the US Navy guarantees the safety of commercial shipping and the US Treasury pays its debts. The euro is not the world’s reserve currency because the EU can guarantee nothing, not even the safety of their own citizens in their own homes.
>The war effort and subsequent economic aid made the USA the global world power that could >dictate the financial “world order”. As a result, the USA have run a trade and investment >deficit for decades. As a result, literally trillions of foreign dollars are invested on USA soil.
Multilevel logic failure here.
You imply exploitation.
There was a global war that left the US as the world’s only fully functional industrial economy. (The UK and USSR had industries that were intact at least, but overworked, abused, and underinvested.) For anyone with a mind for exploitation, this is a potential PARADISE.
And we responded by financing the industrial rebirth of our *enemies*, now economic competitors. As exploiters, we were absolute morons.
The order we created postwar was the same order we advocated for prewar- one based on free trade and open markets. We felt that would favor us. It did. It also favored *everyone else*. That’s why we helped undo the various closed/protected market system empires postwar.
Running a trade deficit is generally considered the opposite of exploitation, you know.
And perhaps the US has attracted investment because it has stable institutions, a relative lack of corruption, and an open innovative and productive economy. (All things Marxists abroad and Progressives at home destroy wherever they touch….. You’d think they hate those things.) Nah.
>>(the stereotypical libertarian demographic, in fact)
>If that is going to be an acceptable argument then let’s bring in JAD to give us his Unified >Theory of Blacks and Women.
>Yeah, didn’t think so. Just another leftist hypocrite.
He can’t help it. He’s VERY proud of being a *leftist* Aspie. Those other less enlightened Aspies can esad or diaf or something. Seriously, his howls of outrage in previous threads when he thought someone else was disparaging Aspies were epic. sigh
@Greg and Michael
“Running a trade deficit is generally considered the opposite of exploitation, you know.”
I cannot decide whether this shows naïvety, ignorance, or dogmatic blindness, or a combination of these.
I have given several links to supporting evidence explaining the history and consequences of the US dollar as reserve currency. You can easily get hundreds of such articles from economists, political scientists, historians, investors, and journalists at every level of learning. I have yet to find an informed article that refutes any of this. I have little hope that any of you can help in this respect.
Because that requires that you want to learn and understand. It seems to me that you want to prevent learning anything new at any cost. Rather dismiss anything new with rethorical tricks straight out of bad courtroom dramas. If all else fails, it is all a conspiracy of the left wing media.
Do you have anything to support your dismissive attitude that involves real economic data about the real world today? If not, I do not see a point in continuing a discussion based on rethorical tricks.
> “Running a trade deficit is generally considered the opposite of exploitation, you know.”
Running a trade deficit when trade is conducted in your own currency = getting something (valuable goods) for nothing (fiat currency).
>I have given several links to supporting evidence explaining the history and consequences of the US dollar as reserve currency. You can easily get hundreds of such articles from economists, political scientists, historians, investors, and journalists at every level of learning. I have yet to find an informed article that refutes any of this. I have little hope that any of you can help in this respect.
Things don’t always mean what you *want* them to mean. Your powers of reading comprehension, selection of sources/cites and assembly of such into a coherent argument have all been shown to be lacking.
The last time I wasted way too much time that I will never get back by thoroughly and completely researching a topic that you were blathering on, it turned out you were wrong about EVERYTHING. Every Single Thing. That one was about violence and crime in the US vs Europe, and it turned into an argument specifically about crime statistics in the UK.
You were wrong about raw numbers, about what they meant, about politics and procedures in the UK both historical and current and the terminology involved, and you got caught in a few logical failures as well.
There are only so many times I’m willing to see you cite a source, carefully read it, to see it actually means the exact opposite of what you are claiming. At least to someone who is not completely ignorant of well, everything. History, economics, politics, anything to do with any military matter….
For just the most recent example, see my longer reply to your use of the Anglo-American Loan.
Do you ever tire of humiliation?
Winter: That the dollar’s status as a reserve currency is beneficial to the USA is not in dispute. All the world over, people buy US T-bills because for more than two centuries everyone who has lent money to the USA has gotten it back with interest. The USA can borrow at very low interest rates because there was, historically, no risk in becoming its creditor. People outside the USA hold dollars for the same reason. You are, in effect, calling the USA’s reputation as a scrupulous debtor “exploitation”, as if honest dealing with creditors was something to be ashamed of.
As for your latest flight – none of the facts you linked to were new to me. It’s your interpretation of those facts that’s cockeyed. Or rather, prejudiced.
” All the world over, people buy US T-bills because for more than two centuries everyone who has lent money to the USA has gotten it back with interest. ”
People used British pounds for most of the last two centuries. They switched to gold after the world wars. The dollar was a logical choice after WWII because the rest of the world was in ruins.
But after 1970, the dollar was indispensible as you could only buh oil in US dollars. No dollars, no oil. And that shift was a conscious political deal between the US and the gulf states. There is absolutely no economic reason to not sell oil in euros or yuans if the client wants to pay. Except for the wrath of the US.
Winter: “People used British pounds for most of the last two centuries. They switched to gold after the world wars.”
You’ve stood history on its head here. Before 1931 the “British pound” was simply a defined weight of gold of a defined purity, like literally every other form of money in Europe. No nation on Earth switched to gold currency during the 20th century; rather, all nations switched from gold to paper money at some point in the Great Depression.
“But after 1970, the dollar was indispensible as you could only buh oil in US dollars.”
It turns out that this has no bearing on the dollar’s status as a reserve currency, as since 1970 (indeed, for quite some time before then) it has been trivially easy to obtain US dollars in exchange for any other currency you might care to name, in exactly the quantity you need for your current transaction. OPEC’s use of the dollar is, IOW, purely as a currency of account, and has no effect on the dollar’s value.
States trying to sell oil in other currencies are engaged in propaganda gestures, not offering a serious threat to the USA’s position. In every case I know of the states that tried that had declared themselves enemies of the US beforehand – usually, many years before – and hostile moves against them by the US can be easily explained as responses to earlier provocations.
And that disposes of the last of your claims.
“OPEC’s use of the dollar is, IOW, purely as a currency of account, and has no effect on the dollar’s value.”
I am puzzled by this response. You need to “own” dollars to be able to buy oil. These dollars have to be in your bank account. So you have to buy or borrow US dollars to buy oil. To be precise, the total oil market needs around $1.7T in dollars per year. If you claim that a large demand for dollars needed to buy oil has no effect on the value of the dollar, you might want to study some elementary monetary and currency texts. I would start with Seigniorage (Wikipedia).
This lack of elementary knowledge does go a long way to explain this protracted, and surreal, discussion here.
Here is a short explanation of the relation between the value of the dollar and oil prices:
More specifically, the world used gold-backed U.S. dollars after World War II, with a guarantee by the U.S. government of exchanging dollars for gold at the rate of $35/ounce. Taking the dollar off the gold standard was the final fuck you.
During the Bretton Woods summit, Keynes wanted to use a neutral currency unit, the “bancor”. But the Americans were like “naw, fuck that, we’re using dollars”. Europe and Japan were over a barrel at the time so they fell in line.
Curiously missing from the list of signatories to the Bretton Woods agreement which set up the dollar as the world’s reserve currency was the USSR. The USSR’s refusal to submit to American monetary hegemony was the event that precipitated the Cold War.
Winter, it’s actually quite simple. Suppose that one day the spot price of oil is $50/barrel and 1 euro buys $0.90. A man in Europe wants one barrel of oil and has 45 euros, so he goes to a money changer, buys dollars with his euros, then immediately buys his oil with those dollars from an Arabian oil company. Said company happens to want something from a European firm (it doesn’t matter what) so they promptly exchange those dollars for euros with, by coincidence, the same money changer their customer used. It should be obvious that this pair of transactions have, on net, no effect on the dollar/euro exchange rate at all.
The point is that all transactions on the oil market are like this. The number of dollars that get traded on any given day has no bearing on the dollar’s value relative to anything else. Instead, the price of a dollar is set by the number of dollars people want to keep – as is true of any currency. (Indeed, Gresham’s Law says that currencies are most traded when they’re least valued. In the Weimar hyperinflation marks were circulating in quadrillions – because nobody wanted them.)
Jeff: “The USSR’s refusal to submit to American monetary hegemony was the event that precipitated the Cold War.”
Oh, right, and Stalin’s decision to impose Communist governments on the eastern half of Europe had nothing to do with it. George Orwell had a remark about such beliefs: “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool.”
Indeed, Winter’s and Jeff Read’s arguments here are unmistakably of the same pattern as the mental habit Orwell described, and condemned, in “Notes on Nationalism”, where that remark appears.
“Winter, it’s actually quite simple. ”
You are now arguing that a change in demand does not affect prices. That is “unconventional”.
I assume you have the data to back up this extraordinary model of international money markets? I expect not, and this is just another Just So story to hide your ignorance.
What you are writing was already laughable when Adam Smith wrote his treatise. I am becoming more and more convinced that you have no clue about international money markets and politics. Nor about international economic history.
It is a pity. If you did knew what you were talkung about, I might have learned something.
Btw, I really admire George Orwell. I doubt whether Orwell would have admired The Donald. I am pretty sure he would have been horrified by Bannon.
Winter: “You are now arguing that a change in demand does not affect prices.”
No. I said that those who buy dollars only to spend them immediately aren’t part of the demand for dollars, making their effect on exchange rates negligible. If A gives B a thousand dollars, and B promptly spends every penny of it, A and B together have no effect on the market for dollars. The markets that move are those for whatever A sold to get the dollars, and whatever B bought with the dollars; the dollars just run around in a circle and end up where they started.
Another way of putting the same point is: in a perfectly predictable economy, nobody would ever hold onto money. The reason people keep some cash on hand, instead of spending or investing it, is to hedge against the unforeseen. In economic terms, money sought for immediate exchange is an accounting convenience, with the real transactions being what a person sells for what he buys. The actual demand for money as such is due to people not knowing what the future will bring, wishing to guard against unexpected loss or seize unexpected gains.
All of this is orthodox economic theory. Any text on basic economics discusses the difference between barter economies and money economies in just these terms. I will not return your rudeness and suggest that you never read a text on basic economics, but it’s clear that you’ve never applied that theory to petrodollars.
Incidentally, it follows from the above that the habit of foreign banks of keeping much of their reserves in US dollars is extremely relevant to the exchange rate for dollars. I’m a bit surprised that you didn’t try to make hay out of that. Was it, perhaps, too difficult for you to find actions of the US government that can be made to look like forcing the banks to do so? Or did you just fail to see the implication?
“No. I said that those who buy dollars only to spend them immediately aren’t part of the demand for dollars, making their effect on exchange rates negligible.”
Sorry, but this is not how currency markets work. The dollars are bought and sold in different markets. A large fraction is not spend but lend or invested in the US. This has large effects on how much money the US can print, exchange rates, the effects of inflation and trade and capital account deficits.
This is not somehow contended or argued in finance and politics. There are ample sources where you can learn about monetary policy and international currency markets.
But this is getting silly. I am not going to argue airodynamics with someone who claims pigs fly.
“I’m a bit surprised that you didn’t try to make hay out of that.”
Jeff Read already brought that up. I do not see why I should repeat his comments.
“In economic terms, money sought for immediate exchange is an accounting convenience, with the real transactions being what a person sells for what he buys.”
The 2008 financial meltdown, as well as all the earlier bubbles and meltdowns show you that this model is ruefully incomplete. It explains next to nothing about money markets.
But this has become a silly discussion. There is absolutely no argument under economists and political scientists about the importance of the reserve currency status and the oil market monopoly of the dollar for the currency and the benefits they bring to the US economy. Nor is there any discussion about how this was brought about by planned and deliberate policies of successive US administrations.
That you are here dismissing economic market theory and history just trying to score a nonsensical point tells me a lot about the depth of your armchair understanding.
What is really comical is that several hard-line Libertarians and Conservatives here are extolling the virtues and altruism of successive US administrations to me. That I live to see this.
Winter, everyone knows that the 2008 financial crisis was caused by securitized mortgages which were misrepresented as far less risky investments than they actually were. The money markets had nothing to do with it.
Now, if the House of Saud sells oil and uses the proceeds to buy US Treasury bonds, in economic terms they’ve just exchanged oil for US bonds; the markets for oil and bonds are affected, but the one for dollars is not. All effects from the transactions on what the US Treasury can do stem from the purchase of the bonds, not the form of money involved. (If you are counting the market in US Treasuries as a “money market”, you are simply confused; a bond isn’t money and can’t be treated as money.)
I am merely repeating here what I said before, except for specifying what was purchased. You have yet to present any economic theory in support of your claim; you have only asserted that there is such a theory, and that the best authorities all agree with it. Well, the “best authorities” all agree that the Paris accord is absolutely necessary to save the planet, and that turns out to be Grade A horse manure when you look at the facts. So I’m not inclined to take an argument from authority from you.
Since the only definite thing you or Jeff has stated about US policies to prop up the dollar’s status is the arrangement with OPEC, it’s hard to discuss anything else. So I’ll just put the question directly. Can you name any policy of the US government – other than regularly paying its debts – which induces foreign banks to keep their reserves in US dollars?
> I am not going to argue airodynamics with someone who claims pigs fly.
Fundamental Truths of Networking #3: With sufficient thrust, pigs fly just fine. However, this is not necessarily a good idea. It is hard to be sure where they are going to land, and it could be dangerous sitting under them as they fly overhead.
Now that’s a bloody lie. What’s the point of arguing with you if you’re going to straight-up lie like this? Nevertheless, here’s a freebie:
I specifically mentioned the Bretton Woods agreement, which set up the dollar as the world’s reserve currency. Back then the dollar was gold-backed; Nixon took the dollar off the gold standard as a fuck you to the world when France, then other countries came to get their gold. This allows the U.S. to have an arbitrarily large trade deficit without the severe economic ramifications of a currency crisis, since the dollar is accepted effectively worldwide. This was known to French economists as exorbitant privilege.
Read Michael Hudson’s book Super-Imperialism: The Economic Strategy of American Empire for more info.
This info was not hard for me to find. Hudson’s book is a free download for crying out loud. It would not be hard for you to find either, but you really don’t want to know, do you? Better that your little mind remain closed, so that your conservative/libertarian dogma goes unchallenged.
This is the “backfire effect”.
Jeff: If the Bretton Woods agreement made the US dollar the world’s reserve currency, Nixon’s breach of that agreement should have unmade it – but it didn’t. It’s been nearly fifty years now since Nixon closed the gold window, and foreign banks still hold US dollars even though they are, quite literally, no more than engraved paper. If Bretton Woods worked as you suppose, Nixon’s act would have set off a massive currency crisis, and OPEC would have started selling oil in other currencies.
Bretton Woods simply acknowledged the financial realities as they stood in 1945, when the agreement came into effect. By 1971, thanks to the extravagance of the federal government under Johnson and Nixon, the official price of gold had fallen below its real price, which the French state (and others) were taking advantage of. The Nixon shock was no more than a prelude to the devaluation of the dollar; it showed the dollar was a weaker currency than it had been. But it didn’t end the dollar’s use as a reserve currency.
Incidentally, I don’t at all blame de Gaulle for exploiting the USA’s policy errors in the 1960’s as he did. The fault lies with Johnson and Nixon, who ran up a massive debt to pay for the Great Society programs and devalued the dollar to reduce that debt’s real value.
Your problem is to show how, when the Bretton Woods agreement has been a dead letter for more than forty years, the US dollar has retained most of the status it had at the end of WWII when that agreement went into effect. The question “Why do foreign banks hold US dollars and US government debt” has not been answered, unless you allow the obvious explanation, that foreigners trust the USA to make good on its debts.
I had not heard of Michael Hudson before. I will say that his Wikipedia article, which includes lines such as “Hudson notes that the existing economic theory (in particular, the Chicago School of economics) is in the service of rentiers and financiers and has developed a special language designed to create the impression that the current status quo has no alternative”, and the Wikipedia article on “super-imperialism” which describes it as Marxist jargon, predisposes me to thinking him a sophist. But then, Wikipedia is known to be unreliable.
I do notice, however, that Hudson’s Super Imperialism was published in 1972, during the fall of the Bretton Woods system, and thus cannot have described any of the developments since that date – and those are what you have to explain.
It is difficult to argue whe half my comments are dropped.
But I’ll try again.
“Since the only definite thing you or Jeff has stated about US policies to prop up the dollar’s status is the arrangement with OPEC, ”
A rethorical trick to divert attention from the fact that we did talk about a lot of stuff besides oil. For one thing, the arrangement was not with OPEC, but with the largest Arab oil producers. These then moved the oil markets.
About the “theory” behind all this? What are you talking about? There are currency markets, international finance etc. And there is market manipulation by the biggest market party. That is not theory but practice.
“I had not heard of Michael Hudson before.”
It is obvious that the whole subject is new to you, starting with exchange currencies. Do not expect an introductory class in international currency markets and political history from us.
“With sufficient thrust, pigs fly just fine.”
I am still not going to discuss airodynamics with someone who claims pigs fly.
“Nixon’s breach of that agreement should have unmade it – but it didn’t. ”
At that time, Nixon knew he could do so with impunity. To Nixon and many of his kind, might is right.
Winter: “At that time, Nixon knew he could do so with impunity.”
You miss the point. Why is the US dollar a global reserve currency now? Why didn’t Nixon trigger a currency crisis in the US when he broke the Bretton Woods agreement? Nixon didn’t have the power to make foreigners buy and hold US dollars – the USA never has had such power – so why on Earth, after Nixon, do people still do it?
“I am still not going to discuss airodynamics with someone who claims pigs fly.”
Then why are you replying at all? Asserting “you’re an ignorant fool” doesn’t get more convincing when repeated.
My analysis of petrodollars is literally Economics 101. You claimed that OPEC’s setting the price of oil in US dollars increases the demand for dollars but not the supply of them, increasing the price of a dollar. Superficially plausible, but wrong: when a good is used as a medium of exchange, it’s part of two transactions, and the increased demand from the first is met by the increased supply from the second. And, of course, when the supply of and demand for a good increase by equal amounts, the good’s price doesn’t change. You ignore half of what’s really going on to make your case.
Finally, your overall thesis – that the defense of the dollar’s reserve currency status, at the expense of foreign nations, is the overriding goal of all American policy – leads you into claims which are patently absurd, such as “the Cold War started because the Soviet Union didn’t join the Bretton Woods agreement.” (A claim which, by the way, betrays the likely origin of this thesis in Soviet propaganda. If you’re convinced that Bretton Woods was imperialist exploitation, Stalin’s real exploitation of Eastern Europe doesn’t look nearly as bad as it truly was.) Since your theory has you saying things that are flatly contradicted by all the historical evidence, you have no room to call me ignorant of economic or political history.
That was my contribution, not Winter’s. He shouldn’t get heat from you about that one.
> and the increased demand from the first is met by the increased supply from the second.
And increased profit for the supplier. Printing a $100 bill only costs 15 cents. You’ve already conceded that the price doesn’t change, and you’re expecting us not to notice that you can’t dispute that the volume does.
“My analysis of petrodollars is literally Economics 101. ”
You are finally getting it, as Random832 already explained.
Increase of seignorage is part of the benefits. The banknote seignorage alone has been around $300B. Another big benefit is that the exchange rate of the dollar is protected against oil price volatility at the expense of other currencies. Yet another is that it is cheaper for oil producers to invest their petro dollars in the US than to exchange them for other currencies, which reduces dollar interest rates and increases US asset prices. And all this is just the oil part of the reserve currency benefits.
“Nixon didn’t have the power to make foreigners buy and hold US dollars”
Upto now you have argued against supply and demand. Now you add the theory of monopolies to the theories you reject. In the early 1970’s, the USA obviously had the market and political power to force this new financial order onto the Europeans. Maybe you can be fooled by alternative history about it. I was born and raised there and saw the balance of power at the time.
Winter: Again, you are looking at half the overall picture here. I’ll spell out the whole sequence of events once more.
First, an OPEC member sells crude oil for dollars. This removes a certain quantity of dollars from circulation, without changing demand from the rest of the world. If nothing else happened, this would cause the price of dollars to rise (Economics 101 in action.) But this leaves the OPEC member holding dollars, and it doesn’t really want dollars.
So, second, the OPEC members buys other things with the dollars from the sale. That returns to circulation all the dollars that the sale withdrew, so the number of dollars available is equal to what it was before the sale occurred. And the purchases don’t change demand from the rest of the world, any more than the sale did. So the purchases cause the price of dollars to fall by the same amount that the sale caused them to rise (Economics 101 again). Put together, the sale and purchases don’t shift the equilibrium price of dollars; what the sale did, the purchases undo.
Seigniorage occurs when people choose to hold a currency, taking it out of circulation for a time, instead of using it as a medium of exchange. Since pricing oil in dollars doesn’t give anybody reason to hold dollars that they didn’t have already, that custom has no effect on the dollar’s seigniorage.
“Another big benefit is that the exchange rate of the dollar is protected against oil price volatility at the expense of other currencies.”
From which it follows that the oil shocks of 1973 and 1979 never happened. Sorry, no; the volatility of oil prices is caused by volatility in the rate of oil extraction, and the American economy has no more protection from that than any other country’s does.
“Yet another is that it is cheaper for oil producers to invest their petro dollars in the US than to exchange them for other currencies”
In the modern financial system, the cost of changing money is trivial, especially compared to the amounts of money involved. You’ve listed three benefits of the petrodollar market to the USA, which are all negligible or nonexistent.
“Now you add the theory of monopolies to the theories you reject. In the early 1970’s, the USA obviously had the market and political power to force this new financial order onto the Europeans.”
The theory of monopoly, as I learned it, assumes a successful restriction on the production of some economic good, generally legal – state licensing of businesses abused to keep competitors to existing firms out of the markets, protectionist tariffs, etc. I fail to see how that theory applies to the Nixon shock, other than as a rhetorical device.
Your mistake is assuming that, because Nixon brought down the Bretton Woods system unilaterally, his action must have been to the USA’s benefit and other states’ detriment. It isn’t so, except in the very short run. The fall of Bretton Woods, and the shift to floating currency exchanges, was actually a sign that American power had declined – that it was no longer possible for the US government to control the value of the US dollar with respect to real goods. The states of Europe gained power when they were released from the obligation to peg their currencies to the dollar. Claiming that the USA forced the Europeans to accept a system that increased their power at America’s expense is … undeserved flattery for America, when you look at it. Should I thank you?
Seigniorage is any profit made off the issuance of a currency. In Barry Eichengreen’s words, “It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.” It means the USA can acquire more oil purchasing power by spinning up the printing presses, something no other country has the luxury of being able to do. Are you really so dense as to miss this?
“So, second, the OPEC members buys other things with the dollars from the sale.”
They don’t. They invest a large part in the US, drivong up asset prices, or lend it to Americans (private and public sector).
Seignorage comes on top of this. 15-30% of US banknotes are stored offshore.
You did not do your homework.
No, Jeff, I’m smart enough to think of asking “What would happen if the USA spun up the printing presses to pay for its imports?” I’m even smart enough to see the answer: hyperinflation of the dollar, and foreign banks dumping their dollars in a panic. Nobody holds onto a rapidly depreciating currency; that’s the practical limit on seigniorage.
After all, it costs only a few cents for the European Central Bank to issue a 500-euro note, and anyone else has to trade 500 euros’ value in real goods to obtain one. And the same is true for the yen, the renminbi, and the Venezuelan bolivar. Any state with a central bank can acquire purchasing power by spinning up a printing press – until people realize what it’s doing, at which point the state’s currency is used only for kindling or toilet paper.
The dollar is not exempt from this. If the US dollar went into a hyperinflationary collapse, OPEC would price crude oil in other currencies the very minute they saw what was happening. In the meantime, if OPEC chose to sell oil in other currencies while the US Treasury kept to its present level of restraint (haha) the market might fluctuate a bit thanks to people like you, but the real sources of demand for US dollars would still be there, and the whole thing would pass over.
Can we drop the “oil is priced in dollars” tangent now? The horse died days ago, it won’t help you to keep flogging it.
Me: “So, second, the OPEC members buys other things with the dollars from the sale.”
Winter: “They don’t. They invest a large part in the US, drivong up asset prices, or lend it to Americans (private and public sector).”
All that matters, in this case, is that the dollars are returned to circulation. What they’re exchanged for is irrelevant. After both transactions are done, the number of dollars in circulation is just where it was before the first transaction; therefore, the market for dollars doesn’t move.
Incidentally, I hear that Saudi princes own a lot of expensive real estate in London. I wonder why they bought that, if it’s so much easier for them to buy things from America.
“Seignorage comes on top of this. 15-30% of US banknotes are stored offshore.”
Dadgumit, Winter, that’s what I’ve asked you to explain. So far all you’ve managed is to state the bare fact, and mutter darkly that it proves the USA is exploiting the rest of the world. I want a causal sequence – A happens because of B – that stands up to examination. The petrodollar thing, I’ve already shown to be in the same category as “wet streets cause rain”. And I just remarked that the fall of Bretton Woods was a loss of American power and a gain to European states, which is an unlikely result for a calculated American plot against Europe.
Though, if you can’t figure out what it is I’m disputing with you, I may be asking too much of your dialectical talents.
“I’m even smart enough to see the answer: hyperinflation of the dollar, and foreign banks dumping their dollars in a panic.”
No, not if the FED would “print” only what is held offshore. This works for paper bank notes and cashless accounts.
We have been arguing for two weeks now that this is exactly what will not happen to a reserve currency unless they go off a cliff.
“After all, it costs only a few cents for the European Central Bank to issue a 500-euro note, and anyone else has to trade 500 euros’ value in real goods to obtain one.”
Except that you cannot buy oil with Euro’s, and other commodities are difficult too.
“If the US dollar went into a hyperinflationary collapse, OPEC would price crude oil in other currencies the very minute they saw what was happening.”
After which the US armed forces would leave the Gulf. The Gulf states would not survive for a year without US protection. These regimes have no legitimacy in their countries. Saudi Arabia is always on the brink of a tribal civil war. Iran alone is strong enough to run over the Emirates and Saudi Arabia. And that is when the US would not simply replace the Gulf regimes.
It seems that you think the US government is an efficient and benign organization run by altruists that rate the worlds well being over that of their own citizens. However, the rest of the world thinks differently.
“I’m even smart enough to see the answer: hyperinflation of the dollar, and foreign banks dumping their dollars in a panic.”
It is not a matter of smarts, but of being informed. A reserve currency can export inflation:
Welfare costs of inflation and the circulation of US currency abroad
“So, second, the OPEC members buys other things with the dollars from the sale.”
They don’t. They invest a large part in the US, drivong up asset prices, or lend it to Americans (private and public sector).”
That sure sounds like “buying other things with the dollars from the sale” to me. Regardless of what it is they’re buying, be it Manhattan real estate, the debt of American citizens, or cheeseburgers at McDonalds, they’re buying things with those dollars.
“That sure sounds like “buying other things with the dollars from the sale” to me. ”
Indeed, but these are not things that drive up inflation numbers nor do they affect the value of the dollar outside of the USA. Which means that the part of the transaction where foreigner X buys dollars drives up the exchange rate of the dollar but the part of the transaction where foreigner Y buys government bonds or real estate does not drive down the exchange rate of the dollar.
What all this does is driving up asset prices in the US which the people of the US use to borrow money against. Money used, among other things, to feed asset bubbles like the dot.com and housing bubbles of the 1990’s and early 2000’s.
Basically, the US can and do use this mechanism to export inflation and import capital. This is what makes it possible for the US to have a consistent trade and capital imbalance for the last three decades without a crashing currency.
Winter, you did notice that both those articles are arguing for a return to the gold standard, didn’t you? I thought you were a convinced Keynesian, and had no problem with fiat currencies. And neither article endorses any of the things you’ve been saying.
I quite understand that when the USA inflates the dollar, other states can either let their currencies appreciate against it or inflate to keep relative prices of imports and exports at par, and that people call the latter “exporting inflation”. What I don’t see is why a state letting its currency appreciate is considered a bad thing. Or rather, I see that it’s bad for the state – any opportunity to depreciate its own currency and claim the profit from seignoirage is good for a state’s budget – but it’s bad for the people it governs.
“Except that you cannot buy oil with Euro’s, and other commodities are difficult too.”
Go back and read my proof that pricing oil in dollars doesn’t affect the market value of dollars. I’m not repeating it again.
Me: “If the US dollar went into a hyperinflationary collapse, OPEC would price crude oil in other currencies the very minute they saw what was happening.”
Winter: “After which the US armed forces would leave the Gulf.”
In the event of a hyperinflation of the dollar, US armed forces would leave the Middle East regardless of what OPEC did, because the US government wouldn’t be able to pay for their supplies. Again you’ve reversed cause and effect.
Winter: “Indeed, but these are not things that drive up inflation numbers nor do they affect the value of the dollar outside of the USA. Which means that the part of the transaction where foreigner X buys dollars drives up the exchange rate of the dollar but the part of the transaction where foreigner Y buys government bonds or real estate does not drive down the exchange rate of the dollar.”
If this were correct, it would follow that as long as the US Treasury took care to buy only American products and securities with money fresh from the printing press, the price of a dollar in real goods within the USA would fall while the price of a dollar outside the USA would stay the same. Which is absurd. The USA’s border is not a hermetic barrier separating the domestic money markets from their foreign counterparts. When the Treasury conjures dollars out of thin air, every dollar in the world loses value, no matter where the new money is spent. “Exporting inflation” is possible only because the market for dollars is global.
The two claims you’ve made, that the dollar’s use as a reserve currency brings the US government seignoirage profits, and that it also gives US assets a competitive advantage over foreign assets, can’t both be true at once. You have to drop one. I recommend the second, since the first is true in the real world.
“Dadgumit, Winter, that’s what I’ve asked you to explain.”
What is there to explain?
Seigniorage? Look up Wikipedia.
Off shore dollar notes?
Reserve currencies and their political use? Look up “Reserve currency” in Wikipedia
The petrodollar and the US economy?
“Winter, you did notice that both those articles are arguing for a return to the gold standard, didn’t you?”
We do see the same problem, but we disagree about the solution. You do not even acknowledge the problem. The fact that people whose livelihood depend on understanding the market do see the problem, and you do not, should give you pause about your ideas.
“Go back and read my proof that pricing oil in dollars doesn’t affect the market value of dollars. I’m not repeating it again.”
I do not trust proofs that deny observable facts. And it is an observed fact that pricing oils in dollars affects the market value of dollars.
Much of your “proofs” assume that markets are in static equilibrium and there is no “time” in the transactions, as well as there is a transparent single global market. Lots of nonsense can be “proven” if you disregard time, and real data. In the real world, nothing of what you have “proven” actually happened.
“In the event of a hyperinflation of the dollar, US armed forces would leave the Middle East regardless of what OPEC did”
Which is an inconsequential statement as the US has not seen hyperinflation of the dollar. Just a consistent “normal” inflation that is largely exported to other countries.
“When the Treasury conjures dollars out of thin air, every dollar in the world loses value, no matter where the new money is spent.”
Prices do not depend on money alone, but on money times spending. That is, it is not only the total amount of money that is in circulation, but also the number of times it change hands. Money that is hovered up and not spend, does not affect prices. That is why petrodollars are “special”. See Wikipedia article.
Furthermore, the US domestic market and the international money market are separate markets. I cannot buy bread with dollars in Europe. And the dollars I spend in Europe do not affect prices in the USA. Money invested in US assets will act as “free” money added to the USA GDP. Their effect on inflation and exchange values will be (severely) delayed. The end result is that interest rates in the USA will be lower than otherwise.
I never said all this will benefit all Americans. Those with assets benefit disproportionately, those without assets will suffer. One effect is a reduction of industrial jobs and jobs in the export industries.
“The two claims you’ve made, that the dollar’s use as a reserve currency brings the US government seignoirage profits, and that it also gives US assets a competitive advantage over foreign assets, can’t both be true at once.”
Every economic treatise I read about this matter said they are indeed both true at the same time. The first one has to do with money not in circulation in the domestic market, the other with reduced transaction costs. These two factors do not affect each other even though they have the same root cause.
I would like to advice you to read up on international economics and financial markets. This really is an interesting field of knowledge. It overthrows many “intuitive” notions about money.
“Dadgumit, Winter, that’s what I’ve asked you to explain.”
Maybe this helps. This is the current account to GDP since 1981.
On average, the US received a net surplus of 2.66% of GDP per year in money from the outside. That is, each year, funds that make up 2.66% of GDP have been injected into the US economy that were backed by foreign economies (i.e., foreigners had to produce and sell real products to get those dollars).
Here is an explanation of “current account”:
Winter: “What is there to explain?”
For what reason do foreigners want to hold US dollars? What’s the benefit to them? All your talk has been about benefits to the USA thanks to this curious desire (some of it even true.) When I ask for the origin of the desire, you offer nothing but dark mutters of “exploitation”.
Me: “Winter, you did notice that both those articles are arguing for a return to the gold standard, didn’t you?”
Winter: “We do see the same problem, but we disagree about the solution. You do not even acknowledge the problem. The fact that people whose livelihood depend on understanding the market do see the problem, and you do not, should give you pause about your ideas.”
FYI, there’s nothing written in those two articles that I disagree with. I do disagree with what you’ve been saying. That should give you pause about your comprehension of what they, or I, have really said, and hence what we are arguing about.
“Much of your “proofs” assume that markets are in static equilibrium and there is no “time” in the transactions, as well as there is a transparent single global market.”
Well, glory be – an intelligent remark. Took you long enough.
The proof is about the equilibrium of the dollar market, and real markets are almost never in equilibrium. However, real markets always tend towards equilibrium (they are kept from it only by the “frictional force” of transaction costs) so reasoning about markets in equilibrium will hold approximately in real markets – and the lower transaction costs are, the closer the approximation gets.
So you are now claiming, in effect, that changing from US dollars to other world currencies is a substantial transaction cost artificially imposed by OPEC. The trouble is that this is not actually true. As I’ve mentioned before, in another context, in most countries anyone who wants US dollars can obtain them in seconds just by walking into the nearest bank and paying for them. The global market for dollars isn’t completely transparent, but its opacity is so slight that for practical purposes traders can ignore it.
(This, by the way, is the chief obstacle remaining to the renminbi becoming a possible reserve currency outside China. The PRC’s financial markets are deeply opaque to foreigners, because the state meddles with them constantly for its own advantage, and the transaction costs in the Chinese market are considerably higher than those of any Western market.)
“Prices do not depend on money alone, but on money times spending. That is, it is not only the total amount of money that is in circulation, but also the number of times it change hands. Money that is hovered up and not spend, does not affect prices.”
And now you deny the theory of supply and demand. I recognize this as the central thesis of John Maynard Keynes, but Keynes was simply wrong. All the phenomena he was trying to account for in his theory are explained much more simply by the concept of transaction costs introduced by Ronald Coase. (Have you read Coase’s papers? Very enlightening.)
Me: “The two claims you’ve made, that the dollar’s use as a reserve currency brings the US government seignoirage profits, and that it also gives US assets a competitive advantage over foreign assets, can’t both be true at once.”
Winter: “Every economic treatise I read about this matter said they are indeed both true at the same time.”
You need to be more skeptical when you read economic treatises. A competitive advantage for US assets from the dollar’s status can exist only if buying foreign assets with dollars imposes a substantial transaction cost. But the seignoirage profits from that status exist because buying foreign assets with dollars does not impose a substantial transaction cost. The US Treasury gets no seignoirage if every dollar it sends abroad comes back ten minutes later.
In summation: I deny your claim of fact, that there are serious difficulties with doing business in dollars outside the USA. And I reject your theory, which is Keynes’, that Say’s law is an illusion. Dispute me on those grounds, if you can.
“For what reason do foreigners want to hold US dollars? What’s the benefit to them?”
Interesting question. Whenever I look into the soul of a conspiracy theorist I see boundless naïvety. The same for Libertarians and Conservatives.
First, there is a considerable economic benefit of having a global reserve currency. There are many options to construct a reserve currency that divides the spoils fairly. The current dollar hegemony is not such a fair option.
Now, why do the other countries go along. To become a reserve currency, a currency must get the backing of enough central banks and trading volume. In both cases, it is a kind of majority vote. The biggest banks and the biggest trading streams must back this currency.
The biggest central banks in the 1970-2000 era were those of the USA, UK, Germany, and Japan. Add to these the majority of the EU, South Korea, Hong Kong (when it was still British), and Singapore, and you have all the major economic centers in the world. The largest traded commodity in the world is oil. That trade is done exclusively in dollars. The biggest oil producers are located in the Persian Gulf.
Why do these central banks and oil producers back the dollar?
US troops deployed overseas:
Japan, Germany, South Korea, Italy, UK, Arab Gulf states, with a sprinkling in Singapore.
Get the point? I will spell it out.
The strongest backers of the dollar as a reserve currency are also those that are protected by US troops.
Do I have to spell out why these very people feel betrayed when Trump suddenly comes around and tells them the US will not protect them unless they shell out more money?
The other question is, whether this is a smart move of the Americans. There are two contenders for reserve currency status, the Euro and the Yuan. If the US tells countries they cannot rely on US protection anymore, China can step in. They are already building up a marine force to protect their Asian trading routes. If the EU really build up a credible armed force, they can do the same. Both economies already have the trading volume and economic power to serve as a reserve currency.
A question. What do they teach in US (high) schools and colleges that they know so little?
If I go by US movies and shows, they seem to spend all their time in English literature and American history. I cannot believe this really is true. But I sometimes get doubts when I hear yet another American give his opinion about the world.
“As I’ve mentioned before, in another context, in most countries anyone who wants US dollars can obtain them in seconds just by walking into the nearest bank and paying for them.”
Do you know what it costs to exchange currencies? Obviously not. Never underestimate the power of transaction costs.
“I recognize this as the central thesis of John Maynard Keynes, but Keynes was simply wrong.”
It is called the Fisher equation: MV = PT
It originates from the 17th century. Milton Friedman contributed a lot to the underlying theory.
Again and again I am stunned by your ignorance and audacity. But maybe ignorance and audacity are two sides of the same coin.
“You need to be more skeptical when you read economic treatises. ”
I am very skeptical of economic treatises. But I am totally dismissive towards theories posed by people who do not know these treatises. All the evidence points towards you being such a person who has no knowledge of economic theory.
“The US Treasury gets no seignoirage if every dollar it sends abroad comes back ten minutes later.”
I am not surprised to see that you not only are ignorant about economic theory, but also about basic facts. At any one time, 15-30% of US bank notes are in foreign hands. See my links posted above.
“I deny your claim of fact, that there are serious difficulties with doing business in dollars outside the USA.”
If I want to buy or sell dollars, that cost me money and time. If I want to insure against exchange rate variation, that costs me money and time. If I want to buy something in Europe using dollars, that costs me money and time. All this money and time I can save if I invest my dollars in the USA.
“And I reject your theory, which is Keynes’, that Say’s law is an illusion. ”
What Say’s law claims is that there are no delays in markets. This is again a static system with instantaneous transactions. As I wrote before, you can prove a lot of nonsense if you ignore time. Anyhow, Say’s law was formulated around 1800. Well before modern overland transport made bulk trading an international affair. Markets may “tend” to equilibrium, but very often they are perpetually far from equilibrium.
Also, I am much more inclined to follow the insights of Keynes than those of you. At least Keynes knew what he was talking about, and you do not.
As the feminists say, it is not our responsibility to educate you.
If you refuse to let go of your dearly held axioms, any explanation we give will not suffice to convince you.
Start by realizing that aside from the categories of defense spending, incarceration rate, and percentage of population who think angels are real, the USA is not the greatest country in the world.
Winter: “The strongest backers of the dollar as a reserve currency are also those that are protected by US troops. Do I have to spell out why these very people feel betrayed when Trump suddenly comes around and tells them the US will not protect them unless they shell out more money?”
Except that Trump didn’t tell anyone that. What he said was that many NATO members have been skating on their obligations to the alliance – and their own citizens – to have their own armed forces for their own defense; and that if those members didn’t want to defend themselves, the USA might choose not to defend them.
I mentioned the Delian League some time ago, and the analogy between it and NATO is quite apposite. The states of Europe should take Trump’s remarks on this subject as a friendly warning from the modern analog of Athens that NATO is in danger of following the same path the Delian League took. But I suppose you never read Thucydides.
Returning to the direct question: apparently you are under the impression that dollar seignoirage pays for the US military budget. Since according to the figures I can find, seignoirage yields $25 billion/year to the USA, while the US military spends over half a trillion dollars each year, I’d say your attempted explanation is woefully incomplete.
And if you bring up the US public debt in this connection – I already characterized that as “the USA going into debt to European banks to pay for Europe’s defense”, which is, not to put too fine a point on it, the very reverse of the USA exploiting Europe.
“Do you know what it costs to exchange currencies?”
I just went to the trouble of looking up the quotes on foreign exchange markets. The spread in the EUR/USD market, as of today, is just over 1 in 10,000; that is, the difference between the amount of dollars needed to buy 1 Euro and the amount obtained by selling 1 Euro is ~1/10,000 of a dollar. That’s a miniscule transaction cost. See here for the relevant data.
No, you won’t get that rate if you buy a loaf of bread at a grocery store; but the trades in the oil market are made by the very entities – governments, multinational corporations, central banks – that participate routinely in the forex markets. So the forex spreads are the transaction costs which matter in discussions of international trade.
“It is called the Fisher equation: MV = PT
It originates from the 17th century. Milton Friedman contributed a lot to the underlying theory.
Again and again I am stunned by your ignorance and audacity.”
Oh Winter, poor Winter … that article says exactly the opposite of what you said! Your claim amounted to “MV = P” – an error not even Keynes ever made. This must be a record for sheer incomprehension.
On the article’s claims, rather than yours: given the definitions of the quantities in the Fisher equation, while V and T can certainly vary, I don’t see how the ratio V/T can ever do so, because “times a unit of money changes hands” and “number of transactions using the money” are two ways of describing the same events. So it follows that M and P must be in fixed proportion also.
“What Say’s law claims is that there are no delays in markets.”
No, it doesn’t. Jean Baptiste Say’s formulation, “A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value”, does not state or imply that said market clears without delay, just that it exists. The process of how markets come to clear, AFAIK, received no serious analysis before the mid-20th century.
By the way, does the name of Ronald Coase mean nothing to you? “The Nature of the Firm”? “The Problem of Social Cost”? Coase was the first person to point out just how unrealistic the assumption that all markets clear instantly actually is, and thus why transaction costs are important to understanding the economy that really exists. I own a collection of his important papers, and have read it closely.
Jeff Read, if you have nothing to say, kindly leave the discussion to the people who are ready to contribute to it. Also, you had better be prepared to educate, if you expect to be believed.
“apparently you are under the impression that dollar seignoirage pays for the US military budget.”
No, the account balance does. An account balance of -2.66% of GDP translates to $500B per year injected into the US economie.
“What he said was that many NATO members have been skating on their obligations to the alliance ”
He threathened NOT to honor the NATO treaty unless they paid more. That was universally understood by all the NATO partners as a classical threat along the lines of “Nice business you have, would be a pity if something happened to it”, but then more direct.
Even Trump must have known his words would be understood this way. Especially because he was told this when he said the same during the elections.
““times a unit of money changes hands” and “number of transactions using the money” are two ways of describing the same events.”
No, the formula tells us that if money changes hand more often, either the prices increase or the number of products sold or a combination. And if the production increases, and V stays fixed, either prices drop or money (M) increases.
All these things have happened.
“The spread in the EUR/USD market, as of today, is just over 1 in 10,000; ”
You forgot to include the costs of insuring against the exchage rate fluctuations. A delivery of oil is quite a long time at sea between the moment it is bought and the moment it arrives. Then there are the dealing rooms and other infrastructure, the requirement to keep a cash reserve in dollars etc. In the end, dealing in dollars increases costs when you are not in a dollar country.
“the USA going into debt to European banks to pay for Europe’s defense”
In the end, when foreign accounts are going to withdraw their money and no asset bubble can get them back, the US will default one way or another. Trump already predicted that the US will “renegotiate” their debt or default. The Republicans have been on the brink of a default several times.
But I assume they will simply let the dollar crash if push comes to shove. There will also be (tax) laws making withdrawing money costly.
If you have a bigger army, you do not have to pay your debts.
“I own a collection of his important papers, and have read it closely.”
Still, you ignore the importance of currency exchange as a transaction cost? Maybe you should also read some papers about international financial markets, and macro economics in general?
Winter: “[Trump] threathened NOT to honor the NATO treaty unless they paid more.”
In what language are “Pay us money” and “Arm yourselves” synonymous? Why do you insist that Trump meant the first, when he said the second?
“No, the account balance does.” [pay for the US military]
The difference of American savings and investments in American securities is made up by loans from foreigners. I stress: loans from foreigners. Not gifts, not taxes: loans.
Go to the blackboard and write 100 times: “A loan is not a tax, because it has to be repaid.”
“No, the formula tells us that if money changes hand more often, either the prices increase or the number of products sold or a combination. And if the production increases, and V stays fixed, either prices drop or money (M) increases.”
And if the Flying Spaghetti Monster touches you with his noodly appendage, you will be blessed with eternal happiness in Pastafarian Heaven.
The article’s statement, “In its most basic form, the theory assumes that V (velocity of circulation) and T (volume of transactions) are constant in the short term”, is inaccurate. All that’s required for the theory, beyond the Fisher equation itself, is that the ratio V/T is constant in the short term. Which logically it should be, because T counts the transfers of goods over a period, V counts the transfers of money over a period, and normally goods are exchanged for money. Unless you’re claiming that people routinely pay money to get nothing, or that people work hard to produce goods that nobody will ever buy?
“You forgot to include the costs of insuring against the exchage rate fluctuations. A delivery of oil is quite a long time at sea between the moment it is bought and the moment it arrives. Then there are the dealing rooms and other infrastructure, the requirement to keep a cash reserve in dollars etc. ”
None of those risks are specific to dealing in one currency over another. The cost of time to delivery is a mix of the interest rate and the speculative risk of holding oil; if a sudden glut of oil hits while your order of crude is in transit, you’ll take the same loss no matter what currency you started out holding. “Dealing rooms and other infrastructure” are what the bid-ask spread in forex trades pay for.
And the main point of the foreign exchange market is to transfer the risks of holding a currency to the people who want to bear that risk. There is no requirement to keep a reserve of dollars; all that’s needed is to deal with people who have such reserves, and the forex trade is where you go to find them.
So again: in commodity markets, the transaction cost added by changing euros into dollars is, to close order, 1 part in 10,000 of the total value of the transaction. This is trivial compared to the transaction costs that are constant across currencies, and thus provides a negligible advantage to those who deal only in dollars (or euros.)
“If you have a bigger army, you do not have to pay your debts.”
If the USA has been planning to stiff its creditors ever since 1971, why in God’s name has it been demanding for years that said creditors arm themselves, which would make it possible for them to collect the unpaid debts?
Your main thesis collapses on one undeniable fact: that the USA is a net debtor. If maintaining the international order were profitable to the USA, it would be the world’s largest net creditor, as it was in 1945. No amount of sophistry can evade the plain truth that America has gone far into debt to keep the world’s peace.
If we can be a net debtor forever, we have made a profit at the detriment of the ones who are net creditors forever. We have acquired X amount of real stuff, with $X of money that we will never pay back. This part is simple arithmetic, and it’s unbelievable that you think it supports your argument.
Separate from actual debt, the existence of $Y in foreign dollar reserves themselves are claims which will never come due on Y amount of goods from the US economy, as those dollars continue to (on net, that is, any particular dollar that comes back is replaced with one or more that goes out) sit in foreign economies forever.
It is in the US interest, obviously, to make sure all the “forevers” listed above do indeed last forever, and therefore to enforce the world order that allows them to endure.
Winter: “The Republicans have been on the brink of a default several times.”
Horse exhaust. Even if the debt ceiling is not raised, the US would still pay its debts; those must be paid regardless. What happens is that the US would not be able to borrow money to pay for other things. Debt service would continue.
“In what language are “Pay us money” and “Arm yourselves” synonymous?”
Who sells these weapons? And the idea was that the US would withdraw troops when the Europeans are armed up. So, it is either “we leave you now” or “we leave you later”. Trump did nothing to give any other idea about his intentions.
“All that’s required for the theory, beyond the Fisher equation itself, is that the ratio V/T is constant in the short term.”
M, V, and T are all three independently manipulated by governments and organizations like the OPEC (and every other oligopolistic cartel). I literally learned that in high-school many decades ago.
“And the main point of the foreign exchange market is to transfer the risks of holding a currency to the people who want to bear that risk.”
And that costs money. I remember the size of the currency derivative markets to be in the trillions of dollars. The currency futures alone have a daily closer of $100B.
Trading on these markets costs money too. All added transaction costs.
” why in God’s name has [the US] been demanding for years that said creditors arm themselves, which would make it possible for them to collect the unpaid debts?”
From anyone else I would assume this was a joke. But I am afraid you are serious. To spell it out: Are you really that naive that you think the US would allow any of its allies to become strong enough to resist it?
“No amount of sophistry can evade the plain truth that America has gone far into debt to keep the world’s peace.”
The account balance has broadly two components, loans and investments. Both are eroded by inflation and devaluation. This has been considerable.
If we take the Swiss Frank as an anchor, the dollar lost 75% of its value since 1971 and 40% since 2001.
The Republican party is playing with defaulting on national debts and has been at the brink of a real default a few times. Trump has brought that possibility up very prominently during the elections. The 2008 financial crisis also showed how easy it is to wipe out foreign investments. A simple change in tax laws would be very effective too.
Currently, lots of money is still flowing into the US. But I admit the system is showing cracks, not least because investors have really been burned by the 2008 financial crisis and they can also hear Trump and the Republicans positioning themselves towards a major “foreign debt restructuring”, aka, a fleecing of foreigners. Also, China and the Euro zone are working hard on a post-dollar world.
“If maintaining the international order were profitable to the USA, it would be the world’s largest net creditor, as it was in 1945.”
The legal titles of the foreign money invested in the US are worth nothing more than a signature of the US president and the Republican leadership. That was a lesson learned from the 2008 financial crisis.
The USA has attracted about 1 GDP (~$18T) in foreign debt and some $3T in foreign investments
Still, the account balance shows that the US still attracts nearly $500B a year more in foreign money than it pays back. This has the same logic as a Ponzi scheme: New money will directly or indirectly pay for servicing the costs of old money with the differences pocketed.
To come back to the old Roman empire. Rome got more in money back from the provinces than it returned in terms of military engagement or public works. The difference is that the Romans were genocidal brutes, the US not so. The US work by the soft power of stock markets and banks.
More on the US on debt.
Here’s Why America Will NEVER Be Vulnerable To Foreign Debt Holders
Some more opinions about the foreign debt as a Ponzi scheme:
Before you start, I disagree with these latter two writers. Personally, I see those foreign debts and investments more as a form of tribute than as a real debt. No one can force the USA to pay back what they owe. And over history, the US have broken about every treaty they signed whenever it suited them.
“What happens is that the US would not be able to borrow money to pay for other things. Debt service would continue.”
Good to hear. It seems to me this fact could be brought more prominent to the fore. The (non-American) press speculates mightely that it will end otherwise.
Again, Winter, your arguments remind me of the mental distortion Orwell spoke of in “Notes on Nationalism”. Specifically, the version of pacifism which is “a nationalistic loyalty or hatred”, the sort which can’t admit that “Those who “abjure” violence can only do so because others are committing violence on their behalf.” As Orwell puts it: “All of these facts are grossly obvious if one’s emotions do not happen to be involved: but to the kind of person named in each case they are also intolerable, and so they have to be denied, and false theories constructed upon their denial.”
The thought that war in Western Europe is an actual possibility, against which precautions can and should be taken, is intolerable to you; so you will not admit the actual reason why American troops are stationed in Western Europe (precisely as a precaution against war.) The whole tangent on the finances of the USA is your attempt to construct a false theory for their presence.
And yet the old witticism that NATO’s purpose is “to keep the Russians out, the Americans in and the Germans down” is still so obviously true that even you don’t dare deny it.
Winter: “Are you really that naive that you think the US would allow any of its allies to become strong enough to resist it?”
See, Americans don’t want to rule the world. In fact, we hate the idea. If Germany, for example, built up enough military power to resist the USA, most Americans would sigh in relief, because then we wouldn’t have to protect the Germans anymore. Any proposal that the USA exact tribute from its allies would be shouted down unanimously by American voters, long before it got to the point where the allies would need to worry about it. (This same sentiment, BTW, is the source of support for libertarian policies in the USA, and the reason why such support is stronger here than, perhaps, anywhere else.)
“M, V, and T are all three independently manipulated by governments and organizations like the OPEC (and every other oligopolistic cartel). I literally learned that in high-school many decades ago.”
When I think back
On all the crap I learned in high school
It’s a wonder I can think at all
Ahem. Unless you supply a coherent explanation to the contrary, I say that given what V and T stand for in the Fisher equation, they cannot vary independently.
“Again, Winter, your arguments remind me… don’t dare deny it”
Are you so desperate that you set up a straw man in my place? If you cannot argue my own words it will not help to start arguing with fictive people.
See, Americans don’t want to rule the world. ”
Isolationism is an old streak in the US. But that believe has not really affected policy for a very long time. I must conclude that you are indeed naive.
“Unless you supply a coherent explanation to the contrary, I say that given what V and T stand for in the Fisher equation, they cannot vary independently.”
And that is why they have been defined as four independent variables for over two centuries? Each represents an average over all the transactions in a market, in our case, the global economy. In the theory they are independent but in practice, they are all related and often the equation is a truism. Your simplification will only make this equation even less useful.
“On all the crap I learned in high school
It’s a wonder I can think at all”
I am sorry for you. I have heard how bad US high schools are. It must have been a big deception.
Random832: “If we can be a net debtor forever, we have made a profit at the detriment of the ones who are net creditors forever. We have acquired X amount of real stuff, with $X of money that we will never pay back. … It is in the US interest, obviously, to make sure all the “forevers” listed above do indeed last forever, and therefore to enforce the world order that allows them to endure.”
You leave out the unpleasant fact that, even if the principal never is truly paid off (being refinanced each time it comes due by new borrowing) the interest on the USA’s debt must be paid – because if it isn’t, the USA won’t find any more creditors, the whole debt comes due, and the economy implodes. Or do you believe that the people who max out their credit cards and pay the minimum due each month are acting in their best interests?
Winter: “I remember the size of the currency derivative markets to be in the trillions of dollars. The currency futures alone have a daily closer of $100B.”
At this point you’ve lost sight of the claim you were trying to prove – that pricing oil in dollars gives American securities in general a substantial competitive advantage over foreign securities. Those who trade in the commodity markets, such as oil, have no need to muck around with currency futures, or any other currency derivative – all they have to do is change the money they have for money the commodity’s seller wants. So the costs of setting up currency derivatives just don’t matter to the commodity markets.
Really, you’re just throwing bits of financial jargon at the wall, in hope that some of it will stick.
Logically, the only way that people insisting on being paid in dollars could give American assets an advantage is if few people outside the USA are willing to accept dollars. But the fact that the dollar is a worldwide reserve currency implies that there are many people outside the USA willing to accept dollars.
“So the costs of setting up currency derivatives just don’t matter to the commodity markets.”
You always forget time. I buy a shipload of oil for $X worth Y1 euros. I pay on delivery weeks later by buying $X dollars for Y2 euros. Y1 and Y2 can have any difference. The same if I need oil in some months time, I will have to reserve these dollars, but at what exchange rate? Volkswagen almost went bankrupt by making the wrong bets with their currency reserves.
But what am I doing here?
“It is difficult to get a man to understand something, when his faith depends on his not understanding it.”
“even if the principal never is truly paid off (being refinanced each time it comes due by new borrowing) the interest on the USA’s debt must be paid –”
That has been discussed above. Look for “Ponzi”.
“Are you so desperate that you set up a straw man in my place?”
Winter, you are a straw man. You have a head stuffed full of facts and opinions, as a scarecrow is stuffed with straw, merely to fill up the volume. There’s no actual thought going on in there, no structure connecting the opinions to the facts which could support them.
Take your initial claim that foreign investment in the USA is a form of tribute, levied by the USA on foreign countries. You have yet to present any evidence which proves this. What you have said shows that there is a lot of foreign investment in the USA, which nobody disputes; and that there’s a real possibility that the US Treasury will default on its debts or inflate the dollar to worthlessness, which (alas) is quite true. But even if the Treasury is consciously running a Ponzi scheme on the whole world, a Ponzi scheme is not and never was a tax. Fraud and extortion are both bad things, but they aren’t the same thing.
“You always forget time. I buy a shipload of oil for $X worth Y1 euros. I pay on delivery weeks later by buying $X dollars for Y2 euros. Y1 and Y2 can have any difference. The same if I need oil in some months time, I will have to reserve these dollars, but at what exchange rate?”
The general rule in commodity markets is that the amount paid is computed from the market price at the time of delivery; so as a rule, if you agree to buy a shipload of oil to be delivered in 90 days, you don’t know how many dollars you’ll end up paying until the day your ship comes in. To lock in a purchase price before the delivery date, you go to the commodity futures market, not the commodity supplier.
Now, a commodity futures contract is not a bundle of dollars; it’s an asset that happens to be priced in dollars, just like the commodity that underlies it. Owning an oil futures contract no more exposes you to exchange rate fluctuations than owning crude oil itself does; and there’s no need whatsoever to get into the currency futures market to trade in oil futures.
In other words, the only reason to reserve dollars now for a payment to be made in the future is if you expect the dollar to appreciate against the euro between now and then – which has nothing to do with the payment you expect to make. The hedge and the final purchase are separate; it’s a fallacy to count the cost of one as part of the other’s cost.
Which brings us back to the demonstrated fact. The cost of changing money on the foreign exchange market – the only cost imposed by buying oil with euros, not dollars – is 1 part in 10,000 of the value exchanged. Every other transaction cost you have suggested is either accounted for in that spread already, or bears equally on all buyers of oil, whatever currency they start with.
“Volkswagen almost went bankrupt by making the wrong bets with their currency reserves.”
That’s the first time I’ve heard anyone say that Volkswagen is a oil refinery. I was under the impression that the company makes cars and trucks.
Winter: “Isolationism is an old streak in the US. But that believe has not really affected policy for a very long time.”
Just why do you think Donald Trump was elected? He is what you would call an “isolationist” – everything you’ve complained about him doing demonstrates it. Are you blind enough to suppose that Trump is continuing, in all respects, the policies of his predecessors?
“Just why do you think Donald Trump was elected?”
Are you now arguing that past US policies were isolationist because they have now elected Trump? Bizar.
What the past has shown is that whoever trusted The Donald was betrayed. So enjoy the feeling of winning while it lasts.
PS: Goldman Sachs and Wall street run this administration. Why do you think they will risk their main source of income by endangering the reserve status of the dollar? That is a serious question.
“The general rule in commodity markets is that the amount paid is computed from the market price at the time of delivery; ”
And the risks of currency fluctuations in the mean time are not insured? Of course they are. That is why there is such a big market in currency futures. Especially big in dollars. Trillions of dollars. Every company doing international trading uses currency options and futures and other derivatives. Why don’t you know this?
Just one of the studies showing this:
Exchange rate exposure, hedging, and the use of foreign currency derivatives
This study even finds that “The hedging premium is statistically and economically significant for firms with exposure to exchange rates and is on average 4.87% of firm value. ”
The Use of Foreign Currency Derivatives and Firm Market Value
Your position in this matter is a lot like arguing the aerodynamics that make that pigs can fly. They don’t.
“That’s the first time I’ve heard anyone say that Volkswagen is a oil refinery.”
We are talking about the position of the dollar as a reserve currency. The oil trade is only a tool to get the reserve status. Remember? You seem to have difficulty keeping aims, tools, cause, and effect appart. Maybe you can write it down? Wikipedia is a valuable tool too.
“Winter, you are a straw man. … could support them.”
I see the use of insults and name calling as a sure sign that the author has run out of reasonable arguments. In your case, this is backed by the fact that you have not addressed any of the facts and evidence I supplied.
“You have yet to present any evidence which proves this.”
Then read again. You tend to bungle my arguments when you represent them. The initial point was that the US (under Nixon) have strong-armed the world into using the US dollar as a reserve currency and the US have been using its clout to keep it that way. The rest are the natural consequences of having the world using the dollar as a reserve currency.
You tend to focus myopically on individual means to that end trying to distract from the big picture. And even there you are unable to disprove the points made by me and other commenters, in addition you argue against the whole community of economists, political scientists, diplomats and investors. That is, you are arguing against everyone involved in the international financial world.
In short, you are arguing that pigs fly and focus on your misunderstanding of aerodynamics. But pigs do not fly. If you are representative of the legion of Trump supporters, it is no wonder they are in desperate need of alternative facts. How else can you “prove” that pigs fly all by themselves.
Winter: “And the risks of currency fluctuations in the mean time are not insured? Of course they are. That is why there is such a big market in currency futures. Especially big in dollars. Trillions of dollars. Every company doing international trading uses currency options and futures and other derivatives. ”
Why yes, every company that does business in multiple currencies has good reasons to hedge against exchange rate fluctuations. Volkswagen, for example, has suppliers and customers on both sides of the Atlantic, and therefore will frequently end up with revenues in dollars and bills to pay in euros, or vice versa.
Is this affected in any way by the dollar’s being a reserve currency, or the practices of the commodity markets? No. It’s a consequence of being a multinational corporation, with revenues in multiple currencies. If you sell to Americans and Europeans, you earn both dollars and euros, and the EUR/USD exchange rate matters to you, no matter what the oil producers and the central banks are doing.
So, if oil refineries are dealing in currency futures and options, it’s because they’re selling natural gas, gasoline, and petrochemicals in many countries, not because crude oil is priced in dollars. Which means that currency hedges are not part of the transaction costs of the market in crude oil, as you are claiming, but a separate matter.
“I see the use of insults and name calling as a sure sign that the author has run out of reasonable arguments.”
Really? Well, you’ve been very free with insults – more so than I – so this licenses me to claim that you ran out of serious arguments somewhere around post #150.
“In your case, this is backed by the fact that you have not addressed any of the facts and evidence I supplied.”
I don’t need to dispute your facts, because I’m attacking your reasoning. I have told you repeatedly that your voluminous citations don’t support your thesis; each time I did so, your reply was to pile on more citations, which were also irrelevant, or to change the subject.
“The initial point was that the US (under Nixon) have strong-armed the world into using the US dollar as a reserve currency and the US have been using its clout to keep it that way. … You tend to focus myopically on individual means to that end trying to distract from the big picture.”
I discussed the means to that supposed goal of US policy which you chose to present, of which there are two: that crude oil being priced in dollars is a significant burden on holders of other currencies; and that foreign purchases of US Treasuries are a form of tribute. Both of these are fantasies, and I have shown them to be such. You can’t expect me to talk about the parts of your “big picture” that you haven’t yet shown.
“in addition you argue against the whole community of economists, political scientists, diplomats and investors. That is, you are arguing against everyone involved in the international financial world.”
Nope! The only such person I’ve contradicted is Lord Keynes (regarding Say’s Law) and I have plenty of company there. You have misunderstood and garbled the arguments of the whole community of economists et cetera; I’ve yet to see you state an economic argument without making a blunder. By contradicting you, I argue against nothing but your own confusion.
I could run yet another point by point discussion of your fact-free “reasoning” that disregards everything known to economics, but I found that the Economist has done a much better job than I ever could:
Donald Trump and the dollar standard
There is much more of interest in this article.
The Telegraph also did a good job:
The dollar’s 70-year dominance is coming to an end
This has been an interesting discussion. I have now experienced first hand how far removed from facts (alternative&fact-free) and out of touch with reality (ideologically blinded) conservative America is. It is one thing to see it displayed on TV, it is quite another to see it in action for real. But I now think we have said all we have to say and we are already starting to repeat ourselves.
Moreover, our distinguished host has already warned me once to not draw out ridiculous arguments eternally, and I am afraid I have already taxed his patience. So, unless there are totally new developments, I call it a quits.
“Donald Trump and the dollar standard”
Nothing in that article supports the claims you’ve been making, Winter. There’s just one passage explaining how the dollar’s global status helps the USA, and you have never said anything like it:
And on the reasons why the dollar has this status, the Economist is silent. It certainly does not say that America coerced other countries into buying Treasury bonds, as you have done. Most of the article discusses side effects of the dollar’s status on the USA’s domestic economy, a subject you have not addressed at all.
“The dollar’s 70-year dominance is coming to an end”
You’re slightly better off here, for Mr. Halligan actually does echo one of your claims – the “petrodollar” thesis. But he does so incidentally, without offering evidence or proof; the real point of the three-year-old column is to speculate on China’s founding of the Asian Infrastructure Investment Bank, as a competitor to the IMF.
Somehow, you have managed to talk at great length about international finance, the Bretton Woods agreement and the Nixon shock without once mentioning the International Monetary Fund or the World Bank – the only institutions, AFAIK, created at Bretton Woods which are still of any importance today. Since those institutions have considerable influence on the monetary and fiscal policies of a large number of states, they and the “Washington Consensus” they support should have a central role in your theories, if you were as knowledgeable as you think you are.
So. You misunderstand and garble your own sources. You bring evidence that is irrelevant to the claims which are actually in dispute. And you claim a depth of expertise which, when challenged, you wholly fail to demonstrate. Well, I didn’t get into this argument to convince you, just to refute you, and that’s certainly been done by now.
“You bring evidence that is irrelevant to the claims which are actually in dispute.”
Three weeks ago, this dispute started with my claim:
tl;dr: The protection by its armed forces is a very lucrative business for the US.
Except for a few illustrations of related concepts, every comment I made was aimed at showing how this was done, and how lucrative it was. The countries protected by the US forces helped the US to set up and maintain a world order (including IMF and World Bank) that benefited the economy of the US hugely, at the count of $500B a year (on average). A full 2.5% of GDP per year.
That you lost sight of the point of this discussion is a pity, but something I was unable to prevent.
“evidence or proof”
Btw, you use this word “evidence” a lot. It does not mean what you think it means. You might contemplate how an anonymous entity on the internet can supply conclusive evidence using only words typed as a comment on a blog? This entity can point to words of other people, but that just moves the problem one step further, it does not solve it.
“if you were as knowledgeable as you think you are.”
I am not knowledgeable, at least not on economics or politics. Why should I think I am?
Couldn’t resist trying to have the last word, could you, Winter?
“Three weeks ago, this dispute started with my claim: ‘The protection by its armed forces is a very lucrative business for the US.’ Except for a few illustrations of related concepts, every comment I made was aimed at showing how this was done, and how lucrative it was.”
And all of them missed their target, because you can’t tell the difference between these two propositions:
The USA has a capital account deficit of ~$500B per year.
The USA coerces foreigners to give it ~$500B per year to fund its government.
It is your claim of coercion, of “exploitation” – your persistent description of loans as “tribute” or the spoils of conquest – that I, and others, took issue with from the start.
“Btw, you use this word “evidence” a lot. It does not mean what you think it means.”
A fact becomes evidence when it forms part of a valid proof. Your problem (and I am hardly the first to say this) is an inability to make a proof out of your facts – to recognize what is evidence for the things you say.
“Couldn’t resist trying to have the last word, could you, Winter?”
“It is your claim of coercion, of “exploitation” – your persistent description of loans as “tribute” or the spoils of conquest – that I, and others, took issue with from the start.”
The rest of the world definitely feels exploited, especially after the 2008 crisis where a lot of foreign money evaporated inside the USA. I used “tribute” to extend the popular picture of the early 2000s of the USA as the new Rome. This is a metaphor I read somewhere that I think covers the feelings of many politicians outside of the USA. That you do not like it does not matter much to me.
There is a financial world order that benefits the economy of the USA to an extraordinary extend. This order did not come into being as the result of a benign act of god, as you seem to want to insist, but due to the acts of USA politicians. I never said this order was the result of coercion (although in some cases, force was used in the developing world), that is just a straw man you are setting up. But coercion is an expensive and inefficient tool anyway.
“A fact becomes evidence when it forms part of a valid proof.”
That definition might apply in a courtroom drama, it does not in empirical sciences. But even courtroom proofs cannot rely on hearsay. Almost very “fact” posted on this blog is hearsay, i.e., just words and they are also too fragmentary to be of use.
Mathematics and Logic have proofs, but without facts. Empirical theories do not have proofs, they can only be falsified. Search for Falsifiability. Economics is partially mathematical proofs without facts and empirical science without proofs.
Hence my question of how to deliver proof of anything about the real world on this blog?
But if you mean by “proof” a complete story about the matter under discussion with references to public sources, here is it. I am sure you will find fault in it.
Two pillars of US global hegemony: Middle Eastern oil and the petrodollar
Winter: “The rest of the world definitely feels exploited, especially after the 2008 crisis where a lot of foreign money evaporated inside the USA.”
Great shedloads of Americans’ money disappeared in the 2008 financial crisis – foreigners were not singled out. If that’s your complaint, take it to Fannie Mae and Freddie Mac, or to Bill Clinton; those are the people responsible.
And I see no reason why a rational person should pay any attention at all to whether someone feels exploited.
“I never said this order was the result of coercion … that is just a straw man you are setting up.”
And now, like a squid, you retreat squirting a cloud of ink – “How could you take me so literally! It was all a metaphor, really!”
I told you exactly what American policy has kept the US dollar in its present exalted status, and enabled the US Treasury to borrow at remarkably low rates: the US Treasury has never yet refused to pay back what it borrowed. You may say, if you like, that this record of honest dealings will eventually be broken; but the fact remains that it has not been, and the financial world assumes that the future will resemble the past.
As far as I can tell, this explanation does not satisfy you because you would rather the USA’s preeminence in world affairs be due to something discreditable.
“But if you mean by “proof” a complete story about the matter under discussion with references to public sources, here is it. I am sure you will find fault in it.”
Your confidence, for once, is justified. I found a howling error in the middle of the third paragraph:
Anyone who remembers the oil shocks of the 1970s, and anyone who looks into the workings of the crude oil market, knows that until fracking was developed it was OPEC, not the USA, that controlled how much crude oil was produced … and that OPEC’s members are not friends of the USA, or subservient to it. The declaration a little later “that Middle Eastern oil remains accessible, free-flowing, cheap, and under US control” is outright fiction. Middle Eastern oil has not been free-flowing, cheap, or under US control since 1979; accessibility is the most American arms have actually achieved.
An author who’s that blatantly wrong about facts that any child can discover can’t be relied on for anything. I grant him this much, that his history of the Bretton Woods system is broadly accurate, despite being couched in Marxist jargon; that’s better than you managed. But the discussion of petrodollars just repeats the same fallacy I’ve already exploded. It’s simply false that foreigners hold US dollars and Treasury bonds because they want to buy petroleum. The causation runs the other way: crude oil, and other commodities, are priced in US dollars because people throughout the world want to hold dollars.
The passages on the arms trade in the Middle East are merely silly, added to insinuate that the Arab states’ failure to use their windfall from oil money to develop proper economies is somehow the USA’s fault.
And then there’s this: “Political events since 2001 have clearly demonstrated that superior military forces of the US and its Western allies may take but cannot hold Iraq’s, Libya’s, or other Middle Eastern countries’ oil.” To which I say, ha. The American retreat from Iraq in 2011 was a deliberate choice, unforced by events in Iraq. Strategic errors prove nothing about real ability.
By the way, though this author wrote after fracking became an important source of crude oil, he doesn’t seem to recognize its strategic implications. Indeed, he makes no reference to fracking at all, though it’s very much relevant to his final section, where he tries to predict the future.
“Your confidence, for once, is justified. I found a howling error in the middle of the third paragraph:”
I knew you would find a reason to dismiss any facts and evidence you did not like. In this case, it seems your interpretation is at fault. The 1970’s oil shock came at the time the US was putting in place the dollar-oil spigot.
On the whole, your tactic has been to question my motives, intelligence, and mental sanity without giving any relevant facts yourself. Your eagerness to “win” an argument, any argument, seems to be only matched by your ignorance about the subject topic and your resistance to learn anything new. This is exemplary of what I see in many discussions with US conservatives/libertarians.
For anyone who does want to know what is in store for the US dollar hegemony, and how it get there, this link might be a nice bedside read (the Introduction and part III are most interesting).
Currency Wars and the Erosion of Dollar Hegemony
It sports a nice quote by some US politician, a certain Ron Paul.
The same Ron Paul is quoted as having said:
There is also a nice quote from the former U.S. Ambassador to Saudi Arabia, Chas Freeman, when he testified before a congressional committee that:
So it seems that US politicians and US diplomats back my version of the story, and most definitely not your version, what ever that may be. But I am sure you will find a reason why you know better than some no-name Washington insider like Ron Paul and the US Ambassador to Saudi Arabia. I even am curious how you will argue your superior insights?
Winter: “I knew you would find a reason to dismiss any facts and evidence you did not like. In this case, it seems your interpretation is at fault. The 1970’s oil shock came at the time the US was putting in place the dollar-oil spigot.”
Oh for heaven’s sake, Winter. Search Google for “crude oil prices history” and look at the charts that come up. In particular, compare the price of crude oil during the years Bretton Woods was in force (and control of the market lay with American firms) to the price since the Nixon shock (when OPEC became a force to be reckoned with.) Anyone who does that and still maintains that the USA has controlled either the price of oil or the amount produced at any time since 1970 is willfully blind.
Nor is this a minor quibble. Your author (has he a name? none appears in the paper) seriously overstates the control the USA actually has over oil from the Middle East, and this forms a major part of his argument. If he’s wrong about that, you shouldn’t trust him to be right about anything else.
“It sports a nice quote by some US politician, a certain Ron Paul.”
Ron Paul is a Libertarian and a doctrinaire pacifist. During his career in the US House of Representatives, he never had the least shadow of influence over US foreign policy, and his words on that subject are an outsider’s. He is no more of an authority than Bernie Sanders is.
As for Chas Freeman, it’s enough to point out that the US Treasury does not buy crude oil, and that US ambassadors have historically tended to become advocates for the states they’re sent to, not the one that put them there. The Kingdom of Saudi Arabia has obvious reasons to say that it sells oil in dollars as a favor to the USA and is owed considerations for doing so. But (as I’ve already proven at length) the favor is trivial; the petrodollar market is an effect, not a cause, of the dollar’s being a global currency.
And seeing as one thing the Saudis have been doing with their profits from the oil market is spreading the most violent and least tolerant versions of Muslim theology all over the world, which has led to major disruptions of civil peace throughout Asia, Africa and Europe, I doubt that the USA or the world owes them any consideration at all.
One last provocation – I consider it more likely that the world will return to a precious metals standard (silver or gold) than that either the euro or the yuan will replace the dollar. Indeed, I firmly expect French and Italian nationalists to break the EU within the next few election cycles, reducing the euro to a glorified deutschmark. And the Chinese financial system is both opaque to foreigners and full of bad debts, factors that make holding yuan much riskier than holding dollars or euros.
Tl;dr: You are alone in your opinions. Where is your evidence?
“Your author (has he a name? none appears in the paper)”
Sorry for the confusion:
Gokay, B (2015) Two pillars of US global hegemony: Middle Eastern oil and the petrodollar. In: The Palgrave Encyclopedia of Imperialism and Anti-Imperialism. Palgrave Macmillan. ISBN 9780230392779
Lan Cao, Currency Wars and the Erosion of Dollar Hegemony, 38 Mich. J. Int’l L. 57 (2016)
You asked for evidence and proof. Complaining you do not know or do not like the author is a lame excuse. Both papers have references to back every statement.
“Ron Paul is a Libertarian and a doctrinaire pacifist.”
Another lame excuse. He is a perfect illustration of the fact that literally everyone who even comes near international affairs, friend and foe, tells the same story about the dollar, oil, and petrodollar. You are alone in your opinions.
“As for Chas Freeman, it’s enough to point out that the US Treasury does not buy crude oil, and that US ambassadors have historically tended to become advocates for the states they’re sent to, not the one that put them there.”
Yet another lame excuse. So you know better than the ambassador and a renowed expert on the Middle East? And he lies before a congressional commitee? Proof?
But this is where it always ends. If the evidence is against the ideology, the messenger must be lying and a fraud. Facts can only be true when they support the favored conclusion.
” I doubt that the USA or the world owes them any consideration at all.”
I agree. But what country was visited first by president Trump? Who sells weapons to Saudi Arabia? Where do the Saudis invest most of their dollars? The US is the unwavering protector of the House of Saud.
“One last provocation – I consider it more likely that the world will return to a precious metals standard (silver or gold) than that either the euro or the yuan will replace the dollar. ”
Indeed. Moreover, they are already building such a system. The Nordic Euro countries already have 4,000 ton of gold, France and Italy together have 5,000, and the ECB have 500, for a total of 10,000 ton. China and Russia are buying up all ore mined and might together have 60,000 ton. And the US probably have divested all their gold.
Gold Standard Challenges
Winter: “Where is your evidence?”
Sitting right in front of you. Closing your eyes and ignoring it won’t make it go away.
You may be confused because I don’t, as you do, link to other people’s interpretations and call them “evidence”. My cites, when I make them, are to unfiltered data – the bid/ask spreads in foreign exchange markets, charts of the price of crude oil over time, the real value of seignoirage to the US Treasury.
“[Ron Paul] is a perfect illustration of the fact that literally everyone who even comes near international affairs”
My good man, Ron Paul has never been anywhere near international affairs. Many people in Congress haven’t.
“So you know better than the ambassador and a renowed expert on the Middle East? And he lies before a congressional commitee? Proof?”
I didn’t say Chas Freeman was lying. I believe he was simply mistaken.
In particular, Freeman said “the US Treasury can print money and buy oil”. Technically that’s true, the Treasury can do that; but it basically never does, as a perusal of the federal budget easily demonstrates. I believe the most important expense direct from the Treasury to foreigners is interest payments on the US national debt; those go to bondholders all over the world, and have nothing to do with the petroleum market at all. By the time a new dollar is exchanged for oil, it’s changed hands enough times that its effect is the same as a dollar that’s exchanged for any other commodity.
“The Nordic Euro countries already have 4,000 ton of gold, France and Italy together have 5,000, and the ECB have 500, for a total of 10,000 ton. China and Russia are buying up all ore mined and might together have 60,000 ton. And the US probably have divested all their gold.”
Here is a list of the 10 nations with the largest gold reserves as of December 2016. The USA has 8,100 tonnes, China has 1,800, and Russia has 1,600. 60,000 tonnes is twice the total mass of gold held by all governments, and roughly 20 times the amount of gold mined each year. It’s an utterly absurd figure.
And a state’s gold reserve is not a gold standard. Neither China nor the EU are contemplating defining their currencies as a fixed quantity of gold, silver, or any other physical commodity, the bare minimum required for a gold standard. Still less are they about to mint coins of gold or silver and circulate them as legal tender.
To rephrase my statement: it is more likely that the world will abandon fiat currencies altogether than that it will switch from the US dollar to another government’s paper money.
“You may be confused because I don’t, as you do, link to other people’s interpretations and call them “evidence”. My cites, when I make them, are to unfiltered data – the bid/ask spreads in foreign exchange markets, charts of the price of crude oil over time, the real value of seignoirage to the US Treasury.”
That explains your ignorance. Maybe you should read a classic:
On the Sources of Knowledge and of Ignorance, by Carl Popper
I just took the trouble to read Lan Cao’s paper, Winter, and I agree that it is, indeed, interesting. What it is not, though, is support for your specific claim regarding petrodollars. Cao’s thesis is that the sheer size of US public debt, and the Federal Reserve’s “quantitative easing” maneuver to devalue the dollar by stealth, are provoking China to build an alternative financial system under its own control. He ascribes both the deal between Russia and China to trade oil in yuan or rubles, and China’s founding of competing banks to the IMF and World Bank, to QE1 and QE2. I see no reason to cavil with any of this.
It’s somewhat surprising how little Lan Cao really says about how the dollar’s status has been maintained since 1971. Part I is a short history of currency in the USA before WWII, and Part II recounts the rise and fall of Bretton Woods; but apart from the Ron Paul quote (which proves nothing) the US dollar’s survival to date is left as a mystery, with Part III jumping to the 21st century and the US-China relationship. IOW at precisely the point where the reader looks for an explanation of the petrodollar market’s importance, the paper has a lacuna.
“On the Sources of Knowledge and of Ignorance, by Carl Popper”
I cannot for the life of me see why you think this essay applies to me. Your method of argument, which consists almost entirely of piling up undigested citations to supposed authorities, bears a strong resemblance to the idea Popper criticizes, that the quest for knowledge is carried out by finding an ultimate, authoritative source in which we may repose complete trust.
My procedure, by contrast, has been to follow out the logical consequences of your claims and show, in some cases, that they are logically contradictory, and in others, that there are things which would have to happen if you were right, and that they are not happening – quite in accord with Popper’s statement that the quest for knowledge proceeds by eliminating error.
By the way, Winter, did you catch Donald Trump’s speech Thursday in Warsaw?
Here’s a transcript.
“By the way, Winter, did you catch Donald Trump’s speech Thursday in Warsaw?”
Yes, he said the exact opposite of what he said before. The Polish government is busy dismantling free speech and democracy in Poland Putin/Orban style. I can see how they will be Trump’s BFF. They are practicing in Poland what Trump is saying he wants to do to the USA.
“What it is not, though, is support for your specific claim regarding petrodollars.”
That was not the aim of this paper. Just as NASA does not prove the moon landings were real in every publication, (political) economists often have better things to do than rehashing the petrodollar. I too have better things to do than to write an introduction on the history and mechanisms of the petrodollar. There are good sources for that. For the petrodollar, you can read the link of Gokay. or the Wikipedia entry for “Petrodollar recycling”. It has extensive references to source materials. Google Scholar gives 6,690 hits on the subject of “petrodollar” (Google has more than 400,000 hits in English alone). I tried to find someone who doubted or denied the existence of the petrodollar system. But I was unable to find even a single such source. Maybe you can help here?
But I did find a nice history of the petrodollar with many references to Star Wars (personally, I would prefer Gokay’s text “Two pillars of…):
Igniting the Battle Station’s Core: Torpedo’ing Petrodollar Hegemony As Means of Christening a Multipolar World Order
“I cannot for the life of me see why you think this essay applies to me.”
Your ideas on “Proof”, “Evidence”, “Logic”, and “Filters” imply a rather naive view of knowledge and how to get it. Especially, it seems that you confuse “experience”, a personal trait, with “knowledge”, a social construct. Karl Popper is always a good read to test and improve your ideas.
“Your method of argument, which consists almost entirely of piling up undigested citations to supposed authorities, bears a strong resemblance to the idea Popper criticizes, that the quest for knowledge is carried out by finding an ultimate, authoritative source in which we may repose complete trust.”
I do not seek authority, I seek witness reports and good analysis of source materials. And in the current case, where we are all lay people, I seek introductory texts and journalistic reports, especially those that give primary sources. It is an illusion to think that it is possible to personally collect and analyze all the primary sources needed in such complex systems as the role of the dollar as a reserve currency.
Obviously, I do not always succeed in finding texts that exactly fit the argument I want to make. I will try harder to delineate my aims with the texts.
Winter: “That was not the aim of this paper. Just as NASA does not prove the moon landings were real in every publication, (political) economists often have better things to do than rehashing the petrodollar.”
If NASA wishes to prove the moon landings were real, it produces evidence for which the best, or only, explanation is that astronauts landed on the moon. For instance, it exhibits certain rocks with compositions that could not be formed on Earth, or it directs people to point a laser at Tranquility Base where one of the astronauts left a mirror and look for the reflection. It does not offer copies of photos from the Viking missions to Mars, because those aren’t relevant to the question.
Similarly, a competent economic historian who wants to show that Nixon’s deal with the House of Saud is economically important would not waste his time, or his readers’, by talking about the effects of quantitative easing and other inflationary measures taken by the Federal Reserve. The role of the petrodollar is the question at hand. A paper that doesn’t even try to address that question is irrelevant.
“For the petrodollar, you can read the link of Gokay. or the Wikipedia entry for “Petrodollar recycling”.”
I already pointed out that Gokay is just plain wrong on the most elementary facts of this subject – citing him is akin to citing as an authority on the American Revolution a man who said that Thomas Jefferson wrote the Federalist Papers.
As for the Wikipedia entry on “petrodollar recycling”, I have it open now, and … well, I’ll just quote the sentence immediately after the title:
The entry never states that oil-exporting nations used their dollar surpluses to buy only American goods and invest only in American securities (in fact it distinctly says otherwise); nor does it say that those surpluses propped up the dollar’s status as a reserve currency. If the House of Saud had been willing to accept European currencies, the only event described in the entry that would not have occurred, as far as I can see, is growth in the Eurodollar market – which had already existed for two decades, and which the USA has never controlled.
Petrodollar recycling, according to Wikipedia, was just a massive transfer of wealth to a bunch of oil exporters who didn’t have the foggiest idea what they ought to do with it. It moved a big chunk of the supply of dollars to different countries, but it didn’t do anything, one way or the other, to the demand for dollars. Since the true mystery of the dollar is why so many foreigners persist in demanding it, pointing to petrodollar recycling doesn’t clear up anything.
“I do not seek authority, I seek witness reports and good analysis of source materials. And in the current case, where we are all lay people, I seek introductory texts and journalistic reports, especially those that give primary sources. It is an illusion to think that it is possible to personally collect and analyze all the primary sources needed in such complex systems as the role of the dollar as a reserve currency.”
Perhaps you should reread that essay by Popper you cited, Winter. It’s exactly this notion, that the way to knowledge is to find the best sources, which he said was wrong, false from the start. I’ll quote the crux of the essay to guide you.
“If NASA wishes to prove the moon landings were real, it produces evidence for which the best, or only, explanation is that astronauts landed on the moon.”
NASA does not wish to prove the moon landings were real. That is pointless.
“Similarly, a competent economic historian who wants to show that Nixon’s deal with the House of Saud is economically important would not waste his time, or his readers’, by talking about the effects of quantitative easing and other inflationary measures taken by the Federal Reserve. ”
As did Gokay and lots of others. But no man is as blind as he who does not want to see. And you obviously do not understand what these people explain in so much detail.
“It’s exactly this notion, that the way to knowledge is to find the best sources, which he said was wrong, false from the start.”
Seeking and verifying facts is an indispensable part of empirical sciences as well as history. Without facts and sources, there is neither history nor empirical science. The idea that you can find the truth just by thinking in your armchair has been dispelled centuries ago.
Winter: “Seeking and verifying facts is an indispensable part of empirical sciences as well as history. Without facts and sources, there is neither history nor empirical science. The idea that you can find the truth just by thinking in your armchair has been dispelled centuries ago.”
There you go again. “On the Sources of Knowledge and of Ignorance” isn’t about people who try to map the universe from their armchairs. It’s about how the empiricists went wrong, and why; how people who began by proclaiming Nature an open book that anyone might read from ended as dogmatists condemning dissenters as heretics.
You can cite, but you cannot understand your citations.
As for Gokay: you are actually going down the same chain of thought that Popper describes as a myth – the conspiracy theory of ignorance:
You are so certain that any honest person who reads your sources will come to your conclusions that you confidently assign moral fault to those, like me, who disagree with you. (This, even though several people have called you out for misreading your sources – but that’s a separate matter.) So when I point out substantial errors in Gokay’s paper, you don’t try to show that those errors have no bearing on the thesis you want to prove. No, you charge me with refusing to understand Gokay. Anyone who reads him fairly will believe him, you think, so I must not have read him fairly; I have displayed my bigotry, away with me!
Which is exactly how people who take pride in their credentials as empiricists and rationalists seal themselves off from outside criticism, and the possibility of learning.
“: It’s about how the empiricists went wrong,”
It’s about both sides going wrong. You need fact and theory. And there is no tabula rasa.
“You are so certain that any honest person who reads your sources will come to your conclusions”
No, I am certain I can argue with reasonable persons who read the same sources. It is next to impossible to argue with those who simply deny the existence of sources to read and facts to discuss.
Is there going to be a new rule (similar to Godwin’s law or rule 34) that the mention of Trump leads to intense polarization? Given the logic of some of the arguments, perhaps intense circular polarization?
I did skip the last XX posts after enjoying a fascinating discussion of OS and older systems.
I did pause enough to see a post about the gold standard go by, and I just have to add that gold (or silver, or air, or currency) is worth what is is because that’s what we feel it is worth. Fiat currencies have allowed more interesting ways to grow our economies than precious metal standard currencies. As long as we believe, the economy continues to work (Monty Python nailed it about 40 years ago – https://www.youtube.com/watch?v=1ujRE2IkEIo)