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How America went for broke

By Philipp in MLP
Thu Oct 04, 2001 at 07:04:24 PM EST
Tags: Politics (all tags)
Politics

Currently it seems to be fashion to blame America's economic problems on the recent terror attacks. This seems to be good enough for George Bush (quote: "If this were a spending contest, I would lose it", 3rd presidential debate, ancient past) to start creating deficits again and spend billions on unspecified projects. But the problems are much deeper than this. It is nicely summed up in an article in the Spectator.


Some gratitous quotes:
Financial systems, just like political systems, require checks and balances [...]. But US policy-makers, driven by an ideological belief in the virtues of unfettered free markets [...] systematically eroded every attempt to control them. [...] The result has been the biggest bubble of all time.

And this unbelievable paragraph:

The comical excesses of the dotcoms may have grabbed the headlines, but by far the biggest misallocation of capital took place in the telecoms sector. It spent an estimated $4,000 billion building new networks to meet the expected explosion in Internet traffic. So great is the excess capacity, it is said that if the entire population of the world - all six billion of us - were to talk solidly on the telephone for a year, it could be transmitted over existing networks within a few hours. According to industry estimates, less than 2 per cent of the fibre-optic cable buried under Europe and North America has even been turned on, or "lit", and of that which has been lit, only about 10 per cent is in use.

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When will NASDAQ return to 5000?
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o creating deficits again and spend billions on unspecified projects
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How America went for broke | 35 comments (24 topical, 11 editorial, 0 hidden)
some good points, but... (+1 fp) (3.57 / 7) (#4)
by sayke on Thu Oct 04, 2001 at 04:09:03 AM EST

it says some things i don't get. i'll get to those in a bit, but first:

the "Meanwhile, many Wall Street economists, consistently wrong with their forecasts all year, gratefully seized this face-saving opportunity to pronounce that they now believe that a recession is inevitable" bit is spot-on, but what disturbs me about it is the way talk of recession easily can become a self-fulilling prophecy. gr.

the credit card debt numbers (average $7,000 per household) sound right though, and that's plenty disturbing in and of itself.

and now for the stuff i must take issue with:

immense amounts of dark fiber now exist that didn't exist a couple ago, but i don't know about claims of "According to industry estimates, less than 2 per cent of the fibre-optic cable buried under Europe and North America has even been turned on, or `lit', and of that which has been lit, only about 10 per cent is in use" - can anybody provide additional numbers on that? that doesn't sound right to me.

i don't think the US situation should be compared to that of japan - this artcile at the nytimes seems to put forth a more accurate picture.

and as for the bits about free markets - it seems to me that much of the problems mentioned above stem from things like the way the US government subsidizes telecoms, thus promoting monopolies there... or the wierd ways the credit card industry relies upon the US government (in the form of carefully crafted bankruptcy laws) in its neverending quest to screw its customers... or the short-sighted government price caps on wholesale electricity in california, which were instrumental in the power crisis there...

i've said it before, and i'll say it again: most of the evils people associate with capitalism arise from government protection of monied interests. remember, kids - corporations, as creations of the state, can't exist in unfettered capitalism*.

* although you could make corporation workalikes via contract, but anyone actually doing so would seem quite unlikely.


sayke, v2.3.1 /* i am the middle finger of the invisible hand */

What you say?! (none / 0) (#10)
by xriso on Thu Oct 04, 2001 at 06:51:25 AM EST

i've said it before, and i'll say it again: most of the evils people associate with capitalism arise from government protection of monied interests. remember, kids - corporations, as creations of the state, can't exist in unfettered capitalism*.
But then ... who do you sue when sh*t happens? :-)
--
*** Quits: xriso:#kuro5hin (Forever)
[ Parent ]
Whoever did it. (2.66 / 3) (#17)
by Duke Machesne on Thu Oct 04, 2001 at 12:25:15 PM EST



[ Parent ]
precisely [nt] (none / 0) (#34)
by sayke on Thu Oct 04, 2001 at 11:57:55 PM EST


sayke, v2.3.1 /* i am the middle finger of the invisible hand */
[ Parent ]
Should the US follow Britains example instead? (4.11 / 9) (#12)
by abdera on Thu Oct 04, 2001 at 07:37:51 AM EST

Perhaps the telecom industry in the US should have followed the shining example of Marconi? Or would Spirent or Energis have been better role models for the US telecoms companies? Maybe France's glorious Alcatel then?

Well, whatever. I'm sure the blame for Europe's problems lies squarely on the shoulders of America.

#224 [deft-:deft@98A9C369.ipt.aol.com] at least i don't go on aol

Really though (none / 0) (#24)
by PhillipW on Thu Oct 04, 2001 at 01:42:51 PM EST

Noone at all put any blame on anyone for Europe's economic situation. The article was saying that the telecoms here in America wasted money(which I disagree with). Nobody mentioned Europe, or blamed America for anything. Are you just trying to incite an argument about something completely off topic?

-Phil
[ Parent ]
Glass houses (3.00 / 3) (#26)
by abdera on Thu Oct 04, 2001 at 02:40:08 PM EST

Nobody mentioned Europe, or blamed America for anything.

Europe is mentioned by simple virtue of the source of information. The article is a case of a European, in this case, British, publication deriding the American economy, and scoffing at the poor decisions made by American corporations. No mention of the fact that markets across Europe have been near free-fall as well, or that European businesses have been just as foolish. Given the state of European and Asian markets, I think that the article should have been titled "How the world went for broke." Just because the bust took a few months longer to hit the European markets, does not mean that it's going to be any less severe.

Noone at all put any blame on anyone for Europe's economic situation.

Perhaps I jumped the gun with my pre-emptive sarcastic response to the expected reaction of those who tend to mistake a correlary relationship with a causal one based simply on chronological order of events blaming the American crash for the European one. I still stand by my point that the article referenced is a prime example of European arrogance regarding America.

#224 [deft-:deft@98A9C369.ipt.aol.com] at least i don't go on aol
[ Parent ]

Please (3.00 / 3) (#33)
by PhillipW on Thu Oct 04, 2001 at 07:02:41 PM EST

It is not arrogance to express your opinions of a foreign nation's policies. You say all of this as though Americans have never done this sort of thing before. You need to be more open to criticism from outside sources and stop calling it all arrogance.

-Phil
[ Parent ]
Forbes ASAP (4.33 / 6) (#13)
by wiredog on Thu Oct 04, 2001 at 08:27:51 AM EST

Has several articles which go into this in much more detail. The authors think that the dark fiber is a Good Thing. Excellent articles on the infrastructure problems as well.

If there's a choice between performance and ease of use, Linux will go for performance every time. -- Jerry Pournelle
End of the world as we know it; feel kinda fine (3.80 / 5) (#14)
by slaytanic killer on Thu Oct 04, 2001 at 08:48:07 AM EST

Interesting. I don't know about the veracity of these things, but it is always interesting to read them.

Really, we have to come to grips with the fact that we haven't gotten rid of the boom-bust cycle.

However, one thing we should concentrate on is the fact that a great deal of infrastructure was built during those "comical" times, and a lot of information was disseminated.

The companies which survived were still intelligent ones, who produced things that were reasonably useful. The dot-coms which realized that programmers existed to obsolete themselves, often fared well. I hear that Ebay understood this, not keeping on a hundred programmers for something which was to run automatically without much human intervention. So, what has changed? Intelligent companies get to exist, and absurd ones don't.

My costs for information are significantly lower than ever before. Books are now near-luxuries rather than necessities. That means I can now shut down my spending on them; and they have accounted for ~20% of my disposable income.

Defecits... (3.75 / 4) (#16)
by Anatta on Thu Oct 04, 2001 at 09:44:07 AM EST

...are a helluva lot better than surpluses. Can anyone point me to any economist that suggests the government should be taking money out of the economy and not using it, in the form of surpluses? I can't recall a single economist suggesting this. Both the Keynesians and Classicialists would find such actions idiotic.

As for the government spending on subsidizing industries that shouldn't be subsidized, check out this article in the Wall St. Journal. Are peanuts vital to the war effort? Ready to give the peanut growers $3.5 billion in the "Farm Security Act"? I know I'm not.

In any case, such actions are still better than surpluses.
My Music

Defecits are good (3.00 / 1) (#23)
by PhillipW on Thu Oct 04, 2001 at 01:31:08 PM EST

If you don't give a shit about future generations who will suffer for it.

-Phil
[ Parent ]
Meanwhile... (2.00 / 1) (#27)
by Anatta on Thu Oct 04, 2001 at 05:41:40 PM EST

The government's got taxes so high that it's going to collect trillions of dollars of our money that it doesn't need (and no, I'm not against all taxation.)

Even after years of Reagan defence surpluses and Clinton social programs, we've grown ourselves out of defecit again and again. Sure, I'd rather have low taxes, few government programs, and no defecits... but no surpluses either. But if I had to choose between defecits and surpluses, I'd choose defecits. At least defecits have some sort of economic foundation (Keynesianism), no matter how poorly that foundation works, while surpluses have no economic foundation other than Democrats claiming that we'll lose our Social Security if we open the LockBox!

And that would be bad... how?
My Music
[ Parent ]

Solution (3.00 / 1) (#30)
by psicE on Thu Oct 04, 2001 at 05:50:58 PM EST

The government should attempt to have as much of a surplus as possible, but distribute all of it (beside a bit for Social Security or Medicare) to taxpayers at the end of each fiscal year.

[ Parent ]
Bad how? (3.50 / 2) (#31)
by Danse on Thu Oct 04, 2001 at 05:57:12 PM EST

And that would be bad... how?

It would be bad because without SS, millions would have nothing when they became too old to work. Millions right now barely make enough to survive day to day. Without SS, they'd have to steal to survive. Then you'll have to pay more for law enforcement. Better that we simply pull cash out of each of their checks and then dole it back to them. If the government would keep its hands out of that money (which really isn't theirs to spend as they please), there probably wouldn't be a problem. It's pretty much accepted that it's bad form to have your citizens living in squalor and/or starving. While we have that in the US, we should try to prevent it as much as we can. SS just happens to be the best idea that's been implemented so far. Too bad it's gives a pitiful return compared to other forms of investment. I'm interested in some other ideas, including privatization of SS, but I haven't really seen anyone get behind a plan, or even offer a very good argument for why it would work better than the current system.






An honest debate between Bush and Kerry
[ Parent ]
No (4.00 / 1) (#32)
by PhillipW on Thu Oct 04, 2001 at 06:53:20 PM EST

While I have given up hope on ever seeing Social Security, I think it would be nice to actually get what I have paid into. I have trashed the idea that I ever will. Defecits certainly do not help that.

Now, how you come across the idea that a deficit pumps more money into the economy is a question I have. You forget that that money came out of the economy in the first place right? If I stole a candy bar from a liquor store, walked back in, and gave the store owner the candy bar, would we say that his store has benefitted from getting a candy bar? No we would not.

-Phil
[ Parent ]
Um, yeah (4.57 / 7) (#18)
by trhurler on Thu Oct 04, 2001 at 12:27:23 PM EST

Right now, there's a lot of unused capacity in fiber. You know why? Because it is cheaper to bury it all at once and then use what you need than to keep digging holes over and over and over again. The plan most of these companies have is to have enough fiber down there to last long enough for technology to improve to the point they want something new anyway or else to the point that they can pack more data onto existing fiber. That's not stupid; that's one of the few bright moves anyone in that industry has actually made!

As for the market, it has been going in boom/bust cycles for years, and is certainly anything but unregulated. Pull that whiney socialist out of your ass and learn to think for yourself.

--
'God dammit, your posts make me hard.' --LilDebbie

Ever heard of Alan Greenspan? (4.00 / 6) (#19)
by sopwath on Thu Oct 04, 2001 at 12:44:21 PM EST

I think there's a few more things that helped the economy grow like it did.

The FED was basically playing with interest rates. By making them lower than they had been for decades, the stock market boomed. Companies had lots of extra money to play with and so...

There was plenty of money for literally taking chances on all the dot-com companies. Investments were not related to how profitable a company might be. No one really knew what could be done with the internet so there wasn't anyone to say this plan will owrk, but this one wont.

The fact that probably most of those dot-coms had no real business plan helped them to fail miserably. After the FED started to reel in the interest rates (after inflation was starting to rise) the stock market peaked. All those dot-coms stopped getting veture capital, thier non-profitable business plans tanked and they went out of business.

Low interest rates good, poor investment decisions bad.


good luck,
sopwath


Graduation, Sleep, Life: Pick Two
Absurdity, fantasy, and pointlessness (4.33 / 6) (#20)
by abdera on Thu Oct 04, 2001 at 01:07:00 PM EST

So great is the excess capacity, it is said that if the entire population of the world - all six billion of us - were to talk solidly on the telephone for a year, it could be transmitted over existing networks within a few hours.

Lets apply some simple math to this thing:

Network capacity = bits transmitted / time to transmit

Bits transmitted = 64000 bps * 31536000 seconds/year * 6 billion people = 1.2x10^22

time = "a few hours" = 10000s

Therefore network capacity = 1.2x10^24 bits / 1 x10^4 seconds = 1.2x10^21 bps

So we need a path with a capacity to transmit 1.2 million petabits per second if we are trying to get the bits from point A to point B. Since this is patently not true, then we must assume that the Spectrum is defining network capacity as the aggregate of every single data path in the network, perhaps even in-house corporate networks. Although this definition may substantiate their fantastical claims, it is a useless definition for several reasons:

  1. Very few data transmissions take only a single hop to reach a destination.
  2. Data traffic is very different from voice traffic in that it is bursty in nature.
  3. Most large, sustained data transmissions take place at much higher rates than 64kbps.
Given this absurdity, I would tend to doubt their other claim that less than 2 per cent of the fibre-optic cable buried under Europe and North America has even been turned on, or "lit". The claim that only about 10 per cent is in use seems about right given the bursty nature of data transmission. I'll bet that my data connection is under 1% utilization overall because I don't spend all day running ttcp in the background, but it is still useful to have an OC3 link when I do want to transfer a significant amount of data. I'm sure that even backbone links experience a significant amount of burstiness, and periodic slowdowns during nights and weekends.

So we have a paragraph full of absurd, fantastical, and pointless claims which is used as grounds for declaring the US economy crippled. Somehow I don't feel particularly worried by this.

#224 [deft-:deft@98A9C369.ipt.aol.com] at least i don't go on aol

I don't think that was the whole point (none / 0) (#22)
by PhillipW on Thu Oct 04, 2001 at 01:23:23 PM EST

The point was to illustrate just how much money the telecoms spent on bandwidth that is not being utilized. Whether or not we could do that with all of our phone calls with the existing network infrastructure is irrelevant. The point was to illustrate TOTAL bandwidth.

That being said, I do not think all of that money was wasted. All of that bandwidth will eventually come into use... a purpose just needs to be found.

-Phil
[ Parent ]
Twisted perspective (4.00 / 2) (#25)
by abdera on Thu Oct 04, 2001 at 02:06:44 PM EST

The point was to illustrate just how much money the telecoms spent on bandwidth that is not being utilized

The point was very poorly illustrated. Demonstration of a very low peak utilization of backbone links would be a much more relevant illustration.

Whether or not we could do that with all of our phone calls with the existing network infrastructure is irrelevant.

My point exactly! So why bother mentioning it?

The point was to illustrate TOTAL bandwidth.

Even if total bandwidth was defined in some way, it would still be irrelevant due to the bursty nature of data transmission. Peak utilization of backbone links is far more significant, but is not mentioned anywhere in the article.

That being said, I do not think all of that money was wasted. All of that bandwidth will eventually come into use... a purpose just needs to be found.

Agreed. The Spectator fails to consider that the so-called bandwidth barons may have been forecasting for the long term. As mentoined elsewhere it's quite a bit cheaper to run a big bundle of fiber once than small bundles frequently. Especially trans-oceanic runs.

#224 [deft-:deft@98A9C369.ipt.aol.com] at least i don't go on aol
[ Parent ]

Interesting poll results (none / 0) (#28)
by roystgnr on Thu Oct 04, 2001 at 05:43:04 PM EST

I'm not sure who surprised me more, the two of you who think that the NASDAQ is going to triple in the next three months, or the twelve of you who seem to expect an upcoming apocalypse...

I voted 2010, myself - 14% annual growth sounds close enough. Of course, I'm probably wrong: by 2008 everyone will have forgotten about all that dot-com unpleasantness, and the nanotech stock bubble will have the NASDAQ at 10000...

-1 substantiate please (2.66 / 3) (#29)
by farl on Thu Oct 04, 2001 at 05:49:18 PM EST

At least do us the favor of telling us WHERE the statistics come from. Randomly copying random quotes does not make a good story. Not even for MLP.


Farl
k5@sketchwork.com
www.sketchwork.com
How Roosevelt beat the Great Depression (3.00 / 2) (#35)
by Caranguejeira on Fri Oct 05, 2001 at 12:02:04 PM EST

Deficit spending. That's right: by going into debt.

Switzerland, Germany and England had already shaken off the global depression by deficit spending in preparation for the impending world war.

In addition, consumer debt contributes billions to the economy each year. When consumers stop spending money they don't have, that's when the economy starts to weaken.

If we learn anything from history, it's that our financial markets do best when there is a lot of borrowing going on, especially consumer borrowing.

Once the economy has recovered, then is the time for the government to ballance the books. In the meantime, let's open up the pork barrell and get the economy rolling.

How America went for broke | 35 comments (24 topical, 11 editorial, 0 hidden)
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