 | | The Daily Reckoning | Wednesday, April 13, 2011 |
- The new, old disruptive technology set to kill your email,
- Once again, are you paying attention to the war on YOUR money?
- Plus, Bill Bonner on hyperinflationary depressions and how the economy works...
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|  | | | Seizing Your Personal Freedom | | Why Now is the Time to Relocate Some of Your US Dollars | |  | | Joel Bowman |
Reporting from Rio de Janeiro, Brazil...
The third largest metropolitan area in South America is not entirely unlike what you'd expect. At least at first glance. São Sebastião do Rio de Janeiro, as it is officially know, is a heaving, sweating, bustling city of some 15 million souls, all working, hustling and scrambling to make ends meet under the watchful eye of Cristo Redemptor, the city's landmark statue, perched high atop the breathtaking Corcovado mountain. The sprawling urban mass below is magnificent, crowded, paradisiacal, overwhelming and dirty.
These are just our first impressions, of course. We only arrived in "Rio," as it is unofficially, more commonly known, on a flight from Montevideo a couple of hours ago. Our bags, however, did not. From what we can gather, they're staying over in São Paulo. Taking the scenic route, apparently.
While we wait for our clean shirts to join us, let's turn our thoughts back to yesterday...back to fresh, clean clothes and some great musings on the war against the US dollar (YOUR dollars, that is)...
"If you keep your money or savings in US dollars inside of the United States, you are a risk taker of epic proportions," cautioned guest columnist and self-styled dollar vigilante, Jeff Berwick, in yesterday's issue. To this editor's mind, Jeff is right on the money.
"Have you not been paying attention to what is going on?" he asked.
It's a fair enough question, Fellow Reckoner, and one worth repeating. Have you been paying attention to what's going on? Are you taking a good, hard look around you? Anyone who's been in and out of US customs recently ought to at least have an inkling of what's coming down the proverbial pipes.
"To begin with," observed Jeff, "the US Government now employs cash- sniffing dogs at most international airports. If you are carrying more than $10,000 in cash and don't declare it to the Government when coming in or out of the US, your cash will be seized. Thanks to these cash- sniffing canines, US customs officials seized $3.2 million at Boston's Logan Airport last year."
For those still a little foggy on the details, let's bring in good ol' dictionary.com for some clarity.
Seize (verb, seized, seiz·ing):
1. To take hold of suddenly or forcibly; grasp: to seize a weapon.
2. To grasp mentally; understand clearly and completely: to seize an idea.
3. To take possession of by force or at will: to seize enemy ships.
4. To take possession or control of as if by suddenly laying hold: Panic seized the crowd.
5. To take possession of by legal authority; confiscate: to seize smuggled goods.
Since we're dealing with the government here, we can confidently discount definition #2. Members of "the state" have had six thousand years to boss us around and order our lives and they have yet to "seize" upon or comprehended in any demonstrable fashion the most obvious and powerful idea of all time: freedom. If they had, they would necessarily have to disband and seek gainful, meaningful employment in whatever productive sector of the economy for which they are qualified, namely, selling pencils from plastic cups on street corners and painting lines up and down privately owned highways.
That leaves us with four definitions of the word all requiring force of some kind, either illegally (as in, when individuals seize something from one and other) or legally (as in when the state does so). The reader will do well here to remember that the words "legal" and "moral" are no more synonymous than are the words "tax" and "liberty."
Continued Jeff, "Some government apologists might say, 'If you aren't doing anything wrong, why would you mind being x-rayed, sniffed, patted down, detained and questioned?'
"Besides the obvious absurdity of that question, the main reason this is of concern is because in every case in history when a government has inflated its currency into worthlessness they always institute capital controls. Just ask anyone from Argentina or Italy. And it won't take much to change the rules from having to 'declare' $10,000 to 'not being allowed' to take $10,000 out of the country."
Jeff goes on to raise some excellent - and timely - points, before concluding that, "The US has started another war. The war on money. Anyone with any amount of cash more than will buy them a couple NFL tickets and beers for the game is suspect. And if you are one of those deluded people who thinks the Federal Reserve is evil and is ripping you off and you buy gold or silver to protect yourself, you are a domestic terrorist. It's going to be a fun few years ahead in the US."
The message is loud and clear. If you haven't already thought about (or, better still, taken actions towards) getting some of your cash out of the United States, yesterday is still the best time to do so.
As an actionable aside, if this is the kind of thing that gets your blood boiling, you might wish to consider joining us in Vancouver this year for our annual investment conference. This year's topic "Fight or Flight: Your Capital at Risk" is being billed as "potentially the most important question of our time." Time, if you hadn't already gathered, is certainly ticking...Grab an early bird discount here.
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| | The Daily Reckoning Presents | | SMS: Nvst B4 It’s 2 L8 | |  | | Patrick Cox |
I've written quite a lot in the past about the battle between Microsoft and Google. That battle, however, is actually an outgrowth of another more fundamental tension in the information technology, or IT, world.
I'm speaking of the open source versus proprietary operating system (OS) argument. This argument has suddenly become even more important as we watch another computer era come to an end.
Specifically, the laptop, which has destroyed the desktop, is being destroyed in turn by mobile devices - both tablet computers and phones. One critically important consequence of this creative destruction is the replacement of e-mail addresses by phone numbers. SMS texting is already much larger in terms of volume than e-mail. Soon, text will surpass e-mail in utility. Then it will displace old style e-mail once and for all.
There's a lot that I need you to understand about this battle, now that various winners have emerged in the mobile space. Not only will this battle restart the software race, it will also create huge winners in a whole range of mobile arenas, from back-end services to component manufacturers and application companies.
There will also be huge losers as the next wave of creative destruction rips through IT like a storm-force gale.
Essentially, Short Message Service (SMS) technology grew out of the 27- year old technology used to transmit short text messages to radio devices like pagers and handsets. SMS uses an underutilized and very small portion of the signaling protocol used to control standard telephone traffic. In the early 1980s, this was identified as a desirable goal, in large part, because it would allow emergency communications when normal voice capabilities were not fully functioning. The actual SMS application was developed in 1984 through a joint French and German effort, specifically by Bernard Ghillebaert and Friedhelm Hillebrand.
The genius of this innovation was that text messages could be fit into the existing signaling formats, exploiting unused bandwidth at no additional cost. The nature of this "hack," however, meant that texts were extremely limited in size. All that was required to implement the SMS technology was that existing mobile devices upgrade their software to recognize and display SMS text data. From that point forward, however, SMS messaging capabilities have been built into all mobile devices and networks.
What was also needed was a new network service to route SMS text messages, SMS service centers. With all the pieces in place, SMS texting was possible but little used. For over two decades, it was a largely dormant capability. At some point, however, teenagers found out about it. Now it's the most widely used data application in history.
Text is, without question, the killer app of our time. On the surface, SMS appears to be a simple, even primitive technology. For that reason, I suspect, the big players like Google and Microsoft basically underestimated its potential and ignored it. This, they will learn, was a huge mistake.
There's something about being an enormously successful disruptive technology company that seems to blind these organizations to the simplest and most obvious threats to their hegemonies. The big players were looking for some new whizbang science-fiction technology to appear so they could buy it up and control it.
As a result, SMS - a technologically simple phone-to-radio protocol - now threatens to topple the giants sitting atop the IT bean stock. Granted, it is new technological advances that make SMS so useful today. Still, the very simplicity of SMS text makes it such a massively disruptive technology. How disruptive?
There are over 4.2 billion SMS texters, accounting for more than 60% of the planet's population. Fewer than half as many people have Internet access. Last year, the SMS industry grew almost 25% and some analysts are predicting the industry will quintuple in size. Already, however, it has displaced e-mail as the network's killer app.
In terms of sheer volume, SMS is unparalleled. Internet traffic is barely a third the size of SMS. Fee-based SMS news services already surpass daily newspaper subscriptions. Internationally, banking services are moving rapidly to the SMS platform. Sweden and Norway now have fully functional SMS banking services. Other places, like Estonia, are replacing coin- and bill-operated machines with SMS-based services.
Want to pay for a cup of coffee, a parking place or groceries? You send a text instead of inserting a coin or handing over cash or a credit card. With Bluetooth enabled, it's even easier. And this is just the beginning. The potential applications for SMS technology are vast. We're at the same point with SMS that we were at with the Internet when most people saw the Web as an amusing, but unimportant diversion. A few people saw otherwise, including Google's Larry Page and Sergey Brin. Others didn't catch on until it was too late to carve out an important part of the business. This includes people as smart as Bill Gates, by the way.
Behind the scenes, the developers who understand what's happening are duplicating the frenetic race for success that I saw in Silicon Valley in the early days of the Internet. It is incredibly exhilarating. This industry is going to be an important driver in the creation of new jobs.
Another reason that people missed the importance of SMS text is that it was sort of assumed that something shinier would come along and replace SMS. Once everybody got their smart Web-enabled phones, it was just understood, SMS text would fade away.
That's not going to happen, for several reasons. One is that we need backward compatibility. Younger users tend to have "feature" phones without Web access, so we have to have a single protocol that everybody can use. More importantly, however, mobile devices put great premium on battery life and weight. SMS is efficient. It radically reduces power demands. This allows smaller chips and longer battery life, which is critical with tablet computers and mobile phones. There is, in fact, going to be a rapid acceleration in the adoption of smartphones very soon. This is because the Android OS has basically won the technological battle of the bands. It will become the standard.
Microsoft has been beaten in the mobile space and their proprietary OS is fading fast. Nokia has made a series of blunders as well and is now losing the mobile OS space it once seemed destined to own forever. For investors in transformational technologies, this is extraordinarily great news. The opportunities are enormous...and they are unfolding at this very moment.
Regards,
Patrick Cox,
for The Daily Reckoning
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| | | | Bill Bonner | | Government Spending and the Path to Money Printing | |  | | Bill Bonner |
Reckoning from Buenos Aires, Argentina...
Stocks down yesterday. Gold down. Oil down. Everything was down. The beginning of the end? Beats us. The Fed is still pumping in money. But investors are beginning to look beyond QE2.
If the economy really is recovering, they say to themselves, the Fed will be able to back off from money printing. Stocks, gold, commodities - everything should go down.
Did we mention a "hyperinflationary depression"?
What's that, you're probably wondering.
Well, it's when you have a deflationary correction...and soaring prices too. And that's what happens when the feds try to stop a major correction by pumping in huge amounts of money and credit.
But let's stop and look at how an economy works.
As an expansion gets underway, first consumers spend money that they earn. Then, they spend money that they will earn in the future. And then, they spend money that they will never earn.
The private economies of many of the world's developed nations reached the "never earn" stage in 2007. All of a sudden, lenders realized that they were never going to see their money again. Many borrowers would never earn enough money to pay off their loans.
The economy began a contraction...correcting its mistakes by writing down the value of those loans.
Markets are always discovering what things are worth. In 2007, they began to discover that a lot of the world's credits weren't worth as much as people had thought.
But then the feds were on the case.
While an individual person might run up debts greater than he can pay, the feds go one step further.
First, an expanding government lives on what taxpayers give it. Then, it lives on what taxpayers give it, plus what it can borrow from them. Then, it spends everything that it can squeeze out of taxpayers, plus what it plans to squeeze out of generations of taxpayers who haven't been born yet. Finally, when it has crushed all the blood out of the turnips, current and future, it spends money that no taxpayer will ever earn or pay in taxes. It just prints money.
This creates a far bigger problem. Because, no one knows what to make of this new money. Where did it come from? Who earned it? What does it mean?
Since the economy is contracting, the new money doesn't have much traction...at first. It is lent to hedge funds, banks, and other speculators. Soon, it finds its way into asset markets and basic commodity prices.
That's why we've seen so many record setting prices in recent weeks.
But this is a special kind of inflation. Instead of stimulating people to buy, spend, borrow, and invest...it makes them feel poor. They pay more for gasoline and have less left over for other things. If they have a job, their earnings barely creep up...while prices race ahead.
Want to see the process in action? It's happening already in the US. And it is even more advanced in England. Here's the report from The Telegraph:
The Centre for Economics and Business Research (CEBR) said soaring inflation coupled with low pay rises means household peacetime disposable income is at its lowest since 1921.
Rising food, clothing and energy prices mean the average British family will have £910 less to spend this year than they did in 2009.
The CEBR calculates that household disposable income will fall by 2pc this year, more than double last year's fall of 0.8pc and the biggest drop since the savage 1919 to 1921 post-First World War recession.
It forecasts inflation will average 3.9pc in 2011, its highest since 1992, as January's increase in VAT from 17.5pc to 20pc and the rising cost of oil and other commodities continue to drive up prices.
At the same time, salaries will rise just 1.9pc as unemployment remains high and the public sector makes cutbacks. Is this the description of a hyperinflation depression? Nope. Just an inflationary recession...so far. But wait until the feds pump some more...
Stay tuned.
And more thoughts...
"Argentina isn't perfect, but I don't know what's better," said our old friend, Doug Casey.
Doug has built a community in Northwest Argentina. He intended it as a Galt's Gulch...a place where like-minded people could live in agreeable circumstances, even if the rest of the world fell apart.
"How's it coming?" we asked.
"It's incredible. It might be the only new development in the world that actually is working. We've finished the golf course...and the spa and the clubhouse. We've got tennis courts. Polo fields. There's a boutique hotel coming in. Houses are being built.
"I decided to take a trip around the country to look at what was going on in other new, comparable communities. But none of them are comparable. Ours is easily the best place in Argentina. Maybe it's the best place in all of Latin America, I don't know.
"We already have a sports spa...now we're going to build an aesthetic spa. And we're putting in a movie theatre. It's really amazing. I'm going to start my own house there soon. It will be the first house I've ever built. I want to get it finished before the world economy collapses."
On our agenda for tomorrow...taking a look at Doug's new community. And then, going on to our own place.
Trouble is, it's far away. There's no email, telephone, or television service. So, you won't hear from us for the next week.
Dear, dear reader...we hope you'll be all right without us.
Regards,
Bill Bonner
for The Daily Reckoning |
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