 | | The Daily Reckoning | Wednesday, September 28, 2011 |
- Never-to-return jobs...are you ready for the new workplace?
- Artificial intelligence and mapping 100,000 neurons in a fly’s brain,
- Plus, Bill Bonner on the trouble with dominant nations and “the last revolt”...
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|  | | | The US’s First Lost Decade | | A Look at Economic Growth During a Great Correction | |  | | Joel Bowman |
Reporting from Buenos Aires, Argentina...
We’ve a couple of corrections to deal with today, Fellow Reckoner. First, a minor one. Then something much larger...
In yesterday’s issue, the guest column was mistakenly attributed to Frank Holmes, whose insightful material appears occasionally in these pages. The essay that we featured, however, was actually penned by Mr. Jeff Clark, an editor with Casey Research. Our apologies to Mr. Clark for this oversight. A version of the column — complete with corrected byline — can be viewed on The Daily Reckoning website, here:
After the Fall: How Far Can Gold and Silver Climb? — By Jeff Clark
Now onto the second order of business, the other correction...something Bill has long been calling “The Great Correction.”
Fellow Reckoners already know that what we’re seeing play out today is hardly the garden variety, single — or even double — dip “recession” the talking heads on television squawk about daily. Indeed, the very nature of a double dip implies that, somewhere between the first dip and where we are today there existed some kind of “recovery.” Various politicians and economists spent the better part of the past couple of years selling this idea to Johnny and Janey Main Street, trying to convince them that what happened in 2008 was merely a blip on an otherwise uninterrupted upward trajectory. Things would soon return to “normal,” they said. There was even a whole season branded the “Summer of Recovery.”
Of course, there was no such recovery. Stock markets are still down 30% — more or less — from their pre-crash highs. Meanwhile, millions more Americans have joined, first, unemployment lines and, second, parents’ and friends’ couches, too disillusioned to even bother looking for a job. The longer they remain unemployed, the larger the drain they become on the welfare state designed to pay them not to work. And even if they do get back on the job, they will likely toil for less than they were paid ten years ago; another sign that the Great Correction is doing its work. News out yesterday confirmed that the average wage of an American worker has actually declined over the past decade — down 7% to $49.5k.
“Economists talk about the lost decade in Japan,” Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities told CNN. “Well, with these 2010 data, we can confirm the lost decade for the American middle class.”
There you have it: The first lost decade of the Great Correction. Japan — proving these things CAN go on longer than is generally expected — just embarked on its third zero-growth, go-nowhere decade. And the Japanese had a private savings base to cushion the initial blow. The Americans have no such thing. They were already deep in the red when their star-spangled correction came due.
More importantly, many jobs that were lost during the past few years will never return. Not at any wage. They’re gone for good. That’s not necessarily a bad thing in and of itself, of course...it’s just the way it is. As technology evolves, it replaces much of the need for human labor. You might think equal or higher productivity with less human input would be a good thing. You might likewise think that being afforded more free time to spend on other productive endeavors would be a good thing too. And you’d be right. But you’d also be unpopular...and unlikely to win any kind of election.
Back in the early 19th century, for example, English textile workers protested that the introduction of mechanized looms was gutting their sector, leaving tens of thousands of people without work. Those in the agricultural sector who were replaced by threshing machines thought likewise. The machines simply did a better, cheaper job than the workers...and they didn’t stop to take cigarette breaks or complain about the weather. The result was a huge increase in productivity, but fewer job openings for unskilled workers. Needless to say, not everyone was happy about this progress. Angry bands rallied behind General Ned Ludd — after whom the Luddites were named — to burn factories and destroy the machines that had replaced them. [We don’t know if they used hammers or tools to break the plant equipment but, sticking to their core philosophy, they could have employed dozens more vandals if only they restricted their actions to hands-only destruction...and twice as many again if they instituted a one-handed destruction policy.]
Today, you might think people would peg Luddite “logic” for what it was: ass-backward and myopic...at best. And yet, just a few months ago, a prominent US congressman accused Apple of killing jobs in the United States because bookstores like Borders and Barnes & Noble could no longer compete with the iPad and its eBook application. The giant retailers couldn’t cut it in the marketplace and had to close their doors. Thousands of workers went with them. Apple had out- played and out-innovated the competition, in other words, just like the looms and threshers of the early 19th century. And yet, rather than inspire applause, this innovation was met with condemnation.
Not only had the company out-innovated, scorned the congressman, Apple had chosen to manufacture its products in a country where...gulp...labor was cheaper and more competitive than minimum wage advocates would allow for back home. How dare Apple not overpay on costs, seemed to be the allegation. And how dare they be subsequently able to offer a cost-effective technology that millions chose freely to buy...including the congressman himself!
There’s no point breaking loom frames, threshing machines and iPads because advancements in technology mean it takes fewer people to produce the same or greater output. Instead, smart individuals and companies will learn to do what Luddites and giant bookstores failed to do: they will adapt and embrace technology and use it to their own competitive advantage.
In the following column, resident technologist, Ray Blanco, touches on one such advancement he sees coming down the pipes. Please enjoy...
| | | | What To Do If Gas Hits $8 and Oil Soars to $300... |
Think we’re “done” with exploding gas and oil prices?
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When it goes, even today’s high gas prices could look like a bargain compared to what’s ahead. Millions of Americans could take a financial hit...but a few could come out way ahead.
Find out how in this urgent new report...
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| | The Daily Reckoning Presents | | Remember This | |  | | Ray Blanco |
Periodically, we see articles heralding the imminent death of Moore’s law and accelerating progress in the world of electronics. For the sake of your portfolio, don’t buy it. Creative destruction, using Joseph Schumpeter’s term, will continue to create breakthrough profit opportunities.
In 2007, Hewlett-Packard’s labs demonstrated the first memristor recognized as such. A portmanteau of “memory” and “resistor,” “memristance” was the theoretical fourth circuit variable first described in 1971. While HP stock will probably not yield the sort of profits we’re looking for here, it will help generate them indirectly.
Because of its unique properties, memristors will enable far more powerful circuitry. Unlike transistor-based circuits that form the core of modern electronics, memristive circuits retain their state after losing power. Theoretically, you could power on a memristor- based computer and have all the data in memory that it had when you powered off. Memristor memory could replace hard drives and transistor-based RAM.
Memristors, however, can do more than act as memory. They can replace existing processing components. This means that much more functionality can be implemented in a single component. Instead of busing data back and forth between separate memory and processing locations on a circuit board, memristors do it all. Data, then, are available for processing with shorter wait times. Memristors reduce total hardware size, cost and energy consumption. Yet memristors can multitask in other ways, opening up a whole range of exciting possibilities.
Existing circuit elements only have two states: something or nothing, one or zero. Binary arithmetic is, therefore, used to build up the mathematical functionality needed to implement the logic that gives a computer “intelligence.” Unlike binary elements, memristors can exist in more than two states. This allows the use of higher base number systems. A single memristor could, therefore, perform the work of many binary transistors. This would permit faster, more powerful processors and higher-density memory. Additional reductions in power consumption is another outcome, of course, since fewer elements would be needed.
The ability to be either logic or memory, along with the ability to assume multiple states, makes memristors more like neurons in the human brain. This similarity isn’t lost on researchers. The multistate capability, taken to its logical conclusion, means that a memristor could exist in virtually infinite states. Then, memristors could be used as analog, instead of digital elements. Such devices would be able to learn on their own, computer theorists say. In fact, simple memristive circuits have already been used to model the adaptive ability of amoebas.
Efforts are under way to fully map the 100,000 neurons in a fly’s brain. Once completed, the fly brain’s “circuitry” could possibly be reverse-engineered with memristive circuitry. This would help us to better understand animal intelligence, and hence be able to develop true artificial intelligence. If sufficiently advanced, such computing devices would be able to easily recognize and differentiate between human faces and understand natural human language.
The memristor revolution is coming. HP expects its first commercially available memristive circuits to be available in mid- 2013.
Regards,
Ray Blanco,
for The Daily Reckoning
Joel’s Note: There is little doubt that technology is changing the way the world works. There will be plenty left behind, yes...but there will also be a few who understood the importance of these advancements and invested ahead of the curve. Ray Blanco’s newsletter seeks to keep readers ahead of that curve. Check it out here.
| | | | | Bill Bonner | | When Empires Change Hands | |  | | Bill Bonner |
Reckoning from Buenos Aires, Argentina...
We got back to Buenos Aires last night. When we got into a cab, we found the driver curious and loquacious.
“You have an accent. Are you French?”
“No...but it’s a good guess. I’ve lived in France for the last 15 years.”
“Oh...I studied French for years. I was the best in my class. But I forgot it.
“My mother was an English teacher. But that was in the ’60s. You know, we’ve had two wars with the English. So, I didn’t want to study English. I decided to study French. And then I forgot it.
“I’m glad you’re not English.”
“No, I’m not English. My family is actually Irish. So, the English are our common enemies. Actually, they’re the common enemies of the French too. But at least in my family we’ve decided to let bygones be bygones.”
“You’re very generous. But we Argentines don’t forget. We hate the English. And the Chileans. And the Americans. And the Albanians, of course. Everybody hates the Albanians. Even the Albanians. It’s the only thing they’re right about.”
“Why the Americans?”
“Because they helped the English in the war.”
“You mean, the Falklands war?”
“Wait a minute. Whose side are you on? I mean the war of the Malvinas...
“We hate the Americans also because they are trying to push everyone around. They’re too big for their britches. But that’s how it works, I guess. I read Arnold Toynbee’s history. Every country tries to push its neighbors around when it can. There will always be a dominant country. And that dominant country will always fall. No country remains dominant forever. They get bigger and bigger. They take over more and more. Then, they go too far. And then they fall and another country takes the dominant position.
“It looks to me as though the US is about to fall. It is pushing too hard and in too many directions. Besides Americans are deep in debt. They can’t afford all they are trying to do. They have soldiers in almost every country in the world. Or, that’s what it seems like. It must cost a fortune. And the US doesn’t have any money.
“Down here we don’t have any money either. But we don’t spend any. No one will lend to us. Because if they lend to us they know we won’t pay it back. We made that pretty clear. So they don’t lend. And we don’t spend. It’s a happy balance. We’re poor. But we look poor. And when you live like a poor person you don’t have to worry about losing your money and ending up poor. You’re already poor.
“Of course, Christina [Kirschner, president of Argentina] tells us that we’re all going to be rich. She says the Argentine economy is working so well that it should be a model for the rest of the world. Maybe she’s right. It’s a model of a bad economy. Completely screwed up by the politicians.
“You know I couldn’t even buy a set of tires for my cab. They didn’t have them. Because they couldn’t import them. Christina owns a tire company. So she didn’t want any competition. She blocked the others from importing tires.
“At least we know our economy is screwed up. The Americans don’t know it. They owe everybody else money. We don’t owe much money. We don’t even mortgage our houses. They want 20% on a house mortgage here. It’s crazy. Better to pay in cash.
“But Americans can get a mortgage for what, 5%? So they borrow a lot. And when you borrow a lot you have less than nothing, if you follow me. I mean, if you don’t borrow anything at least you’re at zero. But the Americans are below zero. Am I right?
“China has the money. And China is smart. And there are a lot of Chinese. So I figure it’s just a matter of time before China replaces the US as the dominant power.
“The trouble is, if you read history you see that these transitions aren’t easy. There is usually a war. The dominant power doesn’t give up without a fight.
“By the way, that’s what WWI and WWII were all about. Germany and England fighting for the dominant position. And you know how many people died? Sixty million. Unbelievable.
“Each time there’s a fight for the top position, in history, the death toll goes up. And when war between China and America breaks out...there could be a billion casualties. I’m not kidding. I hope not. But you have to be realistic.”
And more thoughts...
Tonight, we’re on our way back to France after spending the weekend up in the mountains of Argentina.
What’s new on the high plains and valleys? Not much. The revolution against us seems to have petered out. You may recall that several of the locals — who rent land from us — decided that they didn’t need to pay. They claimed “indigenous rights.” Their families had been there for a long time. So, they figured they should own the land themselves; they shouldn’t have to pay rent — especially to a foreigner.
True, the local Indians once ‘owned’ the land. But then came the Spanish conquistadores. They stole it from them fair and square. Not only that, the Spanish practically exterminated the original owners. So, it is not at all clear that the present families are really descended from the original tribes.
Yes, they have Indian blood. But so does almost everyone in Northwest Argentina. Besides, even the Indians in the valley at the time of the conquest must have stolen it from some other group. There have been people living here for 10,000 years, at least. Some archeologists think they have been there for 30,000 years.
What is clear is that the property changed hands in the 16th century. Ever since, it has been owned by someone of European origin...your editor being the last in a long line. The resident “indigenous” families — about 25 of them — pay a token rent as evidence of the relationship between owner and renter. The ‘rent’ is only a cow or a sheep...usually of so little value we give it back to them. But it affirms that they are not adverse to our title claim. So it must be respected.
That was the situation when a couple families began an insurrection last year. We realized that there was not much we could do about it. Calling in the police would have sent shock waves through the whole area and probably ended badly. So we began a campaign to improve life for all the people on the farm...and waited.
Then, one of the ringleaders wanted to sell some of his cattle. (The local people actually have more cattle on our land than we do.) But he doesn’t have a loading platform. And we do. So we made a deal. He pays the symbolic rent and signs his contract. We let him use the platform.
As for the others, if they pay the rent, we give them a better bull for breeding. And we offered to help them put water and electricity in their houses. We pay for pipe and for a small battery and solar panel. It is a very rudimentary system, but it makes a big change in the locals’ lives — though perhaps not always for the better. Now they can watch TV.
Anyway, that is how the revolution broke down...and your editor retained his title...at least for now.
Jorge, the farm manager, explained more of the background of the story. We were visiting a beautiful little valley about 2 hours on horseback from the main house, where we now grow grapes and nuts. It is a beautiful spot. There are pastures, corals and abandoned fruit orchards. Irrigation ditches connect them all together; nothing will survive without watering...except the cactus. In one place, there is a wall of cactus trees planted to keep animals in or out, we weren’t sure which. There are also several abandoned houses, where people seem to have lived fairly recently, raising corn and keeping goats. The adobe walls of these houses are still intact. The roofs — of straw covered with mud — are mostly still in place. We wondered why there were no families living in them.
“Oh...this is where we had the last revolt,” Jorge began.
“It was about 10 years ago. There used to be five families living here. They had gotten used to having their own way. And so they refused to pay the rent. They took the previous owner to court...they said he had abandoned the property. They asked the court to give them ownership of it. But the owner got some of the other people to testify in his favor. They said he was still an active owner...and that they had paid their rent. The judge ruled in the owner’s favor. The law is pretty clear. If an owner does what he is supposed to do he keeps his property. If he abandons it, the people living on it can claim it.
“That’s what happened up the valley to the north. The owners moved to Buenos Aires. They just forgot about it. Then, when they came back — it must have been about 20 years later — the local people refused to recognize them as the owners. They went to court and the court ruled that he had abandoned the property. The family kept their house and a few hectares around it. But the rest of the farm went to the local people.
“But here in this valley, the story didn’t end with the court ruling. The families here didn’t honor the court decision. They still refused to pay the rent. So about two years later the owner took them to court. This time the local people were in contempt of court. So, the judge got mad and told them to get off the property. That’s why there isn’t anyone living in the valley anymore.
“The previous owner tried to sell the farm before you came along. But no one would buy it because of the land rights issue. But I guess you didn’t know about the problem...”
Regards,
Bill Bonner
for The Daily Reckoning
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