Share This

Monday, 2 May 2011

Internet documentary Treasure Unearthed



Unearthed: A Documentary Treasure on the History of the Internet 

Technology Review by  Christopher Mims published by MIT

15 minutes of a rarely-seen BBC documentary demolish the myth that ARPAnet was inspired by nuclear war, and explain the far more intriguing truth.



The impending deletion of content from Google Video has inspired quite a few uploaders to port their content to Youtube, unearthing a trove of pre-YouTube-era gems like this one. It's a BBC documentary from 1997 called Inside the Internet, and features interviews with the scientists who actually built the infrastructure on which the Internet is based.

It's full of details that are not common knowledge among the billions who now rely on the Internet:

• Leonard Kleinrock, the computer scientist who helped set up the very first piece of hardware to comprise the Internet, an "Interface Message Processor," demolishes the myth that the ARPAnet, the precursor to today's Internet, was set up as a communications network that would be able to continue to pass message even after some of its nodes were knocked out by nuclear war.



Instead, it was simply a means for engineers to give themselves access to the capabilities of remote computers that their systems might not possess.

• The Internet was -- and still is -- based on sending tiny packets of information back and forth (aka "packet switching") because the mathematical theory known as Queueing Theory suggested that the best way to avoid congestion on a communications network was to send small, individually addressed packets of information that could be routed one at a time, so as to find the shortest route.

• UNIX, the basis of Linux (essential to web servers), Mac OS X and countless open-source OSes was born at Bell Labs, and was a product of the frustration of Bell Labs computer scientists with the software they had been forced to use up to that point. It was an internal project that was licensed to academic institutions for only a nominal fee, which helped it go viral.

• The combination of old-style modems operating through telephone lines and the Unix program UUCP allowed the first network of machines that was not part of the officially sanctioned ARPAnet. Called Usenet, it forwarded message from one machine to the next, whenever they happened to connect to the next machine in the chain via modem.

By connecting the edges of the blooming Internet, it helped to create a system in which there was no central node. This made the network immune to censorship, whether intentional or accidental. This, in turn, helped feed the rumor that the network had originally been conceived as one that would be invulnerable to the loss of any central communication hubs(s).

Newscribe : get free news in real time 
Posted by at No comments:

The US's reckless money-printing could put the world back into crisis!

By Liam Halligan
 




Last week, Ben Bernanke suggested that the US base interest rate will stay close to zero for an "extended period". It's been there since December 2008. 

America's reckless money-printing could put the world back into crisis
The US currency has also been falling pretty steadily since the summer of 2010, after Ben Bernanke gave the first inklings he would launch QE2. Photo: AP
 
Traders took these words to mean that the Federal Reserve won't hike rates until the first few months of 2012 at the earliest.

Bernanke also pledged to do whatever is required to keep America's economic recovery on track – confirming that the second programme of "quantitative easing", or QE2, would be completed. These two related announcements – the "reprieve" and the "sugar rush" – sent Wall Street into renewed spasms of synthetic joy.

In the real world, US growth is slowing sharply. Annualised GDP rose just 1.8pc during the first three months of 2011, down from 3.1pc the quarter before. America remains mired in sovereign, commercial and household debt.

Yet as the Fed chairman spoke, US stocks hit their highest level since before the sub-prime crisis. The tech-heavy Nasdaq, incredibly, closed at a 10-year peak.

So the Fed will keep on "printing" virtual money – at least for now. By the end of June, it will have purchased $600bn (£363bn) of longer-term Treasuries, with the US government effectively buying its own debt from funds created ex nihilo. That's on top of the original $1,750bn (£1,048bn) QE scheme, launched in late 2008.

America's base money supply – the bedrock of the world's reserve currency – has doubled in little more than two years. Despite consternation among many US voters, and dismay – rapidly turning to anger – across the world, most of America's political elite refuse even to debate QE. Such is the state of democracy in the "land of the free and the home of the brave". And America is not alone.

Plunging dollar

Bernanke's utterances caused gold to jump another 2pc. Silver – known as "poor man's gold", another "inflation hedge" – spiked 6.5pc. But the real story was the plunging dollar. Against a basket of five major global currencies, the US currency fell sharply and is now at its weakest since July 2008. The Fed's "real broad dollar index", a 26-currency composite and adjusted for inflation, is testing levels not seen since 1979.

Yet still Tim Geithner puffed-out his chest and reaffirmed America's "strong dollar" commitment. "Our policy has been, and will always be, as long as I'm in this job, that a strong dollar is in America's interest," the US treasury secretary said.

That's total nonsense, of course – seeing as a weaker currency boosts US exports and lowers the value of America's external debt. Geithner's words are not only disingenuous, but insulting to America's creditors and trading partners. In fact, Washington's constant berating of Beijing for "currency manipulation" is looking more and more like a diversion tactic.

 Big statement

That's a big statement, I know. But it's based on a dispassionate analysis of the facts. I have no personal beef with America. I've spent a sizeable chunk of my life in America and much of my family is American. I love America! I feel the need to write this as quite a few US economists, even those boasting Nobel prizes, have recently accused analysts who don't toe the "Washington line" of being "America-haters".

Such ad hominem tactics are pathetic – the last refuge of intellectual cowards who know they're losing the argument. For the "Washington line" – inflation isn't a problem, we don't need to raise rates and the Fed can print willy-nilly – is not only looking increasingly untenable, but is having a severe negative impact on much of the rest of the world.



 Damaging relationships

The way the Obama administration is running America's economy – continued fiscal expansionism, QE2 and "dollar benign neglect" – is not only damaging US relationships abroad, but will ultimately lead to greater pain for domestic voters too. I say this not because I hate America but because, as a citizen of the world, I care about the fate of the largest economy on earth.

This latest dollar weakness is part of a longer-term trend. From the start of 2002 until the middle of 2008, the greenback lost 30pc on a trade-weighted basis. The start of the "sub-prime" crisis proper then sent shock waves around the world. For six months or so, Western investors piled into what they knew, liquidating complex positions and buying "Uncle Sam". The dollar surged, spiralling upward during the so-called "safe haven rally".

Then the Fed began QE, apparently to tackle "deflation". The more pressing need was to bail out Wall Street and rein in the real value of America's burgeoning government debt – which happened as the dollar then fell. The US currency has also been falling pretty steadily since the summer of 2010, after Bernanke gave the first inklings he would launch QE2.

Massive problem

America's currency weakness is based on fundamentals including its vast, and upward-spiralling, $14,000bn debt – and that's just what's "on the books". Nothing material is being done to address this massive problem. The unspoken assumption among politicians on both sides of the aisle is that America can just "monetise" its liabilities by continuing to debase the currency.

So the Fed's actions are undermining the dollar precisely because that's what the White House wants. At the same time, sophisticated investors are exploiting ultra-low US rates by borrowing cheaply in dollars and switching the proceeds to currencies where returns are higher. This "carry trade" is flooding foreign exchange markets with US currency – weakening the dollar further.

Benign neglect

Yet "dollar benign neglect" is fraught with economic risks. A weak dollar makes commodities more expensive. It was when the greenback hit it's last trough of $1.60 against the euro in mid-2008 that oil soared to $147 a barrel. Expensive crude damages the world's biggest oil user. And as the dollar falls, America's huge commodity imports cost more, making the trade deficit even worse.

America's currency depreciation trick could also backfire badly if "the rope slips" and, far from a steady decline, the world's pivotal currency goes into free fall. That would plunge America back into recession, or worse – as inflation ballooned amid soaring import costs, forcing the Fed to raise rates in the teeth of shuddering slowdown.

A plummeting US currency would also spark broader chaos as central banks sought to protect the value of their reserves. And after the inevitable downward overshoot, the dollar would snap back, causing the carry trade to "unwind" as dollar borrowers suddenly owed more. The danger then would be that major losses at financial institutions posed renewed systemic threats. Financial markets might then go into a tailspin, reigniting concerns of a fully-blown global slump.

Waning power

Bernanke's comments last week were made to the press – with the Fed now agreeing to regularly scheduled news conferences for the first time in its 98-year history. Some say this decision to submit to demands for transparency indicates that the power of the US central bank, it's global influence, is on the wane.

I'd suggest that, on the contrary, the Fed's global impact may soon reach an all-time high. And that impact won't be pretty. For far from being a "safe haven", an increasingly debased dollar could be the cause of the next global financial crisis.

Reading between the lines of Bernanke's statement, I don't think that last week's Fed missive, as most concluded, confirmed the end of QE2. In my view – and I write this with a sense of trepidation – the Fed's inaugural "meet the press" moment was in fact preparing the ground for the start of QE3.

Liam Halligan is chief economist at Prosperity Capital Management.

 Related Articles

Posted by at No comments:

The West going down, rest of the world up!

Comment by Heather Stewart


The west may be declining, but the rest of the world looks ready for a 40-year boom



While post-industrial economies stumble out of recession, some unlikely developing nations are poised for a period of 'catch-up' reminiscent of China's rapid industrialisation
America's recovery is petering out, the UK economy is flatlining and euroland's crisis rolls on. There's scant cause for optimism in the Old World. But outside the credit-crunched post-industrial countries, the next few years – and decades – could see the blossoming of a whole new group of super-economies.

We all know about the extraordinary rise of China and India; but new research by Willem Buiter, former MPC member and now chief economist at Citigroup, argues that 2011 is an auspicious moment for the emergence of new economic powers, too.

In fact, unlikely as it may seem, Buiter and his colleagues believe the period between now and 2040 could turn out to be one of the best in the whole of human history for spreading the benefits of economic growth.

The fastest-growing economies during this supercharged period, they claim, will include China and India; but also, among others, Mongolia – currently better known for miles of featureless steppe than for economic dynamism – Indonesia, Nigeria, Bangladesh and Vietnam.

And what will bring about this new economic miracle? It's a tale of the mighty power of catch-up: unlike the days of the industrial revolution, when radical new technology – steam-powered mills, trains, threshing machines – transformed people's lives, these countries could achieve extraordinary growth largely by adopting the pre-existing methods, inventions, and sometimes institutions, of richer rivals.

Using the peerless research of Angus Maddison on the economic history of mankind, Buiter reminds us that for the first millennium or so, GDP growth was almost certainly negligible. Nothing changed. Peasant farmers scratched a living – just – from their little patch of land, year after year, century after century. In fact, not much changed until the industrial revolution, when technological improvements and mass urbanisation led to huge growth in productivity. Postwar reconstruction helped generate another jump in growth, as western European countries and Japan rebuilt and played catch-up with the US; and there was a further jump from the 1990s on, as the opening up of former communist countries to trade with the west, and later the integration of China in the global trading system, brought rapid improvements in living standards for millions.

Today, Buiter and his colleagues claim, there is an auspicious combination of large numbers of countries with big populations that are a long way behind their peers in the rest of the world, but are revving up for takeoff.
Of course it's not that simple – a range of factors are significant in what economists call the "convergence" of living standards towards the levels of the wealthiest countries.



High investment is important – and the capital to fund it, often from high levels of domestic saving. A young and relatively well-educated population is handy – recent research has shown that investment in schooling has been critical to China's success. And some openness to international trade and investment (though not to the pernicious credit booms of the 2000s) is important. Bad government, armed conflict or just very bad luck (such as a spate of natural disasters) can set a country's progress back by decades.

Venezuela was richer than many western European nations in 1957, for example, with income per head at two-thirds the US level; but decades of poor policies have seen it falling farther behind instead of catching up, with GDP per capita now barely a fifth that of the US. Zimbabwe provides an even starker example of the catastrophic consequences of bad government.

It could all go wrong at the level of international diplomacy, too: failure to make progress in the Doha round of trade talks, as evidenced yet again in Geneva on Friday, shows how little political will remains, in Washington especially, for further dismantling of trade barriers, and raises the spectre that protectionism could reverse some of the gains of the past decade.

But even without an ambitious World Trade Organisation deal, there is much to be won by, for example, freeing trade between emerging economies. A recent report by the Asian Development Bank urged the countries of "the south" – a catch-all term embracing Africa and Latin America as well as Asia – to burnish their trade and investment links and reduce their dependence on the US and Europe. The bank's research suggested they could almost double their share of world exports – from 33% in 2004 to 55% in 2030 – by waking up to the potential of markets closer to home.

None of this is good news if you're concerned about Britain's status as a mighty world economic power; but there hasn't been much good news on that front for decades. It could be great news, though, for many millions of people who have so far missed out on the benefits of a century or more of economic development.

There's a new drive to assess "happiness" and other alternative measures of success, prompted by the puzzle that after a certain point, rising GDP doesn't seem to make people feel any better. But if you don't have food to eat and you can't send your children to school, the benefits of extra income are blindingly obvious. Let's hope as many as possible of the countries preparing to harness the power of catch-up in the coming decades follow Buiter's key piece of advice – "don't blow it".

Super-hawk's final chance to raise rates has taken a dive

Andrew Sentance, the Bank of England's super-hawk, will have one last chance this week to win fellow policymakers to his cause.

The news isn't going his way. The official GDP figures, released on 27 April, showed the economy stagnant, with 0.5% growth merely taking us back to where we were in the autumn. High street sales are soggy, and retailers are squealing about lost margins as they struggle to avoid passing cost increases on to shoppers. And, so far, there's no sign of wage growth running out of control. Consumer confidence has slumped to levels last seen in the recession.

Instead of stoking an uncontrollable wage-price spiral, inflation is eating into profit margins, gobbling up the spending power of pressurised consumers, and making businesses even more nervous about investment plans. And that's before the bulk of the government's fiscal squeeze has fed through to job and public service cuts.

Backed by the hawks in the City, Sentance has become increasingly strident in his insistence that the Bank has been "selling England by the pound" (quoting 1970s rock band Genesis).

Will fellow hawks Spencer Dale and Martin Weale – who have only demanded a quarter-point rate rise instead of the half Sentance wants – continue the campaign when he goes? If inflation falls again, they may admit it's time for a full stop. - Guardian
Posted by at 1 comment:
Subscribe to: Posts (Atom)