Tuesday, December 30, 2003

Will Japanese Bank Save US?

 
From TDR 12/30:
================

*** "Will there be a dollar crisis?" asks our friend Martin
Spring.

"The most astonishing figure I've seen reported in recent
weeks is the Japanese provision for currency intervention,
essentially to support the dollar. It's Y100 trillion -
about $930 billion at the current yen/dollar exchange rate.

"That's the amount of yen the Japanese central bank has
been authorized to borrow in a year to spend on buying
foreign currencies to hold down the yen's exchange rate.

"The mind-boggling size of the provision - about 50 per
cent greater than America's forecast foreign trade deficit
next year - alerts us to two conclusions:

* The Japanese authorities see a significant risk of a
major dollar crisis which would send money flooding into
alternative major currencies.

* If that happens, they are determined to keep a lid on the
yen - which would both help the dollar to resist decline
and divert most of the money flood into the euro.

For more from Mr. Spring's, see his article on the DR
website: A Dollar Crisis?

(http://www.dailyreckoning.com/body_headline.cfm?id=3651)


=====================
posted by James 10:01 PM

Saturday, December 27, 2003

Europeans are different...again

 
Professor Victor Davis Hanson scores again, in a December NRO piece.

=================

December 19, 2003

Stuck on Calypso’s Island
Dialoguing with the Europeans.

What follows is a fair summation of about 20 or so dialogues I had recently with a series of Europeans — a good cross-section really of Scandinavians, British, Germans, Greeks, and Dutch. Questions and answers are taken almost verbatim from our exchanges.


Europeans: What we object to most is the unilateralism and the language of the Bush administration, more so than any particular policy decision. Can't they tone it down?


Dumb American: Maybe this cowboyism is akin to a similarly southern-accented president's previous failure to consult both our Congress and the U.N. when we bombed Milosevic? Or are you guys ticked off at the litany of needlessly provocative and uncouth asides — like "German way," "sh*tty little country," "Nazi manner," "problems with Miami and New York," etc.? Or perhaps Mr. Bush — in the manner of President Putin — threatened castration to a French journalist?


Europeans: Moving on — you need to study our past to learn why we will no longer accept war as a method of adjudicating disputes.


Dumb American: We long ago did that — and in 1941 figured war was the only way to restore what you nearly destroyed.


Europeans: Well, war is simply not an option any longer for us, like it or not. You started this mess in Iraq and now want us to bail you out; so, yes, there is a sort of "I told you so" self-righteousness over here — and why not?


Dumb Americans: And do Osama bin Laden, General Mladic, Saddam Hussein, and Kim Jong Il — all suitably impressed with your elegant forbearance — agree about the futility of war? As far as Iraq goes, forget about the war, look at the peace. We are not asking you to help us fight, but to send some aid to a consensual government emerging in Iraq. Are we to assume that you would extend $100 billion in military and trade credits to a mass-murdering fascist, but almost nothing to his victims, who got very little from your lucrative trade deals?


Europeans: Perhaps our growing divide arises out of a sort of American simplicity about Israel and Sharon — now that the neocons have taken over Washington and have ignored the legitimate aspirations of the Palestinians. The United States simply is not as sensitive as we in Europe are to the problem of refugees and the abuse of power that is seen as so threatening to the Muslim world.


Dumb American: Do you mean the 50-something dead in Jenin last spring or the 80,000-something Muslim dead in Grozny over more than a decade — or is the rub the 250,000 Muslim dead in Kosovo and Bosnia? Is it the "hyper" reaction of IDF or of the Russian and Serbian armies that grates on you?


Europeans: True, there are legitimate differences in both points of view. But we worry that the Americans are not really aware of the depth of the European venom toward the United States. The anger is really cascading.


Dumb American: Do you think such populist fury will result in the wholesale expulsion of our soldiers from Germany, Suda Bay, or Spain? Or maybe even the ejection of the United States from NATO?


Europeans: Don't laugh — an all-EU force is months away.


Dumb American: Centered around the Charles de Gaul or the Luxembourg Air Force?


Europeans: Come on. You know that the animus is directed at Bush, not the American people.


Dumb American: No; I think the divide is even worse than that, I'm afraid. You see, the reaction over here is just the opposite — we have nearly given up not so much on European governments but Europeans themselves, which we see as essentially the same.


Europeans: In some ways you're right. After all, over half our population now believes that you — not the North Koreans or the Iranians — are the real threat to world peace.


Dumb American: I suppose a similar poll 65 years ago would have revealed the same thing about your fear of a unilateral Churchill and your ease with a multilateral Hitler, who seemed to get a nod from the Russians, Italians, Spanish, Eastern Europeans, and Japanese when he went into Poland. But in any case, we wish you luck with the Iranian mullahs. And as far as Tehran goes, for your sake — as long as we are not yet in missile range — we hope that your Nobel Prizes, trade credits, lectures, and so-called "soft power" provide better deterrence than an ABM.


Europeans: Our disagreement is not so simplistic as that. But part of the problem is that Americans simply do not know much outside their shores and listen to silly Fox News and Rush Limbaugh for their information.


Dumb American: Do you prefer instead the erudition and scholarship of Michael Moore, Noam Chomsky, Gore Vidal, or Thierry Meyssan, who, if the best-seller lists are any indication, have taught Europe much about America since 9/11?


Europeans: I'm talking about snap judgment and simple solutions to complex problems.


Dumb American: Like Bonapartism, Prussian militarism, Nazism, Italian fascism, Francoism, Marxism, and Communism?


Europeans: Well, it is precisely our experience with those nightmares that guides us today, and explains why we would never allow a South Central or Harlem. And certainly we wouldn't unleash someone like this Ashcroft — or wage a preemptive war in Iraq.


Dumb American: Marseilles is a socialist paradise? But tell me: Are Jews safer in Paris than Arabs are in Detroit? And is it a more moral thing for us to jail and try terrorist killers or, like you, turn them loose, as we saw all the time during the last two decades?


Europeans: But don't simply scoff; for us the idea that you would spend $87 billion on fighting in Iraq while your own people don't have health care is preposterous.


Dumb American: But was the death rate this August higher in the Sunni Triangle or Paris? We believe that a nanny state is not only inefficient, but, when the temperature rises, downright lethal.


Europeans: You can see what we need is more communication — what concrete steps need to be taken to resolve the issue?


Dumb American: For starters? Perhaps forgive Iraq's multibillion-dollar debt to France and Germany that Saddam ran up for imported weapons that killed thousands of his own people and some of us as well. Build a couple of aircraft carriers and learn how to use them to promote freedom and democracy. Impose a trade embargo on Syria and Iran. Don't give any more money to those who funnel it to suicide bombers on the West Bank. If you are in NATO, send 50,000 troops to Afghanistan to finish off those who attacked your ally; otherwise get out or dissolve NATO.





And so it typically goes. Most of these European interlocutors are impressively educated. They are naturally inquisitive and well versed in the nuances of culture. But there is also a great fear among them — almost as if the United States is a painful reminder that the world might not be so calm beyond their shores. If we would just not stir things up, leave it alone, not worry about it — the "problem" of terror might go away — as if the Soviet Union once collapsed due not to billions invested in American deterrence, but to a change of heart by well-meaning Marxists in Moscow.


Europeans fixate on American and Israeli foibles — and not the far greater transgressions of Russians, Chinese, Iranians, or Arabs. Why? Because we alone listen to them, and with us they are not overwhelmed by the magnitude of a Grozny, Tibet, mass hangings in Tehran, the obliteration of an entire town in Hama, or the gassing of Kurds. And of course Mr. Bush does not threaten to cut off any European journalist's testicles, or brag about not clicking his heels to Germans.


I'm sure that the Europeans are light-years ahead of us in the use of public transportation. They probably are wiser in their per-capita energy utilization, and their primary and secondary education may be superior. But there is also something of Calypso's island about them. For all their professed enjoyment of food, shelter, and lovemaking, the Europeans are bored silly with their listless routine and are increasingly timid — this from a great people who should not, but really do, live in terror of their own past. Like Odysseus in his comfy subservience to Calypso, these mesmerized and complacent sensualists sometimes contemplate leaving the comfort of their fairyland atoll and in boredom weep nightly, gazing out at the seashore. But as yet they lack the hero's courage to finally build a raft and sail rough seas to confront suitors who are trying to crash their civilization.


This war would be over far sooner if 350 million Europeans insisted on a modicum of behavior from Middle Eastern rogue regimes, rounded up and tried terrorists in their midst, deported islamofascists, cut off funding to killers on the West Bank, ignored Yasser Arafat — and warned the next SOB who blew up Europeans in Turkey, North Africa, or Iraq that there was a deadly reckoning to come from the continent that invented the Western military tradition. Indeed, European sophistication and experience, combined with real power, could be a great aid to the West in its effort to promote liberal and consensual governments outside its shores. But if they do not even believe in the unique legacy of their civilization, then why should we — much less their enemies?


So for now we should not lament that the Europeans are no longer real allies, but rather be thankful that they are still for a while longer neutrals rather than enemies — these strange and brilliant people who somehow lost their way, and no longer can distinguish between a noisy Knesset and Arafat's hangmen, much less between those racing to topple a tyrant in Baghdad and others lounging at Sebrenica.

posted by James 10:17 AM

Friday, December 26, 2003

India, not China....

 
India has one of the highest literacy rates in the world, and most speak better English than most Americans. Their many and diverse religions and languages keep them from being an effective "unified" world power, as they continue to fight amongst themselves. With little concept of private property, it's improbable that they can become a "#1 contender".

Here's a view from The Daily Reckoning -

====================================

From Bill Bonner, back in Ouzilly...

*** Oracle pleased investors with its announcement that sales had risen 8%. Many of the sales were made overseas...and adjusted back into dollars, the increase was only 1%...but investors seemed not to notice. Nor did they seem to mind the accompanying announcement that Oracle was letting 1,364 employees in the U.S. go. It will, meanwhile, add 1,334 employees overseas.

We did not check, but we wouldn't be surprised if many of these new employees were hired in India, which seems to be picking up more and more jobs in the software/service sector.

*** A recent issue of India Today comes with the cover headline: "Champion of the World." In the race of global economic competition, India says it is the lead position...and pulling away.

The numbers are suspect, but India has one of the highest GDP growth rates in the world. While China hogs the headlines, India is where English-speaking outsourcers look first when they are trying to cut costs. The country is a bureaucratic mess, as everyone knows. But it is growing fast...with a labor pool that is nearly as big as China's and growing at a faster rate. In terms of mouths to feed and hands to employ, India is expected to surpass China in less than 2 decades.

India is a relatively free country. China is relatively unfree. From the little we can tell, India's growth is chaotic, but real. China's growth, by contrast, has developed into a bubble...based largely upon lending to customers (Americans) who cannot really afford to buy. China's bubble is destined to blow up...like all bubbles...and lead to God-knows-what kind of problems - social, political and economic. India's growth - while less visible and understandable to the outside world - may actually be more durable.

*** It is the Christmas holiday season. We have brought the whole family to the country for a week of conviviality.

Our oldest son, Will, has come from Florida, bringing his fiancée. Our daughter, Sophia, has returned from her college in West Virginia. Our mother has come back from her visit to Virginia. And the rest of the family has come down from Paris.

Our friend, Michel, has taken a keen interest in India. He is convinced that China is a giant fraud and compares it, unfavorably, to India at every opportunity. He has also become a fan of Bollywood - India's huge film industry - and is fascinated by all that it produces.

Last night, the family settled down to watch one of Michel's favorites - Gadar - a movie in some subcontinent language, with subtitles in some form of English. At first, we all laughed at the odd translations, stylized acting and strange song and dance scenes. But gradually the film engaged us and then finally captivated us.

"It was ridiculous," said film critic, Maria, "but we liked it anyway."

The theme is a love story, which takes place at the time of the partition of India and Pakistan in 1947. Despite what appears to us as an undeveloped or even naïvely simpleminded view of courtship, the film's presentation of politics is remarkably sophisticated and cynical. There is not a single politician, military man, or bureaucrat in the film who is not a moron or a scoundrel. And every scene of collective action is a horror of mob violence. The most 'political' character in the movie is a lunatic who has lost his mind and talks incessantly of liberation from the British and the glories of the new India. He is, alas, a Pakistani, mortal enemies of all Indians!

The film's hero, an Indian, almost single-handedly defeats the entire Pakistani army, wielding a pump that he has pulled out of the ground.

==========================
posted by James 6:36 PM

Sunday, December 14, 2003

Travel Much?

 
Most everyone who writes has to travel occasionally; and everyone who travels has a horror story. After 2 million plus miles on Northwest, this is mine.

The DC-10 is an old old airplane, made by the now defunct McDonnell-Douglas company acquired some years ago by Boeing. But Northwest Airlines and their partner KLM are trying to keep a few going. Not successfully.

When the “pneumatics” failed and engine number two shut down one hour into Wednesday’s flight from Amsterdam, all of the excess fuel was dumped out the ports on the wings…to the great surprise of window side passengers. The Captain lazily intoned: “For those of you who noticed, we have made a 180 degree turn and are going back. The dumping of fuel is a standard safety precaution…”.

We landed safely, and began three days (THREE DAYS!!) of waiting in lines and being told little. Attempts to fix the aging aircraft were unsuccessful, and all 250-plus souls had to be rebooked. The ensuing chaos has not been since Before Mao Died in Remote Provincial Airports, or the Tuesday Ghee Run From Calcutta. Pushing screaming demanding lineless crowds dispelled all notions of doubt about Darwin’s belief that we Descended From Animals, and our Reverting To Form – Only The Strong Survive.

“Don’t ask all these questions!” complains an aging female KLMer “…or we will not get anything done.” (I am not making this up…)

Crowds if screaming tired hungry families implored endlessly for information and assistance; but unsuccessfully, to the impeccably-clad blue-uniformed blue-eyed blond cyborgs of all sexes used by KLM to handle such matters. Until Break Time Came..or The Shift Was Nearing End. After waiting in one of seven 30-person lines to get answers and tickets fixed, more than once the KLMer servicing the line stood up and said…”No more in this line, I have to go”, and the next people in line got to start over at the end of an adjacent line. Little in the way of compensation was offered, (Discounts on Future Travel! Discounts on Onboard Headphone Purchase and Savings on Northwest Merchandise!) except extreme regrets, of course, "but there is nothing we can do, we are awaiting further information."

Rumors circulated like wildfire at the gate. “Go down to the ticket office (a quarter mile away at the other end of the airport)..they can rebook you easily.” After waiting in the crowd there, the Number Machine was discovered. After taking a number (182) and noticing three cyborgs behind the desk were now working on number 131, I gave up. At ten minutes minimum per waiting soul, 500 minutes translated to over eight hours.

Where is the errant DC10 airplane that was being repaired? ..”It is currently being flown by the captain to determine if it is airworthy”. The mind boggles…

The Stranded Passenger Business is a growing one, and a New Revenue Stream. KLM will not give you your checked bags back, no matter what your story (“I am a Type 1 insulin dependant diabetic and will fall into a Large Damage Suit-Inducing Coma if I can not Get To My Packed Medicine" – finds few listeners and little response. Lotsa opportunities for Trail Lawyers Over Here, but few Expressions of Concern when their Use is Threatened.

The two hotels we were offered on subsequent nights WERE BUILT for just this business; the cheap fixed-menu free dinners and breakfast buffets are pushed at the hundreds of souls who are The Real Victims of the Lack Of Maintenance Policies in Amsterdam. This happens almost every day, said the locals at the hotels who now have all the signs and forms preprinted and ready to go; even handing out the aerogramme sheets for Letter Of Complaint, preaddressed to KLM.

And of course You Have No Recourse. They have your bags locked up in “deep storage”, they have your flight coupons, and they wisely string you along for DAYS! With the promise that Escape Is Just Around The Corner. What Can One Do? Legally, little. Ancient Revenge Fantasies erupt with Plans to Find All The Members of the NW Board and Seed Their Lawns in Minnetonka With Salt, and To Release Feral Bulldogs on their Children's Routes Home From School....

And as Nina Simone applies the Special Nina Treatment As Only She Can over the constant Euro-jazz piped-in music to the classic I’ll Be Home For Christmas, we hope we can escape this antiseptic kafkaesque level of Dante’s Inferno and Git Home Soon….


posted by James 5:32 AM

Sunday, November 30, 2003

The Beef Guy

 
Beef Prices Are Skyrocketing, say the “features” on the Network News shows. Mad Cow Disease in Canada (only one cow, it turns out) caused the Govmint (local pronunciation) to Ban Beef Imports From There. And since you can’t grow cows fast, up go the prices. High Class Restaurant owners in NYC are shown complaining about 2-3 dollars a pound more for The Good Stuff.

So when I was introduced to T, a local farmer, as a Supplier of Beef, I got real friendly. T takes 4-5 Angus and stuffs them for their Last 100 days, with Corn and other Good Stuff. Then he drives them up to Missouri, where a Govmint approved Meat Packer process them, ages it all a bit, and vacuum packs and freezes it all in small packages.

Learned a lot about butchers and cows when I filled in the Order Sheet for a quarter (or more properly, half of a half, so I get cuts from both front and back). They also will Smoke the Brisket.

Three weeks later, at about 8pm, T arrives, pulling a flat bed trailer with five home Chest Freezers running off an outboard gas powered generator. With his Pop, he unloads the packages, including about 30 one-pound packs of Ground Beef, and lots of the Good Stuff – roasts, filets, rib steaks, and The Pieces of Ox Tail (“only one per cow, you know”). We stack them all in the New Small Freezer, and We Are Done.

T also raises turkeys (26,000 currently). “just shipped about 14,000 last week”. Dressed? “Nope, they count them and take them alive”. How do you “herd” turkeys? - thinking No Shetland Collie is That Good. ”Well, you get a piece of plastic pipe and tie a rag on the end – They get the idea pretty quick, and go right into the conveyor-loader and on to the truck”, says Pop.

Did a Strip Steak on the Grill last night and Hamburger with Turkey Soup tonight.

Happy Atkins at less than $2.40 per pound delivered.


===============



posted by James 2:17 PM

Saturday, November 29, 2003

Cherchez La Money...

 
Surprise, surprise. The French are Financing the Bad Guys...

From The Wall Street Journal -
=========================


Vive le Checkbook

How France bankrolls America's enemies.

BY MICHAEL GONZALEZ
Saturday, November 29, 2003 12:01 a.m.

"Follow the money" is an old adage, and it means that economic interest will eventually explain much human behavior. That France opposed the removal of Saddam Hussein because he owed millions to French banks is proof of this. Less well known, but much more troubling, are key French financial links with other U.S. enemies. They raise the belief that the Franco-American conflict over Iraq was just one slice of the action. For France was not just Baathist Iraq's largest contributor of funds; French banks have financed other odious regimes. They are the No. 1 lenders to Iran and Cuba and past and present U.S. foes such as Somalia, Sudan and Vietnam.

This type of financing is shared by Germany, France's partner. German banks are North Korea's biggest lenders, and Syria's--and Libya's. But France is the most active. In Castro's sizzling gulag, French banks plunked down $549 million in the first trimester this year, a third of all credit to Cuba. The figure for Saddam's Iraq is $415 million. But these pale in comparison with the $2.5 billion that French banks have lent Iran. The figures come from the Bank for International Settlements (BIS) in Basel, and were interpreted by Iñigo Moré for a Madrid think-tank, the Real Instituto Elcano. As he says, "one could think that Parisian bankers wait for the U.S. to have an international problem before taking out their checkbooks." French banks seem to be almost anywhere U.S. banks are absent. They lend in 57 such countries, and are the main lenders in 23 of those. (His report can be read at www.realinstitutoelcano.org.) The report offers reasons why Foreign Minister Dominique de Villepin really ought to stop using the phrase "our American friends" every time he talks about the U.S.


The policy of offering France as an alternative to the U.S. has had a deeply corrosive effect on the political relationship this year, something that will only increase now that President Bush has enunciated a clear, long-term policy of expanding freedom around the world. And as the banking figures attest, the anti-U.S. French self-image extends beyond politics. Other evidence suggests that it has become deeply embedded in the French psyche and encompasses not just finance and politics but also culture, media and almost every other human activity. France, in all its manifestations, positions itself as an alternative to the U.S., and expects to profit from it. The BIS does not say how profitable or competitive lending to dictators and demagogues has made French banks. But it's worth mulling the chicken and egg question here. As Mr. Moré suggests, perhaps in jest, it could be not that one should follow the money to discover French policy, but that the money has followed French foreign policy.

As with every country, some of France's lending practices can be explained away by its colonial past. It is preponderant in francophone Africa, while the U.K. is Asia's main lender and Spain Latin America's. The past could explain the leading position French banks have in the communist dictatorships and kleptocracies of Vietnam, Laos and Cambodia. But no colonial linkage could explain Cuba (a colony of Spain), Iraq (Britain), Sudan (Britain) or Somalia (Britain and Italy). There must be something else. Mr. Moré offers that it could be French "universalist thinking." U.S. banks could be restrained by laws against lending to certain countries. This is then where French banks find a niche. Leaving aside the pro/con positions on whether sanctions have proved to be ineffective, at least the policy that produced them is not amoral. The niche explanation points to how pervasive the positioning of France as an alternative to the U.S. has become. As a French banker reminded me recently, his government still asks banks to make loans to further its policy objectives.

That, alas, is what they call "vision" in Paris.



posted by James 8:40 AM

Thursday, November 20, 2003

Digital TVs - How consumer electronics companies are doing it

 
From the OpenDTV forum :

===============

Date: Wed, 19 Nov 2003 09:11:22 -0500
From: Craig Birkmaier
Subject: RE: [OpenDTV] VHS is dying...

At 4:29 PM +0000 11/18/03, Albert Manfredi wrote:
>I have no doubt that this will continue to happen. That's how you get
>the cheap TV sets that Mark Schubin lists, as a goal that DTV has to
>reach. It won't be there *immediately*, but no product ever matures
>*immediately*. I am as unsurprised about DTV products not being able to
>match the price of the cheapest of analog TVs tout de suite as I was
>unsurprised by the fact that TV stations would not be ready in time with
>their DTV transmitters (and equally unsurprised that not meeting that
>schedule ultimately wouldn't matter one whit).

Why is it in the interest of the CE industry to drive prices ever lower?

This is the business model that has gotten the big Japanese and
European CE manufacturers in trouble, as third world manufacturers
have used price to gain market share. In case you had not noticed,
these companies are executing a new strategy to drive future profits.
This strategy employs several elements:

1. The development of core technologies that may provide at least a
short term barrier to entry from low cost competitors. These
technologies typically require very large up front investments, both
in terms of R&D and manufacturing facilities, and they create
Intellectual Property that can be used to help control competition.

2. Use various International standards organizations and industry
alliances to control the evolution of core technologies and to
generate perpetual revenue streams. The end game here is to generate
millions in royalty income, without making anything!

3. Develop products and technologies that enable the collection of
use fees, and sales channels that produce royalty revenues from the
sale of "software" and subscriptions.

A good example of the first element is the rush by traditional CE
vendors to a next generation Blue laser technology for optical disc
players and recorder/players. It is worth mention that most of these
companies thought they were on the right path with DVD, based upon
the success of the DVD Industry Forum. The current DVD format is
optimized for both legacy and next generation HD capable displays,
generating royalty revenues for Forum members for each product sold.
Unfortunately, DVD suffers from its own "hole" in the system; the
Forum has had a very difficult time collecting royalties from third
world manufacturers, especially those in China.

But DVD has been a huge success, with respect to setting a precedent.
This is the first major CE format that imposes a "Use Fee" for a core
enabling technology - MPEG-2. Furthermore, there has been a very high
level of compliance with the collection of this royalty, as it is
collected by the disc manufacturers - and it is no small coincidence
that many of the big disc manufacturers are owned by the same
companies that are collecting royalties from the DVD Forum and
MPEG-LA.

It is VERY IMPORTANT to note that MPEG-LA is trying to extend the use
fee model with MPEG-4 Part 2 (AVC) by charging royalties on
subscription broadcast services including cable and DBS., and for
demand based services delivered by ANY distribution technology
including the Internet.

As for the second element, there is not much to say. ISO was co-opted
by the CE industry to control the development of video compression
technology. The entire suite of MPEG standards is a living testament
to the ways in which industries can use standards bodies to control
both the direction and pace of technical evolution of a "disruptive
technology."

And the third element has already been addressed in part. bottom
line, CE manufacturers are trying to generate perpetual revenue
streams based on the mass deployment of new products for which they
control the intellectual property. And CE retailers are participating
in royalty revenues based on the promotion of these products and
services that use the core technology.

This IS NOT the traditional model of selling millions of boxes that
help make money for the content producers. The CE industry is now
getting a share of the revenues after the box is sold. That being
said, we are seeing another new trend.

A significant portion of the cost of the hardware that supports
subscription services is often paid by the service provider, as an
incentive to gain new subscribers. This tends to cloud the cost
issue, making products that rely on free bits (radio, FTA TV etc.)
less attractive, as there is no source of revenues to buy down the
cost of the hardware required to receive the new digital service.

>The reason I have no doubt that this price reduction trend will continue
>to happen is that there is no way to prevent it from happening. Greater
>and greater integration (45 nm by 2007) means that at least some
>manufacturers will take advantage of the innovations and use them to
>compete. Others might hold on to older technology, but cut prices as
>they recoup their R&D investments. Those who doggedly hang on to high
>prices will simply go under. Who exactly can stop this from happening?

This is irrelevant. The BIG cost factor is still the display, a
technology that has stubbornly resisted the Moore's Law driven
digital revolution. I will concede that mass manufacturing of any
product will tend to drive down the price due to volume manufacturing
considerations.

So on one hand, there will be some cost savings due to chip level
integration, but displays will only respond to volume-based
manufacturing. The recent announcements of major new manufacturing
facilities for LCD panels suggests that the big CE manufacturers are
planning to migrate to displays that require a very large up-front
investment, in hopes that the third world manufacturers will be
content to accept the CRT bone that is being tossed their way, while
the traditional CE vendors move on to display products that carry
decent margins. (Note: the margins on HD capable displays account for
the lions share of profits from global TV manufacturing by companies
such as Sony, Panasonic, Samsung, Hitachi, Toshiba, RCA, etc. )

>
>> The royalties should be good for another decade.
>
>I was thinking that with the transition dragging out this long, the
>royalties might end before DTV even takes off. Who knows?

Or these patents may be almost as valuable as the patents on AM
stereo. It is far more likely that this grand experiment in
industrial policy will fail, and some other technology will replace
it.

>
>> Hopefully by the end of this decade we will
>> finally be ready to admit the mistakes made with the U.S. DTV system
>> - if not, U.S. DTTB will certainly be broadly viewed as a joke...on
>> broadcasters.
>
>I'm not sure what "mistake" you're talking about, unless you're
>continuing to make a bigger deal about the RF modulation scheme than it
>deserves. To me, this was always a transitory problem, and I think
>history is proving that to be the case with every new test. The biggest
>problem with 8-VSB now is the uncertainty a couple of years ago, that
>slowed down progress, and the fact that NTSC is still on the air.

The mistake is trying to extend the legacy business model while
making the transition to a MUCH MORE competitive digital television
industry. The mistake is trying to use industrial policy to control
the evolution of a huge marketplace.

The lack of progress has NOTHING to do with 8-VSB, except that it
perpetuates the problems that have caused 85% of U.S. homes to
subscribe to a multi-channel service. It's not worth the effort or
the investment to receive FTA DTV broadcasts - too much hassle, too
little choice.

There is no problem with 8-VSB. It is doing exactly what was
intended, protecting the valuable NTSC franchise.

Regards
Craig

posted by James 11:33 AM

Monday, November 17, 2003

Hating the Jews...

 
On Hating the Jews
by Natan Sharansky

"Hating" seems to be getting fashionably politic and chic. Hating Bush articles are openly discussed and analysed by otherwise respectable publications, while strong denunciations of "hate crime" can be found a few pages later. Hypocracy reigns, it seems.

Here, a soviet dissident, now part of the Israeli government, looks at the historical record and asks some good questions, like how can Israel be responsible for a phenomena found 2000 years ago?

Like Aunt Jean says, "We're all Jews."






posted by James 8:06 AM

Saturday, November 15, 2003

Just Ask WalMart....

 
From the Daily Reckoning
===================

Thursday morning, Wal-Mart announced somewhat disappointing
earnings for the third quarter. America's largest employer fell
short of Wall Street's consensus earnings estimate for the first
time in seven years. The company's earnings report wasn't really
so bad, it just wasn't so great.

"I don't think consumer spending is slowing," said President and
CEO Lee Scott, "but I also don't see the strength that many of
you in the investment community appear to see."

Forgive us our cynicism, but we would tend to trust Wal-Mart's
assessment of our economic condition over the government's
assessment.

"The best quarter of America GDP since the Reagan Revolution did
not turn heads at Wal-Mart stores," writes Jim Grant, editor of
Grant's Interest Rate Observer. "Gains in same-store sales, which
had been running at 6% in August and September, subsided to the
neighbor hood of 3% to 5% in the first three weeks of October.

"The 'paycheck-to-paycheck customer,'" a Wal-Mart spokesman tells
David Lane of this staff. "Always has been, always will be."

But clearly, this archetypal American consumer is not spending
money with the abandon that a 7.2% GDP would imply. "As a rule,"
Grant relates, "working people come into funds on the 15th of the
month or at the end of the month... Wal-Mart has devised an
elegantly simple calculation to measure the liquidity of Homo
americanus. It calculates the difference between sales on the
14th, when people are dry, and the 15th, when people are
liquid."

Currently, this simple indicator is flashing red. According to a
couple of Wall Street analysts who monitor Wal-Mart's
consumer-liquidity indicator, "The consumer's liquidity crisis is
the worst that Wal-Mart has seen and is the most pronounced in
the last five to seven years."

posted by James 9:06 PM

Wednesday, November 12, 2003

Master and Commander

 
The series of books were great, and this looks like it is a wonderful Movie.

Promo site is here -
Master and Commander - for clips and info and music and story outline...

and the Venerable Wm. F. Buckley Jr, a Noted Seaman Himself, contributes these comments:

Happily Seduced



posted by James 2:34 PM

Friday, November 07, 2003

Good Stuff

 
Chris Hutchins has dumped on Mother Theresa for years and is inspired by the recent papal beatification.

http://politics.slate.msn.com/id/2090772/

http://www.nationalreview.com/hanson/hanson200311070835.asp


posted by James 8:02 AM

Friday, October 31, 2003

Gilder on jobs...

 
" Seek to save jobs and you get unemployment. Seek profits and you get jobs."

Telecosm Lounge post:
In 1999, for instance, 1.15 million workers lost jobs through mass
layoffs, out of a total of 2.5 million lost. Liberalized, competitive
economies with flexible labor markets can usually cope with such
restructuring; the US economy, the world’s most dynamic, certainly should
be able to do so. Indeed, history suggests that, over the medium to long
term, a flexible job market and the mobility of US workers will make it
possible for the United States to create new jobs faster than offshoring
eliminates them.

The openness of the US economy and its inherent flexibility--particularly
that of its labor market--are two of its great recognized strengths. The
current danger is that public policy will make its economy less flexible.
To do so would endanger the economic well-being of the United States.

=============

George Gilder's reply:

Seek to save jobs and you get unemployment. Seek profits and you get jobs.
Peter Drucker said it years ago and it is still supremely true.

The most negative factor in the entire economic scene is the focus on lost
jobs, the trade gap with China, and the allegedly too strong dollar. This
set of concerns defies economic reality, in which the trade gap is a sign
of fast growth and attractive markets, China is the best hope for US
technology during this continuing jubilee of litigation, and US employment
is the envy of all the countries that we now affront with our fatuous pose
as an exchange rate victim.

Between January 1998 and January 2001, the US economy created a bulge of
some 8 million net new jobs with rising real wages, while all of Western
Europe created no net new jobs at all. With the regulatory collapse of
the Internet economy, the US gave two million jobs back by January 02. But
unemployment remains low by historical standards and will decline.
Productivity growth near 10 per cent is impelling wages ever higher.

Tax cuts, far from a transitory demand side factor, have no effect on
demand at all, but establish a long term and cumulative economic
superiority over most of our trading partners. This U.S. edge assures
healthy trade gaps, capital surpluses, and robust US markets far into the
future. Indeed, the tax cuts have already massively paid for themselves
with $2.5 trillion of capital gains on assets and are also shrinking the
budget deficit.

Critics want an end of outsourcing and a closing of the trade gap. But
nothing would so drastically damage US manufacturing output and
employment. Driven by our capital surplus and superior growth, the trade
gap mostly consists of commodities needed by US manufacturers, work in
progress, and critical path technologies such as memory chips. The only
way to close it is to render the US an unattractive market for capital,
crashing the stock market, wiping out the trillions of unrealized
appreciation, and expanding the budget deficit.

Stop outsourcing and you destroy the profitability of much of the US
economy. You cannot create jobs by squelching profits. --GG

posted by James 3:24 PM

Thursday, October 30, 2003

Pipe Smoking...

 
Pipe Smoking…

The two-hour drive east brought Rich, Barber Jim and me to Hardy, home of a famous Tobacco and Pipe Store. Dick is the proprietor, a long time tobacconist, and respected name in Pipe Smoking. The Pipe Puffers of Northern Arkansas is a club that Barber Jim had invited me to join, albeit some distance away, and here we were for the October Meeting.

Rich is an interesting fellow. When the Air Traffic Controllers went on strike and before Reagan fired them, seven from Dallas were prosecuted. Ordered to go to work, they refused, a crime punishable by federal prison time. Six served some time; Rich did not because of a process technicality. He “went ballistic” at the trial and then, so did the judge. Scary. His nickname in the Air Force and Marines (two Vietnam tours) was Psycho. A serial pipe smoker, he carries a leather six pack holder with his favorites.

Barber Jim has said a highlight of each meeting was a Pipe Smoking Contest; and when we walked into the Store, tables were set up for about fifteen who followed us in shortly. At each place was a small bag of about an ounce of tobacco, a candle, and two kitchen matches.

After the raffles and silent bids and other club business, the contest began. You had to use a corncob pipe, submitted to the Judge who okayed it. Mine was one Jim had given me..painted black…and sporting a filter element inside: probably five dollars retail. The good natured ribbing and jollity came to abrupt halt as we all packed our pipes carefully, not losing a scrap of stray tobacco. The goal was to keep it going – with smoke coming out – for as long as possible. If you could keep it going for an hour, you got a special cap, denoting membership in an exclusive bunch who’d done that. Jim had never made it. On the wall was a plaque with citations and names and times of those who had. Hmm…

The clock started and you had one minute to get your pipe lit properly, using the lit candle to light the two matches; then the Real Timing Began. Oops, George over there went out in the first two minutes.

As we settled down into the silence of the overworked ceiling fans, not much was said. Many minutes passed….then a few began to drop off with a grudging ”I’m out”. But most kept on slowly nursing their loads and time dragged on. Jim dropped out at about 27 minutes. Rich hadn’t entered. The Big Guy on the End of Our Table resembled A.J Foyt in appearance and manner. He’d just returned form the Nationals in Kentucky and placed 28th in a similar contest. He was quietly confident. Time dragged on. My first hope was to just outlast Jim..and I did…and then to outlast AJ..and I did!

Then as the time approached 45 minutes, many dropped out. I was getting a little woozy, but felt like I could keep the fire going, so to speak, for a bit longer. And I did. Finally, the last Club Member, Eddie, sighed “I’m out” at 57 minutes…and I was still going, and The Last One! The nervous silence that followed was punctuated by whispered inquiries to Barber Jim about me and his Pipe. The hour mark passed, and I kept going. At one hour, ten minutes and thirty seconds, my pipe smoke disappeared and I was through.

Grins and smiles and congratulations then flowed along with invitations to Join and Come Again and Consider Going To Nationals in Michigan Next Year. As a non-member, I missed out on the winner’s One Hour Cap, but I did get a bunch of different tobaccos. I was a Bit Wasted, and was not sure I could make it to the car, much less drive the two hours home. But I did.

I had no idea what I was doing, but just went slowly and paid close attention to The State of The Fire. Not sure I’ll try again, without Becoming An Expert of Pipe Fires via the Internet by the November Meeting.

Better To Be Lucky Than Smart, they say. I’m still a little woozy…

posted by James 9:48 PM

Friday, October 24, 2003

Fall Events

 
Fall Events

The Annual Turkey Trot Festival here last weekend featured live turkeys dropped from a helicopter while “the kids’ merrily chase and catch them. Turkeys are fast, and can be mean. No casualty reports or numbers were available.

Color Photo Front Page Above The Fold of – an airplane! Yes, an American Airlines commuter plane flew into the little used local airport to allow folks to go inside and ask questions of the crew.

In a nearby community, BeanFest and the Great Outhouse Race begins on Saturday morning at the town square with a Big Breakfast of Pinto Beans and Cornbread. Then, Outhouses On Wheels (no, not a program for the incontinent elderly as you might first think…) are madly pushed by participants in A Race Down The Street (ESPN- call me) for the Coveted Golden Toilet Seat Trophy. BeanStuffed Observers cheer them on and Anxiously Await for the finish.

And support is increasing for an In-Town Deer Hunt. For long bow archers only, and lasting two months, proponents claim safer driving and disease prevention as good reasons to do this. Previous hunts in the last few years killed 80 deer; accidents caused by deer decreased from 12 to seven to two in the same period. And, good news for consumers, the Sausage Price Index plunged.

posted by James 10:36 AM

Saturday, October 18, 2003

GM Car Profits drop over 90%?

 
From TDR 10/16:
===============
- Yesterday, the giant automaker reported a profit of $425 million in the third quarter. But GM's global automotive operations contributed only $34 million to the bottom line - down dramatically from $368 million a year ago. GM's finance operations - especially its mortgage finance operations - carried the day, contributing essentially all of the company's third-quarter profit.
===============


posted by James 6:20 AM

Sunday, October 12, 2003

River Rats....

 
This three-man group plays guitars and sing like true hillbillies. They are from Mountain View, about an hour away on the White River, where they run tourist stores and a bed and breakfast. “Don here he makes fiddles and banjos outta gourds he grows hisself…”

But they are excellent musicians, and lapse into three part “gospel” and country harmony flawlessly. After an hour, they break to walk back to the lobby to sell their CDs and tapes, sign autographs and talk to the folks.

After intermission, Brick, the one with one tooth, disappears and is said to have gone outside “to turn the truck around” – this being the Arkansas expression for drinking out of a bottle in the truck. We’re not talking Evian here, folks. He comes back ”drunk”, and does some very funny bits.

“Honey, I’ve struck it rich” says a fellow calling his wife from Las Vegas. “Pack your clothes!”

“Should I pack summer or winter clothes” she asks.

“I don’t care as long as you’re gone by the time I get home” he replies.

Moon, the Chet Atkins Fan, draws out a classical guitar he has built, copied from one Andres Segovia used and proceeds with a show stopping rendition of Malaguena.

The crowd was only about fifty in a venue holding 600, but we all had fun. NASCAR races in Flippin and Turkey Shoot Days in Gassville cut into the attendance, they say.

posted by James 12:12 PM

Friday, October 10, 2003

VDH: We Are At War....

 
Victor Davis Hanson, The California Classics Professor again scores...from The National Review On Line

Legends of the Fall

Excerpt:

"French newspapers may blare, "The slowly rotting situation in Iraq, the Mideast and Afghanistan has destroyed the myth American omnipotence," but they don't tell us how removing the Taliban and Saddam Hussein is worse than selling weapons to them — or why and how France lost 30 times more of its own citizens to heat in a month than we lost soldiers in battle in two years. Apparently French apartments are far more deadly places than the Pakistani border or the Sunni Triangle."

posted by James 2:05 PM

A Lesson for Young Men of All Ages...

 
The Dangers of Drinking Beer


posted by James 6:10 AM

Tuesday, September 30, 2003

Reckoning...

 
Financial Day of Reckoning.

I’m a great fan of The Daily Reckoning(TDR) a site with a daily column of commentary on financial and economic doings. Two of the principals (William Bonner and Addison Wiggin) have written a book that has become (cliche alert) an instant best seller. (Barnes and Noble, Amazon). "Financial Reckoning Day: Surviving the Soft Depression of The 21st Century" (John Wiley & Sons New York, London),

They calmly analyze the bubbles of the tech stocks, home prices, credit expansion, more – putting it into a historical perspective that covers the financial doings of the world since paper money started.

This book is so good, you want to clip parts out and send to Colleagues and yell “YES, YES!!” like the always exuberant Mogumbo Guru, a weekly contributor to TDR.

I’ve always liked “contrarians”, especially when they are show to be right. The first chapters take apart George Gilder, in a nice way, and all the tech hyperbole he has generated. But, they rightly quote him : “I don’t do price…” .

By ignoring the basics (Yes, Virginia, There Still Are The Basics..) on Why People Do Stuff, and the “universalism” that folks always operate in their own best interest, and take actions based on The Heart, not Reason – Gilder lost a lot of his own money, and much more of Other People’s Money.

Go Buy This One

posted by James 3:36 PM

Saturday, September 27, 2003

Investing in China

 
What's The Best Way To Buy Into This Expanding China Opportunity?

A Colleague in Beijing says: "Chinese (middle class – 10% - 120 million!) are investing in cars and real estate....Invest in paint companies – cars get banged up, walls need covering..."

This from The Daily Reckoning earlier this week.

==========================

The Daily Reckoning PRESENTS: Pao Mo! Pao Mo! Now that we know the real way to say 'bubble' in Chinese, here's a way for you to get in on it before it pops.

THE NEXT EMPIRE
By James Boxley Cooke

Everyone in the West has long talked about China in terms of its massive potential. But the future is now.

Many different elements - as you'll soon see - are combining forces. And China is beginning to realize its potential as a world economic superpower. Let's take a closer look at some promising developments in China over the past several years...

We've seen diplomatic breakthroughs, such as the U.S. designation of China as a "most favored nation," and its entry into the World Trade Organization. And just as importantly, we've seen Hong Kong's growing free-market influence on the motley politics driving the mainland economy. We've seen small businesses springing up from the Chinese countryside like mushrooms. In fact, we've seen every indicator that the people of China, including its huge middle class, are ready for a full-scale economic revolution.

China is not only the world's most populous nation, with over 1.3 billion citizens; it's also Asia's fastest-growing major economy. And has been for over a decade. Even with the current global economic slowdown, China is still likely to grow at more than 7% a year. That's a huge number for an economy this size. And it represents huge potential profits for us as investors.

I think the potential for the newly capitalistic Chinese economy is absolutely enormous. And while there are certainly political risks to keep less intrepid souls at bay, even a small investment in this region has the potential to make a big impact on our portfolios in the months and years ahead.

Take, for example, the thoughts of legendary hedge-fund manager [and friend of the Daily Reckoning] Jim Rogers, who enthused last year that no country's economic prospects excite him more than China's. In a Barron's interview, Rogers said, "The 21st century is the century of China... Everybody should teach their children and grandchildren Chinese.

"There is no question China is going to dominate all of Asia," Rogers added. "...and the whole world, eventually."

Strong words. But I think he's right. As I've said often, the development of China may well be the single-biggest investment story of the decade ahead. I suggest investing now, rather than trying to play catch-up later.

One vehicle we recommend is the closed-end Templeton Dragon Fund, managed by Mark Mobius. It's traded on the New York Stock Exchange, and gives us broad diversification inside China with the best emerging-market manager in the business.

As Oxford Club advisory panelist Lynn Carpenter writes, "One of the nice things about a closed-end fund is that - unlike a regular mutual fund - the assets under management don't fluctuate daily depending on contributions or withdrawals. Since the assets are stable, the manager of the fund can invest the assets for the long-term, without having to worry about redemptions."

That's key. We want Mobius putting money to work when he sees opportunities, not when retail investors decide to send him cash. The same is true on the sell side. We don't want him pulling the trigger just to meet shareholder redemptions.

Yet for all its potential, many investors still blanch when it comes to investing in this part of the world, noting that China is still a communist nation with a notoriously corrupt bureaucracy and only a gradually evolving rule of law. Are there enough positives to justify risking his capital in this part of the world?

Yes, indeed.

Sure, China is an area fraught with risks. It's no place for an investor for whom preservation of capital is paramount. But for more aggressive investors, it is a potential bonanza.

Let me start with the basics. In 2001, China grew at more than seven times the rate of the U.S. economy, despite the fact that the country's population is more than five times as large. Yet the vast majority of U.S. investors remain oblivious to the investment implications, even though the economic story is front-page news.

According to Andy Xie, a leading economist at Morgan Stanley in Hong Kong, "China's rise as a manufacturing base is going to have the same kind of impact on the world that the industrialization of the U.S. had, perhaps even bigger."

In fact, China is already the world's fourth-largest industrial base, behind only the U.S., Germany and Japan.

Already China makes:

* More than 50% of the cameras sold world-wide
* More than 35% of the televisions sold world-wide
* More than 30% of the air conditioners sold world-wide
* More than 25% of the washing machines sold world-wide
* More than 22% of the refrigerators sold world-wide

These numbers allow you to see the enormous impact that China is already having. But that impact is only just beginning. China's entry into the World Trade Organization is accelerating these economic trends at light speed.

Why? World Trade Organization membership cuts production costs, forces down tariffs, and removes obstacles to selling overseas. That, in turn, is drawing record direct investment in China.

Over $600 billion has been invested over the past two decades. And while individual investors and brokers are still asleep at the wheel, Fortune 500 companies are falling over themselves to take advantage of what's happening in the world's most populous country. For instance:

* GM purchased more than $1 billion in spare parts from China in the last few years and plans to increase that figure dramatically in the near future.

* Ford announced recently that it plans to boost its purchases of auto parts in China to as much as $1 billion annually starting this year (2003).

* General Electric expects purchases from China - both parts and finished goods - to hit $5 billion annually in the next three years.

* Wal-Mart concedes that more than $10 billion in Chinese- made goods are sold in its stores every year.

* Motorola says its total investment in China will hit a record $50 billion this year.

As you can see, the biggest investors in the U.S. - the Fortune 500 - are already plowing money into China.

With the exception of Hong Kong, however, markets inside China are too wild, unregulated and risky for us to gamble our capital there directly. For these reasons, the best 'safe' investment vehicle for our members remains the Templeton Dragon Fund.

The fund is broadly diversified between Hong Kong, Taiwan and China and, as I mentioned before, managed by the world's leading emerging market manager, Mark Mobius. In my view, the Templeton Dragon Fund is the safest, most-liquid way to obtain a pure play on the growth of China.

I remember our Club's Investment Director, Alexander Green, speaking at an investment conference at which he called China perhaps the single-biggest investment opportunity of the decade ahead. At once, a hand in the audience shot up. "Everyone comes back from China awestruck about the growth that's occurring there. But, in my opinion, China will never become a real investment opportunity until it quits relying on exports and starts developing its own domestic market."

Tell that to General Motors, I say.

For the year ended December 2002, GM reported that it sold over 264,000 vehicles in China, a 325% surge over 2001. And its goal is to have launched at least four new models in the world's fastest-growing auto market by the time this year is through.

"Growth potential remains enormous in China," said Phil Murtaugh, chairman of GM China. "We will respond with an unprecedented series of product launches and continue to seek additional opportunities."

(Incidentally, industry experts estimate that GM's profit margins are at least twice as high on cars it makes in China as on similar models made in the U.S.)

For years investors have talked about the enormous potential of China's gargantuan market. But, in the end, it always seemed to boil down to potential and little else.

There's a good reason for this. China has a well-deserved reputation as a fickle and ornery place for foreigners to do business. China's enigmatic legal system has only recently begun to honor property rights. Chinese entrepreneurs have often distinguished themselves primarily by aggressively pirating Western products like software, compact discs and cell phones. And foreigners have often tripped themselves up by overpaying for licenses, industrial land and office space.

But things are changing, rapidly and for the better. Just a year after China joined the World Trade Organization, and two decades after it began allowing foreign companies to invest locally, multinationals are quickly capitalizing on China's fabled market.

Chinese consumers - in droves - are now buying products from both domestic and foreign manufacturers. As the NY Times reported: "Already, the Chinese buy more cell phones than consumers anywhere else. They buy more film than the Japanese. They now buy as many vehicles as the Germans."

* For companies like Siemens and Motorola, China has become the single-most important market for mobile phone handsets and other equipment, accounting for billions of dollars in annual revenue.

* Japan's Toshiba now says it sells two-thirds of what it makes in its 34 China-based operations to the Chinese. Local sales were more than $2.5 billion last year.

* McDonalds and Kentucky Fried Chicken have 700 China-based restaurants between them and open scores of additional stores each year.

* Eastman Kodak controls an estimated 63% of the domestic market in China for rolled film.

* Even Starbucks has found plenty of urban tea drinkers ready to spend $2.50 for a latte.

Yes, foreign companies are doing very well in China. But, for most of them, it's still a small percentage of their total sales and profits. And the Chinese are too smart to let foreign companies rake in all the dough. There is tremendous opportunity for local Chinese companies as well.

And American entrepreneurs are rapidly moving in. The Wall Street Journal confirms it. As Leslie Chang recently reported: "Last year China became the biggest recipient of foreign investment, for the first time surpassing the U.S. Foreign investment jumped almost 13% in 2002 to $52.74 billion. Even SARS, of which more than 60% of all reported cases worldwide appeared in mainland China, so far appears not to have dented the country's essential appeal: cheap labor, improving technology, and a fast-growing consumer pool."

In the future there will come a day when investors everywhere wake up and recognize China as "the opportunity of a lifetime." Dozens of mutual funds will spring up, offering myriad ways to capitalize on growth in China. Stockbrokers will call their clients and pitch their new China products with enthusiasm. "Business Week" and "Fortune" will run cover stories about the phenomenal growth in Chinese capital markets. Even your friends and colleagues will start telling you about the unprecedented investment opportunity they see in this nation of one and a quarter billion.

And that, my friends, is when we'll be getting out.

Sincerely,

James Boxley Cooke, for The Daily Reckoning

Editor's note: James Boxley Cooke is a former executive with T. Rowe Price, one of the oldest and most respected names in mutual fund management, with over $200 billion in assets under management. He is currently the Chairman of the Oxford Club.
========================

posted by James 4:15 PM

Tuesday, September 23, 2003

World's Fastest Growing Economy?

 
From The Daily Reckoning

===================

Bill Bonner, back in Paris...

*** Guess which country has the fastest-growing economy in
the G7? Japan! GDP grew 4% in the 3rd quarter in the land
of the raw fish eaters. And now Bloomberg tells us that
the Japanese - who are the world's biggest holders of U.S.
Treasury bonds - are losing interest in dollar assets. Oh
là là... What if they decide they don't need so many
Treasuries, after all?
posted by James 8:10 PM

Saturday, September 20, 2003

Guns

 
I don't own a real gun. I have an unreliable BB gun that is used unsuccessfully to chase away squirrels. But I believe in most of what the NRA says about gun usage. "Citizens" owning guns helps keep things civilized.

Here is an article by Pat Buchanan

Excerpt:
====================

In 1995, Gary Kleck published in the Journal of Criminal Law and Criminology of Northwestern Law School his now-famous paper, “Armed Resistance to Crime: The Prevalence and Nature of Self-Defense with a Gun.” Among its unchallenged assertions:

Law-abiding citizens use guns to defend themselves against criminals 2.5 million times a year or about 6,850 times every day.

Of these 2.5 million self-defense uses of guns, more than 200,000 are by women defending themselves against sexual abuse. Often, a Saturday Night Special is a girl’s best friend.

11 out of every 12 times citizens use their guns in self-defense, they merely brandish them or fire a warning shot.

When citizens do fire, they shoot and kill twice as many criminals as do cops every year. But, while 2 percent of civilian shootings are of people mistaken for criminals, that is true of 11 percent of police shootings.

Publicized by the Gun Owners of America, these facts have been confirmed by scholar John Lott who has just published a book with Indiana Jones in mind: The Bias Against Guns . Its subtitle: “Why Almost Everything You’ve Heard about Gun Control is Wrong.”


posted by James 12:43 PM

Friday, September 19, 2003

Victor David Hanson on the French...

 
(From his column today)
Hanson

http://www.nationalreview.com/hanson/hanson091903.asp
=========================

Yet sophistication is not morality. Neither is nihilism. More people, remember, fried in France this August while its social utopians snoozed at the beach than all those lost in Kabul and Baghdad together. I think an American pilot who flew over the peaks of Afghanistan or a Marine colonel now patrolling in Iraq was far more likely to ensure that his aged mother back home lives under humane conditions than was a Frenchman this summer on his month-long vacation on the Mediterranean coast. So remember, this August Americans lost 100 brave soldiers fighting selflessly for the liberty of others while thousands of Frenchmen perished through their children’s neglect and self-absorption.


posted by James 4:36 PM

Feynman's Nanotech vision...in 1959

 
The promise of nanotechnology has been debated for years. The "popularizer" of several years ago, Nanosystems: molecular machinery, manufacturing, and computation by K. Eric Drexler, Wiley 1992, became the technical reference to all the good things that could happen. Lotsa reasons why they haven't happened yet. But in semiconductors, they are doing many things just like nanotechnology; and Gilder Himself sees this as a Next Big Thing.

Richard Feynman was a professor of Physics at Stanford and his classic Physics Course Notes have remained the basis for educating many/most of the people who went on to lead the semiconductor industry, and other "high tech", Silicon Valley endeavors. One fictional view of how this might all get out of hand is told in the novel "Prey" by Michael Crichton (Jurrassic Park, ER, many other credits).

Here is a link to a 1959 talk on Doing Things Smaller - "There's plenty of room at the bottom..." is the theme.

http://www.zyvex.com/nanotech/feynman.html


============================


There's Plenty of Room at the Bottom
An Invitation to Enter a New Field of Physics

by Richard P. Feynman

This transcript of the classic talk that Richard Feynman gave on December 29th 1959 at the annual meeting of the American Physical Society at the California Institute of Technology (Caltech) was first published in the February 1960 issue of Caltech's Engineering and Science, which owns the copyright. It has been made available on the web at http://www.zyvex.com/nanotech/feynman.html with their kind permission.

For an account of the talk and how people reacted to it, see chapter 4 of Nano! by Ed Regis, Little/Brown 1995. An excellent technical introduction to nanotechnology is Nanosystems: molecular machinery, manufacturing, and computation by K. Eric Drexler, Wiley 1992.
=======================


I imagine experimental physicists must often look with envy at men like Kamerlingh Onnes, who discovered a field like low temperature, which seems to be bottomless and in which one can go down and down. Such a man is then a leader and has some temporary monopoly in a scientific adventure. Percy Bridgman, in designing a way to obtain higher pressures, opened up another new field and was able to move into it and to lead us all along. The development of ever higher vacuum was a continuing development of the same kind.

I would like to describe a field, in which little has been done, but in which an enormous amount can be done in principle. This field is not quite the same as the others in that it will not tell us much of fundamental physics (in the sense of, ``What are the strange particles?'') but it is more like solid-state physics in the sense that it might tell us much of great interest about the strange phenomena that occur in complex situations. Furthermore, a point that is most important is that it would have an enormous number of technical applications.

What I want to talk about is the problem of manipulating and controlling things on a small scale.

As soon as I mention this, people tell me about miniaturization, and how far it has progressed today. They tell me about electric motors that are the size of the nail on your small finger. And there is a device on the market, they tell me, by which you can write the Lord's Prayer on the head of a pin. But that's nothing; that's the most primitive, halting step in the direction I intend to discuss. It is a staggeringly small world that is below. In the year 2000, when they look back at this age, they will wonder why it was not until the year 1960 that anybody began seriously to move in this direction.

Why cannot we write the entire 24 volumes of the Encyclopedia Brittanica on the head of a pin?

Let's see what would be involved. The head of a pin is a sixteenth of an inch across. If you magnify it by 25,000 diameters, the area of the head of the pin is then equal to the area of all the pages of the Encyclopaedia Brittanica. Therefore, all it is necessary to do is to reduce in size all the writing in the Encyclopaedia by 25,000 times. Is that possible? The resolving power of the eye is about 1/120 of an inch---that is roughly the diameter of one of the little dots on the fine half-tone reproductions in the Encyclopaedia. This, when you demagnify it by 25,000 times, is still 80 angstroms in diameter---32 atoms across, in an ordinary metal. In other words, one of those dots still would contain in its area 1,000 atoms. So, each dot can easily be adjusted in size as required by the photoengraving, and there is no question that there is enough room on the head of a pin to put all of the Encyclopaedia Brittanica.

Furthermore, it can be read if it is so written. Let's imagine that it is written in raised letters of metal; that is, where the black is in the Encyclopedia, we have raised letters of metal that are actually 1/25,000 of their ordinary size. How would we read it?

If we had something written in such a way, we could read it using techniques in common use today. (They will undoubtedly find a better way when we do actually have it written, but to make my point conservatively I shall just take techniques we know today.) We would press the metal into a plastic material and make a mold of it, then peel the plastic off very carefully, evaporate silica into the plastic to get a very thin film, then shadow it by evaporating gold at an angle against the silica so that all the little letters will appear clearly, dissolve the plastic away from the silica film, and then look through it with an electron microscope!

There is no question that if the thing were reduced by 25,000 times in the form of raised letters on the pin, it would be easy for us to read it today. Furthermore; there is no question that we would find it easy to make copies of the master; we would just need to press the same metal plate again into plastic and we would have another copy.

How do we write small?
The next question is: How do we write it? We have no standard technique to do this now. But let me argue that it is not as difficult as it first appears to be. We can reverse the lenses of the electron microscope in order to demagnify as well as magnify. A source of ions, sent through the microscope lenses in reverse, could be focused to a very small spot. We could write with that spot like we write in a TV cathode ray oscilloscope, by going across in lines, and having an adjustment which determines the amount of material which is going to be deposited as we scan in lines.

This method might be very slow because of space charge limitations. There will be more rapid methods. We could first make, perhaps by some photo process, a screen which has holes in it in the form of the letters. Then we would strike an arc behind the holes and draw metallic ions through the holes; then we could again use our system of lenses and make a small image in the form of ions, which would deposit the metal on the pin.

A simpler way might be this (though I am not sure it would work): We take light and, through an optical microscope running backwards, we focus it onto a very small photoelectric screen. Then electrons come away from the screen where the light is shining. These electrons are focused down in size by the electron microscope lenses to impinge directly upon the surface of the metal. Will such a beam etch away the metal if it is run long enough? I don't know. If it doesn't work for a metal surface, it must be possible to find some surface with which to coat the original pin so that, where the electrons bombard, a change is made which we could recognize later.

There is no intensity problem in these devices---not what you are used to in magnification, where you have to take a few electrons and spread them over a bigger and bigger screen; it is just the opposite. The light which we get from a page is concentrated onto a very small area so it is very intense. The few electrons which come from the photoelectric screen are demagnified down to a very tiny area so that, again, they are very intense. I don't know why this hasn't been done yet!

That's the Encyclopaedia Brittanica on the head of a pin, but let's consider all the books in the world. The Library of Congress has approximately 9 million volumes; the British Museum Library has 5 million volumes; there are also 5 million volumes in the National Library in France. Undoubtedly there are duplications, so let us say that there are some 24 million volumes of interest in the world.

What would happen if I print all this down at the scale we have been discussing? How much space would it take? It would take, of course, the area of about a million pinheads because, instead of there being just the 24 volumes of the Encyclopaedia, there are 24 million volumes. The million pinheads can be put in a square of a thousand pins on a side, or an area of about 3 square yards. That is to say, the silica replica with the paper-thin backing of plastic, with which we have made the copies, with all this information, is on an area of approximately the size of 35 pages of the Encyclopaedia. That is about half as many pages as there are in this magazine. All of the information which all of mankind has every recorded in books can be carried around in a pamphlet in your hand---and not written in code, but a simple reproduction of the original pictures, engravings, and everything else on a small scale without loss of resolution.

What would our librarian at Caltech say, as she runs all over from one building to another, if I tell her that, ten years from now, all of the information that she is struggling to keep track of--- 120,000 volumes, stacked from the floor to the ceiling, drawers full of cards, storage rooms full of the older books---can be kept on just one library card! When the University of Brazil, for example, finds that their library is burned, we can send them a copy of every book in our library by striking off a copy from the master plate in a few hours and mailing it in an envelope no bigger or heavier than any other ordinary air mail letter.

Now, the name of this talk is ``There is Plenty of Room at the Bottom''---not just ``There is Room at the Bottom.'' What I have demonstrated is that there is room---that you can decrease the size of things in a practical way. I now want to show that there is plenty of room. I will not now discuss how we are going to do it, but only what is possible in principle---in other words, what is possible according to the laws of physics. I am not inventing anti-gravity, which is possible someday only if the laws are not what we think. I am telling you what could be done if the laws are what we think; we are not doing it simply because we haven't yet gotten around to it.

Information on a small scale
Suppose that, instead of trying to reproduce the pictures and all the information directly in its present form, we write only the information content in a code of dots and dashes, or something like that, to represent the various letters. Each letter represents six or seven ``bits'' of information; that is, you need only about six or seven dots or dashes for each letter. Now, instead of writing everything, as I did before, on the surface of the head of a pin, I am going to use the interior of the material as well.

Let us represent a dot by a small spot of one metal, the next dash, by an adjacent spot of another metal, and so on. Suppose, to be conservative, that a bit of information is going to require a little cube of atoms 5 times 5 times 5---that is 125 atoms. Perhaps we need a hundred and some odd atoms to make sure that the information is not lost through diffusion, or through some other process.

I have estimated how many letters there are in the Encyclopaedia, and I have assumed that each of my 24 million books is as big as an Encyclopaedia volume, and have calculated, then, how many bits of information there are (10^15). For each bit I allow 100 atoms. And it turns out that all of the information that man has carefully accumulated in all the books in the world can be written in this form in a cube of material one two-hundredth of an inch wide--- which is the barest piece of dust that can be made out by the human eye. So there is plenty of room at the bottom! Don't tell me about microfilm!

This fact---that enormous amounts of information can be carried in an exceedingly small space---is, of course, well known to the biologists, and resolves the mystery which existed before we understood all this clearly, of how it could be that, in the tiniest cell, all of the information for the organization of a complex creature such as ourselves can be stored. All this information---whether we have brown eyes, or whether we think at all, or that in the embryo the jawbone should first develop with a little hole in the side so that later a nerve can grow through it---all this information is contained in a very tiny fraction of the cell in the form of long-chain DNA molecules in which approximately 50 atoms are used for one bit of information about the cell.

Better electron microscopes
If I have written in a code, with 5 times 5 times 5 atoms to a bit, the question is: How could I read it today? The electron microscope is not quite good enough, with the greatest care and effort, it can only resolve about 10 angstroms. I would like to try and impress upon you while I am talking about all of these things on a small scale, the importance of improving the electron microscope by a hundred times. It is not impossible; it is not against the laws of diffraction of the electron. The wave length of the electron in such a microscope is only 1/20 of an angstrom. So it should be possible to see the individual atoms. What good would it be to see individual atoms distinctly?

We have friends in other fields---in biology, for instance. We physicists often look at them and say, ``You know the reason you fellows are making so little progress?'' (Actually I don't know any field where they are making more rapid progress than they are in biology today.) ``You should use more mathematics, like we do.'' They could answer us---but they're polite, so I'll answer for them: ``What you should do in order for us to make more rapid progress is to make the electron microscope 100 times better.''

What are the most central and fundamental problems of biology today? They are questions like: What is the sequence of bases in the DNA? What happens when you have a mutation? How is the base order in the DNA connected to the order of amino acids in the protein? What is the structure of the RNA; is it single-chain or double-chain, and how is it related in its order of bases to the DNA? What is the organization of the microsomes? How are proteins synthesized? Where does the RNA go? How does it sit? Where do the proteins sit? Where do the amino acids go in? In photosynthesis, where is the chlorophyll; how is it arranged; where are the carotenoids involved in this thing? What is the system of the conversion of light into chemical energy?

It is very easy to answer many of these fundamental biological questions; you just look at the thing! You will see the order of bases in the chain; you will see the structure of the microsome. Unfortunately, the present microscope sees at a scale which is just a bit too crude. Make the microscope one hundred times more powerful, and many problems of biology would be made very much easier. I exaggerate, of course, but the biologists would surely be very thankful to you---and they would prefer that to the criticism that they should use more mathematics.

The theory of chemical processes today is based on theoretical physics. In this sense, physics supplies the foundation of chemistry. But chemistry also has analysis. If you have a strange substance and you want to know what it is, you go through a long and complicated process of chemical analysis. You can analyze almost anything today, so I am a little late with my idea. But if the physicists wanted to, they could also dig under the chemists in the problem of chemical analysis. It would be very easy to make an analysis of any complicated chemical substance; all one would have to do would be to look at it and see where the atoms are. The only trouble is that the electron microscope is one hundred times too poor. (Later, I would like to ask the question: Can the physicists do something about the third problem of chemistry---namely, synthesis? Is there a physical way to synthesize any chemical substance?

The reason the electron microscope is so poor is that the f- value of the lenses is only 1 part to 1,000; you don't have a big enough numerical aperture. And I know that there are theorems which prove that it is impossible, with axially symmetrical stationary field lenses, to produce an f-value any bigger than so and so; and therefore the resolving power at the present time is at its theoretical maximum. But in every theorem there are assumptions. Why must the field be symmetrical? I put this out as a challenge: Is there no way to make the electron microscope more powerful?

The marvelous biological system
The biological example of writing information on a small scale has inspired me to think of something that should be possible. Biology is not simply writing information; it is doing something about it. A biological system can be exceedingly small. Many of the cells are very tiny, but they are very active; they manufacture various substances; they walk around; they wiggle; and they do all kinds of marvelous things---all on a very small scale. Also, they store information. Consider the possibility that we too can make a thing very small which does what we want---that we can manufacture an object that maneuvers at that level!

There may even be an economic point to this business of making things very small. Let me remind you of some of the problems of computing machines. In computers we have to store an enormous amount of information. The kind of writing that I was mentioning before, in which I had everything down as a distribution of metal, is permanent. Much more interesting to a computer is a way of writing, erasing, and writing something else. (This is usually because we don't want to waste the material on which we have just written. Yet if we could write it in a very small space, it wouldn't make any difference; it could just be thrown away after it was read. It doesn't cost very much for the material).

Miniaturizing the computer
I don't know how to do this on a small scale in a practical way, but I do know that computing machines are very large; they fill rooms. Why can't we make them very small, make them of little wires, little elements---and by little, I mean little . For instance, the wires should be 10 or 100 atoms in diameter, and the circuits should be a few thousand angstroms across. Everybody who has analyzed the logical theory of computers has come to the conclusion that the possibilities of computers are very interesting---if they could be made to be more complicated by several orders of magnitude. If they had millions of times as many elements, they could make judgments. They would have time to calculate what is the best way to make the calculation that they are about to make. They could select the method of analysis which, from their experience, is better than the one that we would give to them. And in many other ways, they would have new qualitative features.

If I look at your face I immediately recognize that I have seen it before. (Actually, my friends will say I have chosen an unfortunate example here for the subject of this illustration. At least I recognize that it is a man and not an apple .) Yet there is no machine which, with that speed, can take a picture of a face and say even that it is a man; and much less that it is the same man that you showed it before---unless it is exactly the same picture. If the face is changed; if I am closer to the face; if I am further from the face; if the light changes---I recognize it anyway. Now, this little computer I carry in my head is easily able to do that. The computers that we build are not able to do that. The number of elements in this bone box of mine are enormously greater than the number of elements in our ``wonderful'' computers. But our mechanical computers are too big; the elements in this box are microscopic. I want to make some that are sub microscopic.

If we wanted to make a computer that had all these marvelous extra qualitative abilities, we would have to make it, perhaps, the size of the Pentagon. This has several disadvantages. First, it requires too much material; there may not be enough germanium in the world for all the transistors which would have to be put into this enormous thing. There is also the problem of heat generation and power consumption; TVA would be needed to run the computer. But an even more practical difficulty is that the computer would be limited to a certain speed. Because of its large size, there is finite time required to get the information from one place to another. The information cannot go any faster than the speed of light---so, ultimately, when our computers get faster and faster and more and more elaborate, we will have to make them smaller and smaller.

But there is plenty of room to make them smaller. There is nothing that I can see in the physical laws that says the computer elements cannot be made enormously smaller than they are now. In fact, there may be certain advantages.

Miniaturization by evaporation
How can we make such a device? What kind of manufacturing processes would we use? One possibility we might consider, since we have talked about writing by putting atoms down in a certain arrangement, would be to evaporate the material, then evaporate the insulator next to it. Then, for the next layer, evaporate another position of a wire, another insulator, and so on. So, you simply evaporate until you have a block of stuff which has the elements--- coils and condensers, transistors and so on---of exceedingly fine dimensions.

But I would like to discuss, just for amusement, that there are other possibilities. Why can't we manufacture these small computers somewhat like we manufacture the big ones? Why can't we drill holes, cut things, solder things, stamp things out, mold different shapes all at an infinitesimal level? What are the limitations as to how small a thing has to be before you can no longer mold it? How many times when you are working on something frustratingly tiny like your wife's wrist watch, have you said to yourself, ``If I could only train an ant to do this!'' What I would like to suggest is the possibility of training an ant to train a mite to do this. What are the possibilities of small but movable machines? They may or may not be useful, but they surely would be fun to make.

Consider any machine---for example, an automobile---and ask about the problems of making an infinitesimal machine like it. Suppose, in the particular design of the automobile, we need a certain precision of the parts; we need an accuracy, let's suppose, of 4/10,000 of an inch. If things are more inaccurate than that in the shape of the cylinder and so on, it isn't going to work very well. If I make the thing too small, I have to worry about the size of the atoms; I can't make a circle of ``balls'' so to speak, if the circle is too small. So, if I make the error, corresponding to 4/10,000 of an inch, correspond to an error of 10 atoms, it turns out that I can reduce the dimensions of an automobile 4,000 times, approximately---so that it is 1 mm. across. Obviously, if you redesign the car so that it would work with a much larger tolerance, which is not at all impossible, then you could make a much smaller device.

It is interesting to consider what the problems are in such small machines. Firstly, with parts stressed to the same degree, the forces go as the area you are reducing, so that things like weight and inertia are of relatively no importance. The strength of material, in other words, is very much greater in proportion. The stresses and expansion of the flywheel from centrifugal force, for example, would be the same proportion only if the rotational speed is increased in the same proportion as we decrease the size. On the other hand, the metals that we use have a grain structure, and this would be very annoying at small scale because the material is not homogeneous. Plastics and glass and things of this amorphous nature are very much more homogeneous, and so we would have to make our machines out of such materials.

There are problems associated with the electrical part of the system---with the copper wires and the magnetic parts. The magnetic properties on a very small scale are not the same as on a large scale; there is the ``domain'' problem involved. A big magnet made of millions of domains can only be made on a small scale with one domain. The electrical equipment won't simply be scaled down; it has to be redesigned. But I can see no reason why it can't be redesigned to work again.

Problems of lubrication
Lubrication involves some interesting points. The effective viscosity of oil would be higher and higher in proportion as we went down (and if we increase the speed as much as we can). If we don't increase the speed so much, and change from oil to kerosene or some other fluid, the problem is not so bad. But actually we may not have to lubricate at all! We have a lot of extra force. Let the bearings run dry; they won't run hot because the heat escapes away from such a small device very, very rapidly.

This rapid heat loss would prevent the gasoline from exploding, so an internal combustion engine is impossible. Other chemical reactions, liberating energy when cold, can be used. Probably an external supply of electrical power would be most convenient for such small machines.

What would be the utility of such machines? Who knows? Of course, a small automobile would only be useful for the mites to drive around in, and I suppose our Christian interests don't go that far. However, we did note the possibility of the manufacture of small elements for computers in completely automatic factories, containing lathes and other machine tools at the very small level. The small lathe would not have to be exactly like our big lathe. I leave to your imagination the improvement of the design to take full advantage of the properties of things on a small scale, and in such a way that the fully automatic aspect would be easiest to manage.

A friend of mine (Albert R. Hibbs) suggests a very interesting possibility for relatively small machines. He says that, although it is a very wild idea, it would be interesting in surgery if you could swallow the surgeon. You put the mechanical surgeon inside the blood vessel and it goes into the heart and ``looks'' around. (Of course the information has to be fed out.) It finds out which valve is the faulty one and takes a little knife and slices it out. Other small machines might be permanently incorporated in the body to assist some inadequately-functioning organ.

Now comes the interesting question: How do we make such a tiny mechanism? I leave that to you. However, let me suggest one weird possibility. You know, in the atomic energy plants they have materials and machines that they can't handle directly because they have become radioactive. To unscrew nuts and put on bolts and so on, they have a set of master and slave hands, so that by operating a set of levers here, you control the ``hands'' there, and can turn them this way and that so you can handle things quite nicely.

Most of these devices are actually made rather simply, in that there is a particular cable, like a marionette string, that goes directly from the controls to the ``hands.'' But, of course, things also have been made using servo motors, so that the connection between the one thing and the other is electrical rather than mechanical. When you turn the levers, they turn a servo motor, and it changes the electrical currents in the wires, which repositions a motor at the other end.

Now, I want to build much the same device---a master-slave system which operates electrically. But I want the slaves to be made especially carefully by modern large-scale machinists so that they are one-fourth the scale of the ``hands'' that you ordinarily maneuver. So you have a scheme by which you can do things at one- quarter scale anyway---the little servo motors with little hands play with little nuts and bolts; they drill little holes; they are four times smaller. Aha! So I manufacture a quarter-size lathe; I manufacture quarter-size tools; and I make, at the one-quarter scale, still another set of hands again relatively one-quarter size! This is one-sixteenth size, from my point of view. And after I finish doing this I wire directly from my large-scale system, through transformers perhaps, to the one-sixteenth-size servo motors. Thus I can now manipulate the one-sixteenth size hands.

Well, you get the principle from there on. It is rather a difficult program, but it is a possibility. You might say that one can go much farther in one step than from one to four. Of course, this has all to be designed very carefully and it is not necessary simply to make it like hands. If you thought of it very carefully, you could probably arrive at a much better system for doing such things.

If you work through a pantograph, even today, you can get much more than a factor of four in even one step. But you can't work directly through a pantograph which makes a smaller pantograph which then makes a smaller pantograph---because of the looseness of the holes and the irregularities of construction. The end of the pantograph wiggles with a relatively greater irregularity than the irregularity with which you move your hands. In going down this scale, I would find the end of the pantograph on the end of the pantograph on the end of the pantograph shaking so badly that it wasn't doing anything sensible at all.

At each stage, it is necessary to improve the precision of the apparatus. If, for instance, having made a small lathe with a pantograph, we find its lead screw irregular---more irregular than the large-scale one---we could lap the lead screw against breakable nuts that you can reverse in the usual way back and forth until this lead screw is, at its scale, as accurate as our original lead screws, at our scale.

We can make flats by rubbing unflat surfaces in triplicates together---in three pairs---and the flats then become flatter than the thing you started with. Thus, it is not impossible to improve precision on a small scale by the correct operations. So, when we build this stuff, it is necessary at each step to improve the accuracy of the equipment by working for awhile down there, making accurate lead screws, Johansen blocks, and all the other materials which we use in accurate machine work at the higher level. We have to stop at each level and manufacture all the stuff to go to the next level---a very long and very difficult program. Perhaps you can figure a better way than that to get down to small scale more rapidly.

Yet, after all this, you have just got one little baby lathe four thousand times smaller than usual. But we were thinking of making an enormous computer, which we were going to build by drilling holes on this lathe to make little washers for the computer. How many washers can you manufacture on this one lathe?

A hundred tiny hands
When I make my first set of slave ``hands'' at one-fourth scale, I am going to make ten sets. I make ten sets of ``hands,'' and I wire them to my original levers so they each do exactly the same thing at the same time in parallel. Now, when I am making my new devices one-quarter again as small, I let each one manufacture ten copies, so that I would have a hundred ``hands'' at the 1/16th size.

Where am I going to put the million lathes that I am going to have? Why, there is nothing to it; the volume is much less than that of even one full-scale lathe. For instance, if I made a billion little lathes, each 1/4000 of the scale of a regular lathe, there are plenty of materials and space available because in the billion little ones there is less than 2 percent of the materials in one big lathe.

It doesn't cost anything for materials, you see. So I want to build a billion tiny factories, models of each other, which are manufacturing simultaneously, drilling holes, stamping parts, and so on.

As we go down in size, there are a number of interesting problems that arise. All things do not simply scale down in proportion. There is the problem that materials stick together by the molecular (Van der Waals) attractions. It would be like this: After you have made a part and you unscrew the nut from a bolt, it isn't going to fall down because the gravity isn't appreciable; it would even be hard to get it off the bolt. It would be like those old movies of a man with his hands full of molasses, trying to get rid of a glass of water. There will be several problems of this nature that we will have to be ready to design for.

Rearranging the atoms
But I am not afraid to consider the final question as to whether, ultimately---in the great future---we can arrange the atoms the way we want; the very atoms , all the way down! What would happen if we could arrange the atoms one by one the way we want them (within reason, of course; you can't put them so that they are chemically unstable, for example).

Up to now, we have been content to dig in the ground to find minerals. We heat them and we do things on a large scale with them, and we hope to get a pure substance with just so much impurity, and so on. But we must always accept some atomic arrangement that nature gives us. We haven't got anything, say, with a ``checkerboard'' arrangement, with the impurity atoms exactly arranged 1,000 angstroms apart, or in some other particular pattern.

What could we do with layered structures with just the right layers? What would the properties of materials be if we could really arrange the atoms the way we want them? They would be very interesting to investigate theoretically. I can't see exactly what would happen, but I can hardly doubt that when we have some control of the arrangement of things on a small scale we will get an enormously greater range of possible properties that substances can have, and of different things that we can do.

Consider, for example, a piece of material in which we make little coils and condensers (or their solid state analogs) 1,000 or 10,000 angstroms in a circuit, one right next to the other, over a large area, with little antennas sticking out at the other end---a whole series of circuits. Is it possible, for example, to emit light from a whole set of antennas, like we emit radio waves from an organized set of antennas to beam the radio programs to Europe? The same thing would be to beam the light out in a definite direction with very high intensity. (Perhaps such a beam is not very useful technically or economically.)

I have thought about some of the problems of building electric circuits on a small scale, and the problem of resistance is serious. If you build a corresponding circuit on a small scale, its natural frequency goes up, since the wave length goes down as the scale; but the skin depth only decreases with the square root of the scale ratio, and so resistive problems are of increasing difficulty. Possibly we can beat resistance through the use of superconductivity if the frequency is not too high, or by other tricks.

Atoms in a small world
When we get to the very, very small world---say circuits of seven atoms---we have a lot of new things that would happen that represent completely new opportunities for design. Atoms on a small scale behave like nothing on a large scale, for they satisfy the laws of quantum mechanics. So, as we go down and fiddle around with the atoms down there, we are working with different laws, and we can expect to do different things. We can manufacture in different ways. We can use, not just circuits, but some system involving the quantized energy levels, or the interactions of quantized spins, etc.

Another thing we will notice is that, if we go down far enough, all of our devices can be mass produced so that they are absolutely perfect copies of one another. We cannot build two large machines so that the dimensions are exactly the same. But if your machine is only 100 atoms high, you only have to get it correct to one-half of one percent to make sure the other machine is exactly the same size---namely, 100 atoms high!

At the atomic level, we have new kinds of forces and new kinds of possibilities, new kinds of effects. The problems of manufacture and reproduction of materials will be quite different. I am, as I said, inspired by the biological phenomena in which chemical forces are used in repetitious fashion to produce all kinds of weird effects (one of which is the author).

The principles of physics, as far as I can see, do not speak against the possibility of maneuvering things atom by atom. It is not an attempt to violate any laws; it is something, in principle, that can be done; but in practice, it has not been done because we are too big.

Ultimately, we can do chemical synthesis. A chemist comes to us and says, ``Look, I want a molecule that has the atoms arranged thus and so; make me that molecule.'' The chemist does a mysterious thing when he wants to make a molecule. He sees that it has got that ring, so he mixes this and that, and he shakes it, and he fiddles around. And, at the end of a difficult process, he usually does succeed in synthesizing what he wants. By the time I get my devices working, so that we can do it by physics, he will have figured out how to synthesize absolutely anything, so that this will really be useless.

But it is interesting that it would be, in principle, possible (I think) for a physicist to synthesize any chemical substance that the chemist writes down. Give the orders and the physicist synthesizes it. How? Put the atoms down where the chemist says, and so you make the substance. The problems of chemistry and biology can be greatly helped if our ability to see what we are doing, and to do things on an atomic level, is ultimately developed---a development which I think cannot be avoided.

Now, you might say, ``Who should do this and why should they do it?'' Well, I pointed out a few of the economic applications, but I know that the reason that you would do it might be just for fun. But have some fun! Let's have a competition between laboratories. Let one laboratory make a tiny motor which it sends to another lab which sends it back with a thing that fits inside the shaft of the first motor.

High school competition
Just for the fun of it, and in order to get kids interested in this field, I would propose that someone who has some contact with the high schools think of making some kind of high school competition. After all, we haven't even started in this field, and even the kids can write smaller than has ever been written before. They could have competition in high schools. The Los Angeles high school could send a pin to the Venice high school on which it says, ``How's this?'' They get the pin back, and in the dot of the ``i'' it says, ``Not so hot.''

Perhaps this doesn't excite you to do it, and only economics will do so. Then I want to do something; but I can't do it at the present moment, because I haven't prepared the ground. It is my intention to offer a prize of $1,000 to the first guy who can take the information on the page of a book and put it on an area 1/25,000 smaller in linear scale in such manner that it can be read by an electron microscope.

And I want to offer another prize---if I can figure out how to phrase it so that I don't get into a mess of arguments about definitions---of another $1,000 to the first guy who makes an operating electric motor---a rotating electric motor which can be controlled from the outside and, not counting the lead-in wires, is only 1/64 inch cube.

I do not expect that such prizes will have to wait very long for claimants.

posted by James 3:25 PM