October 2013

Steil, Benn. The Battle of Bretton Woods. Princeton: Princeton University Press, 2013. ISBN 978-0-691-14909-7.

As the Allies advanced toward victory against the Axis powers on all fronts in 1944, in Allied capitals thoughts increasingly turned to the postwar world and the institutions which would define it. Plans were already underway to expand the “United Nations” (at the time used as a synonym for the Allied powers) into a postwar collective security organisation which would culminate in the April 1945 conference to draft the charter of that regrettable institution. Equally clamant was the need to define monetary mechanisms which would facilitate free trade.

The classical gold standard, which was not designed but evolved organically in the 19th century as international trade burgeoned, had been destroyed by World War I. Attempts by some countries to reestablish the gold standard after the end of the war led to economic dislocation (particularly in Great Britain), currency wars (competitive devaluations in an attempt to gain a competitive advantage in international trade), and trade wars (erecting tariff or other barriers to trade to protect domestic or imperial markets against foreign competition).

World War II left all of the major industrial nations with the sole exception of the United States devastated and effectively bankrupt. Despite there being respected and influential advocates for re-establishing the classical gold standard (in which national currencies were defined as a quantity of gold, with central banks issuing them willing to buy gold with their currency or exchange their currency for gold at the pegged rate), this was widely believed impossible. Although the gold standard had worked well when in effect prior to World War I, and provided negative feedback which tended to bring the balance of payments among trading partners back into equilibrium and provided a mechanism for countries in economic hard times to face reality and recover by devaluing their currencies against gold, there was one overwhelming practical difficulty in re-instituting the gold standard: the United States had almost all of the gold. In fact, by 1944 it was estimated that the U.S. Treasury held around 78% of all of the world's central bank reserve gold. It is essentially impossible to operate under a gold standard when a single creditor nation, especially one with its industry and agriculture untouched by the war and consequently sure to be the predominant exporter in the years after it ended, has almost all of the world's gold in its vaults already. Proposals to somehow reset the system by having the U.S. transfer its gold to other nations in exchange for their currencies was a non-starter in Washington, especially since many of those nations already owed large dollar-denominated debts to the U.S.

The hybrid gold-exchange standard put into place after World War I had largely collapsed by 1934, with Britain forced off the standard by 1931, followed quickly by 25 other nations. The 1930s were a period of economic depression, collapsing international trade, competitive currency devaluations, and protectionism, hardly a model for a postwar monetary system.

Also in contention as the war drew to its close was the location of the world's financial centre and which currency would dominate international trade. Before World War I, the vast majority of trade cleared through London and was denominated in sterling. In the interwar period, London and New York vied for preeminence, but while Wall Street prospered financing the booming domestic market in the 1920s, London remained dominant for trade between other nations and maintained a monopoly within the British Empire. Within the U.S., while all factions within the financial community wished for the U.S. to displace Britain as the world's financial hub, many New Dealers in Roosevelt's administration were deeply sceptical of Wall Street and “New York bankers” and wished to move decision making to Washington and keep it firmly under government control.

While ambitious plans were being drafted for a global monetary system, in reality there were effectively only two nations at the negotiating table when it came time to create one: Britain and the U.S. John Maynard Keynes, leader of the British delegation, referred to U.S. plans for a broad-based international conference on postwar monetary policy as “a major monkey-house”, with non-Anglo-Saxon delegations as the monkeys. On the U.S. side, there was a three way power struggle among the Treasury Department, the State Department, and the nominally independent Federal Reserve to take the lead in international currency policy.

All of this came to a head when delegates from 44 countries arrived at a New Hampshire resort hotel in July 1944 for the Bretton Woods Conference. The run-up to the conference had seen intensive back-and-forth negotiation between the U.S. and British delegations, both of whom arrived with their own plans, each drafted to give their side the maximum advantage.

For the U.S., Treasury secretary Henry Morgenthau, Jr. was the nominal head of the delegation, but having no head for nor interest in details, deferred almost entirely to his energetic and outspoken subordinate Harry Dexter White. The conference became a battle of wits between Keynes and White. While White was dwarfed by Keynes's intellect and reputation (even those who disagreed with his unorthodox economic theories were impressed with his wizardry in financing the British war efforts in both world wars), it was White who held all the good cards. Not only did the U.S. have most of the gold, Britain was entirely dependent upon Lend-Lease aid from the U.S., which might come to an abrupt end when the war was won, and owed huge debts which it could never repay without some concessions from the U.S. or further loans on attractive terms.

Morgenthau and White, with Roosevelt's enthusiastic backing, pressed their case relentlessly. Not only did Roosevelt concur that the world's financial centre should be Washington, he saw an opportunity to break the British Empire, which he detested. Roosevelt remarked to Morgenthau after a briefing, “I had no idea that England was broke. I will go over there and make a couple of talks and take over the British Empire.”

Keynes described an early U.S. negotiating position as a desire by the U.S. to make Britain “lose face altogether and appear to capitulate completely to dollar diplomacy.” And in the end, this is essentially what happened. Morgenthau remarked, “Now the advantage is ours here, and I personally think we should take it,” then later expanded, “If the advantage was theirs, they would take it.”

The system crafted at the conference was formidably complex: only a few delegates completely understood it, and, foreshadowing present-day politics in the U.S., most of the delegations which signed it at the conclusion of the conference had not read the final draft which was thrown together at the last minute. The Bretton Woods system which emerged prescribed fixed exchange rates, not against gold, but rather the U.S. dollar, which was, in turn, fixed to gold. Central banks would hold their reserves primarily in dollars, and could exchange excess dollars for gold upon demand. A new International Monetary Fund (IMF) would provide short-term financing to countries with trade imbalances to allow them to maintain their currency's exchange rate against the dollar, and a World Bank was created to provide loans to support reconstruction after the war and development in poor countries. Finally a General Agreement on Tariffs and Trade was adopted to reduce trade barriers and promote free trade.

The Bretton Woods system was adopted at a time when the reputation of experts and technocrats was near its peak. Keynes believed that central banking should “be regarded as a kind of beneficent technique of scientific control such as electricity and other branches of science are.” Decades of experience with the ever more centralised and intrusive administrative state has given people today a more realistic view of the capabilities of experts and intellectuals of all kinds. Thus it should be no surprise that the Bretton Woods system began to fall apart almost as soon as it was put in place. The IMF began operations in 1947, and within months a crisis broke out in the peg of sterling to the dollar. In 1949, Britain was forced to devalue the pound 30% against the dollar, and in short order thirty other countries also devalued. The Economist observed:

Not many people in this country believe the Communist thesis that it is the deliberate and conscious aim of American policy to ruin Britain and everything Britain stands for in the world. But the evidence can certainly be read that way. And if every time aid is extended, conditions are attached which make it impossible for Britain to ever escape the necessity of going back for still more aid, to be obtained with still more self-abasement and on still more crippling terms, then the result will certainly be what the Communists predict.

Dollar diplomacy had triumphed completely.

The Bretton Woods system lurched from crisis to crisis and began to unravel in the 1960s when the U.S., exploiting its position of issuing the world's reserve currency, began to flood the world with dollars to fund its budget and trade deficits. Central banks, increasingly nervous about their large dollar positions, began to exchange their dollars for gold, causing large gold outflows from the U.S. Treasury which were clearly unsustainable. In 1971, Nixon “closed the gold window”. Dollars could no longer be redeemed in gold, and the central underpinning of Bretton Woods was swept away. The U.S. dollar was soon devalued against gold (although it hardly mattered, since it was no longer convertible), and before long all of the major currencies were floating against one another, introducing uncertainty in trade and spawning the enormous global casino which is the foreign exchange markets.

A bizarre back-story to the creation of the postwar monetary system is that its principal architect, Harry Dexter White, was, during the entire period of its construction, a Soviet agent working undercover in his U.S. government positions, placing and promoting other agents in positions of influence, and providing a steady stream of confidential government documents to Soviet spies who forwarded them to Moscow. This was suspected since the 1930s, and White was identified by Communist Party USA defectors Whittaker Chambers and Elizabeth Bentley as a spy and agent of influence. While White was defended by the usual apologists, and many historical accounts try to blur the issue, mentions of White in the now-declassified Venona decrypts prove the issue beyond a shadow of a doubt. Still, it must be said that White was a fierce and effective advocate at Bretton Woods for the U.S. position as articulated by Morgenthau and Roosevelt. Whatever other damage his espionage may have done, his pro-Soviet sympathies did not detract from his forcefulness in advancing the U.S. cause.

This book provides an in-depth view of the protracted negotiations between Britain and the U.S., Lend-Lease and other war financing, and the competing visions for the postwar world which were decided at Bretton Woods. There is a tremendous amount of detail, and while some readers may find it difficult to assimilate, the economic concepts which underlie them are explained clearly and are accessible to the non-specialist. The demise of the Bretton Woods system is described, and a brief sketch of monetary history after its ultimate collapse is given.

Whenever a currency crisis erupts into the news, you can count on one or more pundits or politicians to proclaim that what we need is a “new Bretton Woods”. Before prescribing that medicine, they would be well advised to learn just how the original Bretton Woods came to be, and how the seeds of its collapse were built in from the start. U.S. advocates of such an approach might ponder the parallels between the U.S. debt situation today and Britain's in 1944 and consider that should a new conference be held, they may find themselves sitting the seats occupied by the British the last time around, with the Chinese across the table.

In the Kindle edition the table of contents, end notes, and index are all properly cross-linked to the text.

 

Houston, Keith. Shady Characters. New York: W. W. Norton, 2013. ISBN 978-0-393-06442-1.

¶ The earliest written languages seem mostly to have been mnemonic tools for recording and reciting spoken text. As such, they had little need for punctuation and many managed to get along withoutevenspacesbetweenwords. If you read it out loud, it's pretty easy to sound out (although words written without spaces can be used to create deliciously ambiguous text). As the written language evolved to encompass scholarly and sacred texts, commentaries upon other texts, fiction, drama, and law, the structural complexity of the text grew apace, and it became increasingly difficult to express this in words alone. Punctuation was born.

In the third century B.C. Aristophanes of Byzantium (not to be confused with the other fellow), librarian at Alexandria, invented a system of dots to denote logical breaks in Greek texts of classical rhetoric, which were placed after units called the komma, kolon, and periodos. In a different graphical form, they are with us still.

Until the introduction of movable type printing in Europe in the 15th century, books were hand-copied by scribes, each of whom was free, within the constraints of their institutions, to innovate in the presentation of the texts they copied. In the interest of conserving rare and expensive writing materials such as papyrus and parchment, abbreviations came into common use. The humble ampersand (the derivation of whose English name is delightfully presented here) dates to the shorthand invented by Cicero's personal secretary/slave Tiro, who invented a mark to quickly write “et” as his master spoke.

Other punctuation marks co-evolved with textual criticism: quotation marks allowed writers to distinguish text from other sources included within their works, and asterisks, daggers, and other symbols were introduced to denote commentary upon text. Once bound books (codices) printed with wide margins became common, readers would annotate them as they read, often ☛ pointing out key passages. Even a symbol as with-it as the now-ubiquitous “@” (which I recall around 1997 being called “the Internet logo”) is documented as having been used in 1536 as an abbreviation for amphorae of wine. And the ever-more-trending symbol prefixing #hashtags? Isaac Newton used it in the 17th century, and the story of how it came to be called an “octothorpe” is worthy of modern myth.

This is much more than a history of obscure punctuation. It traces how we communicate in writing over the millennia, and how technologies such as movable type printing, mechanical type composition, typewriting, phototypesetting, and computer text composition have both enriched and impoverished our written language. Impoverished? Indeed—I compose this on a computer able to display in excess of 64,000 characters from the written languages used by most people since the dawn of civilisation. And yet, thanks to the poisonous legacy of the typewriter, only a few people seem to be aware of the distinction, known to everybody setting type in the 19th century, among the em-dash—used to set off a phrase; the en-dash, denoting “to” in constructions like “1914–1918”; the hyphen, separating compound words such as “anarcho-libertarian” or words split at the end of a line; the minus sign, as in −4.221; and the figure dash, with the same width as numbers in a font where all numbers have the same width, which permits setting tables of numbers separated by dashes in even columns. People who appreciate typography and use TeX are acutely aware of this and grind their teeth when reading documents produced by demotic software tools such as Microsoft Word or reading postings on the Web which, although they could be so much better, would have made Mencken storm the Linotype floor of the Sunpapers had any of his writing been so poorly set.

Pilcrows, octothorpes, interrobangs, manicules, and the centuries-long quest for a typographical mark for irony (Like, we really need that¡)—this is a pure typographical delight: enjoy!

In the Kindle edition end of chapter notes are bidirectionally linked (albeit with inconsistent and duplicate reference marks), but end notes are not linked to their references in the text—you must manually flip to the notes and find the number. The end notes contain many references to Web URLs, but these are not active links, just text: to follow them you must copy and paste them into a browser address bar. The index is just a list of terms, not linked to references in the text. There is no way to distinguish examples of typographic symbols which are set in red type from chapter note reference links set in an identical red font.

 

Niven, Larry and Matthew Joseph Harrington. The Goliath Stone. New York: Tor Books, 2013. ISBN 978-0-7653-3323-0.

This novel is a tremendous hoot which the authors undoubtedly had great fun writing and readers who know what's going on may thoroughly enjoy while others who don't get it may be disappointed. This story, which spans a period from 5 billion years before the present to A.D. 2052 chronicles the expansion of sentient life beyond the Earth and humankind's first encounter with nonhuman beings. Dr. Toby Glyer, pioneer in nanotechnology, arranges with a commercial space launch company to send a technologically opaque payload into space. After launch, it devours the orbital stage which launched it and disappears. Twenty-five years later, a near-Earth asteroid is detected as manoeuvring itself onto what may be a collision course with Earth, and fears spread of Glyer's asteroid retrieval mission, believed to involve nanotechnology, having gone horribly wrong.

Meanwhile, distinctly odd things are happening on Earth: the birth rate is falling dramatically, violent crime is way down while suicides have increased, terrorism seems to have come to an end, and test scores are rising everywhere. Athletes are shattering long-established records with wild abandon, and a disproportionate number of them appear to be American Indians. Glyer and space launch entrepreneur May Wyndham sense that eccentric polymath William Connors, who they last knew as a near-invalid a quarter century earlier, may be behind all of this, and soon find themselves inside Connors' secretive lair.

This is an homage to golden age science fiction where an eccentric and prickly genius decides to remake the world and undertakes to do so without asking permission from anybody. The story bristles with dozens if not hundreds of references to science fiction and fandom, many of which I'm sure I missed. For example, “CNN cut to a feed with Dr. Wade Curtis, self-exiled to Perth when he'd exceeded the federal age limit on health care.” Gentle readers, start your search engines!

If you're looking for “hard” science fiction like Niven's “Known Space”, this is not your book. For a romp through the near future which recalls the Skylark novels of “Doc” Smith, with lots of fannish goodies and humourous repartee among the characters, it's a treat.

 

Rawles, James Wesley. Expatriates. New York: Dutton, 2013. ISBN 978-0-525-95390-6.

This novel is the fourth in the series which began with Patriots (December 2008), then continued with Survivors (January 2012) and Founders (October 2012). These books are not a conventional multi-volume narrative, in that all describe events in the lives of their characters in roughly the same time period surrounding “the Crunch”—a grid down societal collapse due to a debt crisis and hyperinflation. While the first three books in the series are best read in order, as there is substantial overlap in characters and events, this book, while describing contemporary events, works perfectly well as a stand-alone thriller and does not contain substantial spoilers for the first three novels.

The earlier books in the series were thrillers with a heavy dose of survival tutorial, including extended litanies of gear. The present volume leans more toward the thriller genre and is, consequently, more of a page-turner.

Peter and Rihannon Jeffords are Christian missionaries helping to run an orphanage in the Philippine Islands wishing nothing more than to get on with their lives and work when the withdrawal of U.S. forces in the Pacific due the economic collapse of the U.S. opens the way for a newly-installed jihadi government in Indonesia to start flexing its imperialist ambitions, looking enviously at Malaysia, Papua New Guinea, the Philippines, and ultimately the resource-rich and lightly populated “Top End” of Australia as their manifest destiny.

Meanwhile, Chuck Nolan, a Texan petroleum geologist specialising in explosive seismic exploration, working in the Northern Territory of Australia, is adjusting, along with native Australians, to the consequences of the Crunch. While not directly affected by the U.S. economic collapse, Australia's highly export-driven economy has been severely damaged by the contraction in world trade, and being dependent upon imported food and pharmaceuticals, hardships are everywhere and tragedies commonplace.

Back in the United States, Rihannon Jeffords' family, the Altmillers, are trying to carry on their independent hardware store business in Florida, coping with the collapse of the currency; the emergence of a barter economy and use of pre-1965 silver coins as a medium of exchange; the need for extraordinary security precautions at work and at home as the rule of law and civil society erode; and escalating worries about feral mobs of looters raiding ever wider from the chaos which was Orlando.

As the story develops, we exerience a harrowing sea voyage through hostile waters, asymmetrical warfare against a first world regional power, irregular resistance against an invader, and local communities self-organising defence against an urban “golden horde” ravaging the countryside. You will learn a great deal about partisan resistance strategies, decapitation of opposition forces, and why it is most unwise for effete urban populations to disarm those uncouth and disdained denizens of the boonies who, when an invader threatens, are both the first and ultimate lines of defence.

This book is meticulously researched with a wealth of local and technical details and only a few goofs and copy-editing errors. Like the earlier novels, the author dispels, often with spare prose or oblique references, the romantic notion that some “preppers” seem to have that the collapse of civilisation will be something like a camping trip they'll enjoy because they're “ready”. These happy would-be campers overlook the great die-off, the consequences of masses of people suddenly withdrawing from mood-altering drugs, roving bands of looters, the emergence of war-lords, and all of the other manifestations of the normal state of humanity over millennia which are suppressed only by our ever-so-fragile just in time technological society.

 

Weil, Elizabeth. They All Laughed at Christopher Columbus. New York: Bantam Books, 2002. ISBN 978-0-553-38236-5.

For technologists and entrepreneurs, the latter half of the 1990s was a magical time. The explosive growth in computing power available to individuals, the global interconnectivity afforded by the Internet, and the emergence of broadband service with the potential to make the marginal cost of entry as a radio or video broadcaster next to zero created a vista of boundless technological optimism. Companies with market valuations in the billions sprang up like mushrooms despite having never turned a profit (and in some cases, before delivering a product), and stock-option paper millionaires were everywhere, some sporting job titles which didn't exist three years before.

In this atmosphere enthusiasms of all kinds were difficult to restrain, even those more venerable than Internet start-ups, and among people who had previously been frustrated upon multiple occasions. So it was that as the end of the decade approached, Gary Hudson, veteran of three earlier unsuccessful commercial space projects, founded Rotary Rocket, Inc. with the goal of building a reusable single-stage-to-orbit manned spacecraft which would reduce the cost of launching payloads into low Earth orbit by a factor of ten compared to contemporary expendable rockets (which, in turn, were less expensive than NASA's Space Shuttle). Such a dramatic cost reduction was expected to immediately generate substantial business from customers such as Teledesic, which originally planned to launch 840 satellites to provide global broadband Internet service. Further, at one tenth the launch cost, space applications which were not economically feasible before would become so, expanding the space market just as the comparable collapse in the price of computing and communications had done in their sectors.

Hudson assembled a team, a mix of veterans of his earlier ventures, space enthusiasts hoping to make their dreams a reality at last, hard-nosed engineers, and seasoned test pilots hoping to go to space, and set to work. His vision became known as Roton, and evolved to be an all-composite structure including tanks for the liquid oxygen and kerosene propellants, and a unique rotary engine at the base of the conical structure which would spin to create the pressure to inject propellants into 96 combustors arrayed around the periphery, eliminating the need for heavy, complicated, and prone-to-disintegrate turbopumps. The crew of two would fly the Roton to orbit and release the payload into space, then make a de-orbit burn. During re-entry, a water-cooled heat shield on the base of the cone would protect the structure from heating, and when atmospheric density was sufficient, helicopter-like rotor blades would deploy from the top of the cone. These blades would be spun up by autorotation and then, shortly before touchdown, tip jets powered by hydrogen peroxide would fire to allow a controlled powered approach and precision landing. After a mission, one need only load the next payload, refill the propellant tanks, and brief the crew for the next flight. It was estimated one flight per day was achievable with a total ground staff of fewer than twenty people.

This would have been revolutionary, and there were many, some with forbidding credentials and practical experience, who argued that it couldn't possibly work, and certainly not on Hudson's schedule and budget of US$ 150 million (which is closer to the sum NASA or one of its contractors would require to study such a concept, not to actually build and fly it). There were many things to worry about. Nothing like the rotary engine had ever been built, and its fluid mechanical and thermal complexities were largely unknown. The heat shield was entirely novel, and there was no experience as to how it would perform in a real world environment in which pores and channels might clog. Just getting to orbit in a single stage vehicle powered by LOX and kerosene was considered impossible by many, requiring a structure which was 95% propellant at launch. Even with composite construction, nobody had achieved anything close to this mass fraction in a flight vehicle.

Gary Hudson is not just a great visionary; he is nothing if not persuasive. For example, here is a promotional video from 1998. He was able, over the history of the project, to raise a total of US$ 30 million for the project from private investors (disclosure: myself included), and built an initial atmospheric test vehicle intended to validate the helicopter landing system. In 1999, this vehicle made three successful test flights, including a hop up and down and a flight down the runway.

By this point in 1999, the technology bubble was nearing the bursting point and perspicacious investors were already backing away from risky ventures. When it became clear there was no prospect to raise sufficient funds to continue, even toward the next milestone, Hudson had no option but to lay off staff and eventually entirely shutter the company, selling off its remaining assets (but the Roton ATV can be seen on display at the Mojave Spaceport).

There are any number of “business books” written about successful ventures, often ghostwritten for founders to show how they had a unique vision and marched from success to success to achieve their dream. (These so irritated me that I strove, in my own business book, to demonstrate from contemporary documents, the extent to which those in a technological start-up grope in the dark with insufficient information and little idea of where it's going.) Much rarer are accounts of big dreams which evoked indefatigable efforts from talented people and, despite all, ended badly. This book is a superb exemplar of that rare genre. There are a few errors of fact, and from time to time the author's description of herself among the strange world of the rocket nerds is a bit precious, but you get an excellent sense of what it was like to dream big, how a visionary can inspire people to accomplish extraordinary things, and how an entrepreneur must not only have a sound technical foundation, a vision of the future, but also have kissed the Barnum stone to get the job done.

Oddly, the book contains no photographs of this unique and stunning vehicle or the people who built it.

 

Mencken, H. L. The Vintage Mencken. New York: Vintage, [1955] 1990. ISBN 978-0-679-72895-5.

Perhaps only once in a generation is born a person with the gift of seeing things precisely as they are, without any prejudice or filter of ideology, doctrine, or preconceived notions, who also has the talent to rise to a position from which this “fair witness” viewpoint can be effectively communicated to a wide audience. In this category, one thinks immediately of George Orwell and, more recently and not yet as celebrated as he deserves to be, Karl Hess, but without doubt one of the greatest exemplars of these observers of their world to have lived in the 20th century was H[enry] L[ouis] Mencken, the “Sage of Baltimore” and one of the greatest libertarian, sceptic, and satirical writers of his time, as well as a scholar of the English language as used in the United States.

This book, originally published during Mencken's life (although he lived until 1956, he ceased writing after suffering a stroke in 1948 which, despite his recovering substantially, left him unable to compose text), collects his work, mostly drawn from essays and newspaper columns across his writing career. We get reminiscences of the Baltimore of his youth, reportage of the convention that nominated Franklin Roosevelt, a celebration of Grover Cleveland, an obituary of Coolidge, a taking down of Lincoln the dictator, a report from the Progressive convention which nominated Henry Wallace for president in 1948, and his final column defending those who defied a segregation law to stage an interracial tennis tournament in Baltimore in 1948.

Many of the articles are abridged, perhaps in the interest of eliding contemporary references which modern readers may find obscure. This collection provides an excellent taste of Mencken across his career and will probably leave you hungry for more. Fortunately, most of his œuvre remains in print. In the contemporary media cornucopia and endless blogosphere we have, every day, many times the number of words available to read as Mencken wrote in his career. But who is the heir to Mencken in seeing the folly behind the noise of ephemeral headlines and stands the test of time when read almost a century later?