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| http://www.gilder.com/ | Issue 317.0/November
16, 2007
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HEADLINES:
- The
Week / David Malpass: Washington: Out of Tune With
Growth
- Friday Feature / Kevin Kelly: Technology Wants To Be Free
- Friday Blogger Bonus / Steve Forbes: Ben and Alan's Inflation
- Readings /
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The
Week / Washington: Out of Tune With Growth
David
Malpass, Forbes.com: As the U.S. economy slows in coming months the focus of markets
and voters will likely shift to recovery--how to get back to a strong growth
trend. Unfortunately, Washington seems increasingly out of tune with growth.
We're poised to deepen what could be a sharp 2008 slowdown with a weak dollar,
tax increases and protectionism, the opposite of the growth policies that are
working abroad and have worked here in the past.
The
time-tested path to recovery is through sounder money, lower tax rates, freer
trade and tighter restraints on government expansion. As Britain's economy
slouched through the 1960s, an investing watchword emerged: "It's never
too late to short the pound." Some fear this now applies to the dollar.
Margaret Thatcher reversed Britain's devastating decline with tax cuts,
deregulation and a policy of sound money, which was exactly how Ronald Reagan
fought off the weak-dollar malaise of the 1970s.
In
mid-1993 China's Vice Premier, Zhu Rongji, chose sound money to break China out
of the inflationary economic depression surrounding the Tiananmen Square
debacle. He replaced the black market currency with a stable yuan to stop high
inflation and food hoarding. Sound money in conjunction with price decontrols
and tax cuts in rural areas have brought 15 years of very fast growth, policies
that could work almost as well in Latin America and parts of Africa if the U.S.
and the IMF stopped discouraging them.
When
Vladimir Putin replaced Boris Yeltsin as Russia's autocrat, amid economic chaos
on the last day of 1999, one of his first economic steps was to stabilize the
ruble. His government then adopted a flat-rate income tax, ending Russia's days
as an economic basket case.
The
path to economic recovery is staring the U.S. in the face: Put a high priority
on a strong and stable dollar, cut high tax rates and restrain Washington's
economic expansionism.
If
the economy slows, we should be looking for problems in the engines of
growth--labor, capital formation and innovation. We know we're riding in a
championship flying machine that's capable of going supersonic when allowed.
But we don't have to look far for engine rattles: a mountainous tax code,
dollar weakness and constant lawsuits.
Nowhere
else do so many middle-income people have to hire so many tax preparers. Our
corporate tax rates are second highest in the developed world, penalizing job
creation and investment. Washington levies heavy income taxes on Americans
working abroad, discouraging precisely the skill mix we need most.
The capital gains tax, a critical determinant of asset values, was lowered to 15% in 2003, causing the predictable stock and housing market booms. But it's not indexed for inflation. And it's already scheduled to go up by a third in 2011, with Democratic presidential candidates proposing even bigger and earlier rate hikes. As the housing crisis deepens, we should be lowering or inflation-indexing capital gains taxation to increase asset values.
The
uncertainty in U.S. tax rates and the scheduled tax rate increases have been
reason enough for investors to prefer foreign investments….
Read on:
http://members.forbes.com/forbes/2007/1126/029_print.html
|
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Friday Feature / Technology Wants To Be
Free
Kevin Kelly, The Technium (11/14/07): Last February
during a break at the most recent TED conference I was speaking to Chris
Anderson, current editor in chief at Wired about his planned next book,
called FREE. Nearly 10 years ago I had written a chapter in my thin New Rules
for the New Economy book that focused on the role of the free and the economics
of plentitude. I called that chapter “Follow the Free.” Almost nothing I’ve
written has been as misunderstood as this short chapter. I’ve not had a Q+A
session since then without this question coming up: “You say we should embrace
the free. How can everything be free?”
The truth is that the concept of the free is easily misunderstood.
Thus I applaud Chris’ brilliance in devoting a whole book to unraveling the
mess. There’s much to be said about it, and even then we’ll just be at the
beginning of understanding what free means. I originally thought I was done
with the subject 10 years ago, but the continual questions, as well as the
continual evolution of the commons, new social dynamics, new technological
disruptions, and further research in the decade since have surfaced some new
ideas. In particular I’ve concluded the free is deeply entwined into the very
foundation of technology. I was sharing some of those emerging half-baked
thoughts with Chris in the lobby of TED. Since that conversation I’ve
discovered that the tie between technology and the free goes even further than
I thought. My current conclusion can be summarized simply: Technology wants to
be free…
George Gilder once noted there was a self-reinforcing positive feedback
loop in miniaturization of technology. Smaller chips ran cooler, which allowed
them to run faster, which allowed them to run cooler, which allowed them to be
made smaller. And so on. There is a similar self-reinforcing positive feedback
loop in the free-ization of technology. Nearly-free goods permit waste and
experimentation, which breed new options for that good, which increase its
abundance and lower its price, which generate more new options, which permit
further novelty. And so on. These loops work on each other, compounding the
effects between techniques and goods, and supercharging the entire
ecology of technologies with an unstoppable momentum towards the free and
towards unleashing new capabilities and possibilities.
The odd thing about free technology is that the “free as in beer” part is
actually a distraction. As I have argued elsewhere (see my 2002 New York Times
Magazine article on the future of music for example) the great attraction of
“free” music is only partially that it does not cost anything. The chief
importance of free music (and other free things) is held in the second English
meaning of the word: free as in “freedom.” Free music is more than piracy
because the freedom in the free digital downloads suddenly allowed music lovers
to do all kinds of things with this music that they had longed to do but were
unable to do before things were “free.” The “free” in digital music meant the
audience could unbundled it from albums, sample it, create their own playlists,
embed it, share it with love, bend it, graph it in colors, twist it, mash it,
carry it, squeeze it, and enliven it with new ideas. The free-ization made it
liquid and ‘free” to interact with other media. In the context of this freedom,
the questionable legality of its free-ness was secondary. It didn’t really
matter because music had been liberated by the free, almost made into a new
media.
Technology wants to be free, as in free beer, because as it become free it also
increases freedom. The inherent talents, capabilities and benefits of a
technology cannot be released until it is almost free. The drive toward the
free unleashes the constraints on each species in the technium, allowing it to
interact with as many other species of technology as is possible, engendering new
hybrids and deeper ecologies of tools, and permitting human users more choices
and freedoms of use. As a technology grows in abundance and cheapness, it is
more likely to find its appropriate niche which it can sustain itself and
support other technologies in commodity mode. As technology heads toward the
free it unleashes the only lasting thing it can: options and possibilities.
Read on:
http://www.kk.org/thetechnium/archives/2007/11/technology_want.php
________________________________________
Friday Blogger Bonus / Ben and Alan's Inflation
Steve Forbes, Fact and Comment (11/14/07): At Starbucks the other day I
was all set to buy one of the crumb cakes until I noticed that they were about
half their usual size. Some of us are old enough to remember the 1960s and
1970s, when food companies shrank the size of candy bars, cakes and other
products to avoid increasing nominal prices.
Broad-based
inflation is happening again globally. The Russian government has
"persuaded" food producers to keep prices of sensitive items stable
until after upcoming parliamentary elections. Argentina has been imposing price
controls on many products, and in China rising inflation is creating increasing
anxiety.
The global inflation unleashed by Alan Greenspan and the Federal Reserve in 2004 is now showing up more and more in traditional price indexes. The Fed and other whistlers-past-the-graveyard state that "core" inflation is not too bad. But core inflation leaves out "volatile" food and energy prices. Add these in and you get a much more alarming picture.
The
whole idea of core inflation is reminiscent of a prank Herb Stein, head of
President Richard Nixon's Council of Economic Advisers, played in the early
1970s. When a bad batch of numbers was released, Stein deadpanned that if you
took out all the items in the Consumer Price Index that had gone up, there
would be no inflation. Amazingly, most reporters took this as a profound
insight….
Read on:
http://members.forbes.com/global/2007/1126/015.html
__________________________________________
Readings /
Silicon Circuits Made Ink-jet Printable
http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=202805929
Ken Fisher: The Carry Trade Connection
http://www.forbes.com/personalfinance/2007/11/02/yen-euro-currencies-pf-gi-in_kf_1102chartroom_inl.html
Intel 45-nanometer Penryn Processors Arrive
http://spectrum.ieee.org/nov07/5704
Weekly GTI Index
http://www.gtindex.com/
__________________________________________
Friday Letter Editor: Mary Collins George / mcollins@gilder.com
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