Weekend reading recommendations – part 3


  1. Peak Oil and the Curse of Cassandra“, Jamais Cascio, 31 July 2005 — This is interesting nonsense, a myth about Y2k applied to today’s crisis.
  2. Milestones in American history which passed by almost unnoticed in the mainstream media.  Did you note them?
  3. UK Meteorological Office forecasts are not so good (but their long-range forecasts might be excellent, Anthony Watt, posted at his blog Watts Up with That, 6 September 2008


I.  Peak Oil and the Curse of Cassandra“, Jamais Cascio, 31 July 2005 — This is fascinating nonsense, a myth about Y2k applied to today’s crisis.

But to mention Y2K now, in 2005, tends to generate smirks rather than contemplation. After all, nothing happened, right? Serious people will argue that Y2K was nothing more than a full-employment act for computer programmers, looking to put one over on the ignorant public. Y2K, indeed; where were the plane crashes, train derailments, nuclear power plant meltdowns and ATMs spewing cash we were promised? I suspect that many peak oil followers will react very poorly to my comparison of peak oil and Y2K — clearly I’m trying to say that peak oil is a hoax, right?

Wrong. … Y2K is a lesson in what can happen when sufficiently-motivated people around the world work hard to avert disaster.

*** Like so much analysis even by knowledgeable Americans, it ignores the experiences of the world outside our borders.  Much of the world, esp. in Asia and the emerging nations, ignored Y2K.  Despite their minimal preparations — far less than the massive US efforts — they too experienced minimal disruption.  We spent vast fortunes; they spent little.  Both had similar results.

II. Milestones in American history passing by almost unnoticed in the mainstream media, described in this excerpt from Grant’s Interest Rate Observer, 5 September 2008:

In fact the mortgage market is probably shrinking.  Originations have fallen, and refinancing activity is muted.  And month by month, that hardy bank of homeowners who have not gone broke are faithfully remitting the funds with which to amortize {reduce} their principal balances.  Even longtime practitioners stop and stare, for they have never seen the mortgage market shrink before.

Foreigners watch agog, too, as they are the financiers of the American lifestyle.  The most dependable, most high-margin US export is the dollar bill itself.  Consuming much more than it produces (in every year but one since 1982), this country discharges its debts in dollars.  Conveniently, its trusting creditors are happy to invest those dollars in American securities including the mortgage-backed obligations of the government-sponsored enterprises (GSE’s).

… On July 13, Treasury Secretary Paulson announced a plan to deal the foundering of the GSE’s.  although the plan was mot so much a plan as an expression of intent, Paulson’s intent was clear enough.  What he principally intended was that the GSE crisis not blow up in his face. … Paulson pointed noted that GSE debt “is held by financial institutions around the world,” by which he meant the world’s central banks.

We take these assurances to be ironclad. … Nothing will be allowed to blemish the GSE’s mortgage-backed securities.  The great American dollar-export franchise depends on that.

*** Grant’s describes two milestones that America is passing by:

(1) The inflection point of the post-WWII debt supercycle, as the growth in US household debt — the engine of US prosperity, esp since 1982 — ends, and the great deleveraging cycle begins.

(2)  For the first time since the post-Revolutionary War period (see this history), American domestic policy must reflect the needs of foreign creditors.  And the need to do so will only grow over time, considering the size of our foreign debts and the need not only to roll them forward (we cannot pay without risking inflation) but also seek hundreds of billions in new loans each year.

III. UK Meteorological Office forecasts are not so good (but their long-range forecasts might be excellent:  “UK’s Met Office blows another summer forecast“, Anthony Watt, posted at his blog Watts Up with That, 6 September 2008 — Excerpt:

The UK Met office is the official UK meteorological agency and is one of the leading promoters of the idea of climate change. Their web site is in fact titled ‘Met Office: Weather and climate change.’

He provides a “A Chronology of UK Met Office press releases”, showing that they have a  poor record at short-term forecasting.  However, they remain confident about their long-term forecasts.

Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

3 thoughts on “Weekend reading recommendations – part 3

  1. I would like to briefly comment on item I, especially on FM’s comment: Like so much analysis even by knowledgeable Americans, it ignores the experiences of the world outside our borders. Much of the world, esp. in Asia and the emerging nations, ignored Y2K. Despite their minimal preparations — far less than the massive US efforts — they too experienced minimal disruption. We spent vast fortunes; they spent little. Both had similar results.

    I have a background in the legacy systems that were of the most concern for the Y2K runup (mostly “big iron” mainframes running code written in COBOL, Assembly and the like) and was employed a major financial firm in the late 90’s and early 2000’s.

    The assertion that other countries had minimal preparations, spent far less and had a similar failure rate as the U.S. has a gaping fallacy in its heart. The U.S. was far more reliant on legacy systems most at risk from the two-digit year issue at the root of the “Y2K” problem. The U.S. was an early adopter of computer systems for financial transactions, government recordkeepiing and industrial controls. Other countries built out their IT systems a decade or so later, in an era where memory was becoming cheap and where incorporating a 2-digit-year made little sense, unlike the early 70’s when much of the risky code in the U.S. was written. Their infrastructure was different, a little more robust and thus they had less to worry about.

    The Y2K “problem” is actually a great example of planning and executing to overcome a looming challenge. People started worrying in the early-to-mid-90’s, plans were made, people were hired, the plans were executed and in the end it was successful.

    We spent vast fortunes because we had to. And we forget, those IT systems had helped generate vast fortunes in the meantime…
    Fabius Maximus replies: I do not have time to research this, and it is not within the focus of this site. However, I can provide one example which I believe refutes the Y2K myth. The banking system of most East Asian nations relied on “legacy systems”. Most of them refused to upgrade for Y2K, and spent minimal effort in preparation. They did just find, with only minor problems.

    I believe (but have not confirmed this) that this is also true for many of their corporate and utility systems. I find it difficult to believe the other major nations of the world in 1999 did not rely on computers to run their infrastructure.

  2. I was going to make a comment on item I but i’ll just have to say ditto to MF’s comment and relate a story.
    My father started at Prudential insurance in 1966 as a junior programmer. In 1998 he was hired by a consulting firm as a senior consultant to work on a team to update the same main frame computer system with the same OS he programmed in 1966 at Prudential.
    He told me when he sat in meetings he would tell the younger IT guys where they had to go in the programming to find little pieces of code slotted in unrelated code that had to be modified. They thought he was insane. Until they looked. They could’t comprehend that in 1966 computers had so little capacity every little nook and cranny had to be used, and in none of those nooks and crannies was a 4 digit date ever used. In 1966 no one thought the system would still be operating in 2000.
    Fabius Maximus replies: I too have heard these stories, which were legion in 1999. However this ignores my point. Not all nations binged on tech upgrades in 1999. Many did almost nothing. continuing to rely on their old (sometimes very old) systems. They too did just find in 2000.

    This is not my field, so I could be wrong. However, repeating the myth is not more evidence for the myth.

  3. What it does point out is that simple cultural differences could be the cause of great differences in outcomes rather than some vast drive to create a work project. The computer systems in the US didn’t limit the use of 4 digits. It was an early cultural business decision to save computer capacity, storage tape, punch cards and input labor. The only difference necessary for Asia to have a different out come was for them to decide to use 4 digits. Our mistake was to assume we would replace these systems sooner. In many other places they may have assumed they would not. Or they may find a 2 digit date culturally unacceptable. I agree the analogy to peak oil is silly. By the way if you ask my father he’d tell you in 1966 it was well known it could happen. But the tide ran against changing to a 4 digit format because it would increase immediate business costs. It is a lesson in planning for the future.

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