Post Office, Telegraph, Telephone, Cell Phones, Texting, Technology, Productivity, Savings, Investment, Japan Inc. and Eurozone Crisis

Posted by PITHOCRATES - August 13th, 2013

History 101

(Originally published August 28th, 2012)

Ben Franklin’s Post Office struggles to Stay Relevant in a World where Technology offers a Better Alternative

Once upon a time people stayed in touch with each other by mailing letters to each other.  Benjamin Franklin helped make this possible when he was America’s first Postmaster General of the United States.  And it’s in large part due to his Post Office that the American Revolutionary War became a united stand against Great Britain.  As news of what happened in Massachusetts spread throughout the colonies via Franklin’s Post Office.

In America Samuel Morse created a faster way to communicate.  (While others created this technology independently elsewhere.)  Through ‘dots’ and ‘dashes’ sent over a telegraph wire.  Speeding up communications from days to seconds.  It was fast.  But you needed people who understood Morse code.  Those dots and dashes that represented letters.  At both ends of that telegraph wire.  So the telegraph was a bit too complicated for the family home.  Who still relied on the Post Office to stay in touch

Then along came a guy by the name of Alexander Graham Bell.  Who gave us a telephone in the house.  Which gave people the speed of the telegraph.  But with the simplicity of having a conversation.  Bringing many a teenage girl into the kitchen in the evenings to talk to her friends.  Until she got her own telephone in her bedroom.  Then came cell phones.  Email.  Smartphones.  And Texting.   Communication had become so instantaneous today that no one writes letters anymore.  And Ben Franklin’s Post Office struggles to stay relevant in a world where technology offers a better alternative.

As Keynesian Monetary Policy played a Larger Role in Japan Personal Savings Fell

These technological advances happened because people saved money that allowed entrepreneurs, investors and businesses to borrow it.  They borrowed money and invested it into their businesses.  To bring their ideas to the market place.  And the more they invested the more they advanced technology.  Allowing them to create more incredible things.  And to make them more efficiently.  Thus giving us a variety of new things at low prices.  Thanks to innovation.  Risk-taking entrepreneurs.  And people’s savings.  Which give us an advanced economy.  High productivity.  And growing GDP.

Following World War II Japan rebuilt her industry and became an advanced economy.  As the U.S. auto industry faltered during the Seventies they left the door open for Japan.  Who entered.  In a big way.  They built cars so well that one day they would sell more of them than General Motors.  Which is incredible considering the B-29 bomber.  That laid waste to Japanese industry during World War II.  So how did they recover so fast?  A high savings rate.  During the Seventies the Japanese people saved over 15% of their income with it peaking in the mid-Seventies close to 25%.

This high savings rate provided enormous amounts of investment capital.  Which the Japanese used not only to rebuild their industry but to increase their productivity.  Producing one of the world’s greatest export economies.  The ‘Made in Japan’ label became increasingly common in the United States.  And the world.  Their economic clot grew in the Eighties.  They began buying U.S. properties.  Americans feared they would one day become a wholly owned subsidiary of some Japanese corporation.  Then government intervened.  With their Keynesian economics.  This booming economic juggernaut became Japan Inc.  But as Keynesian monetary policy played a larger role personal savings fell.  During the Eighties they fell below 15%.  And they would continue to fall.  As did her economic activity.  When monetary credit replaced personal savings for investment capital it only created large asset bubbles.  Which popped in the Nineties.  Giving the Japanese their Lost Decade.  A painful deflationary decade as asset prices returned to market prices.

Because the Germans have been so Responsible in their Economic Policies only they can Save the Eurozone

As the world reels from the fallout of the Great Recession the US, UK and Japan share a lot in common.  Depressed economies.  Deficit spending.  High debt.  And a low savings rate.  Two countries in the European Union suffer similar economic problems.  With one notable exception.  They have a higher savings rate.  Those two countries are France and Germany.  Two of the strongest countries in the Eurozone.  And the two that are expected to bail out the Eurozone.

Savings Rate

While the French and the Germans are saving their money the Japanese have lost their way when it comes to saving.  Their savings rate plummeted following their Lost Decade.  As Keynesian economics sat in the driver seat.  Replacing personal savings with cheap state credit.  Much like it has in the US and the UK.  Nations with weak economies and low savings rates.  While the French and the Germans are keeping the Euro alive.  Especially the Germans.  Who are much less Keynesian in their economics.  And prefer a more Benjamin Franklin frugality when it comes to cheap state credit.  As well as state spending.  Who are trying to impose some austerity on the spendthrifts in the Eurozone.  Which the spendthrifts resent.  But they need money.  And the most responsible country in the Eurozone has it.  And there is a reason they have it.  Because their economic policies have been proven to be the best policies.

And others agree.  In fact there are some who want the German taxpayer to save the Euro by taking on the debt of the more irresponsible members in the Eurozone.  Because they have been so responsible in their economic policies they’re the only ones who can.  But if the Germans are the strongest economy shouldn’t others adopt their policies?  Instead of Germany enabling further irresponsible government spending by transferring the debt of the spendthrifts to the German taxpayer?  I think the German taxpayer would agree.  As would Benjamin Franklin.  Who said, “Industry, Perseverance, & Frugality, make Fortune yield.”  Which worked in early America.  In Japan before Japan Inc.  And is currently working in Germany.  It’s only when state spending becomes less frugal that states have sovereign debt crises.  Or subprime mortgage crisis.  Or Lost Decades.

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Post Office, Telegraph, Telephone, Cell Phones, Texting, Technology, Productivity, Savings, Investment, Japan Inc. and Eurozone Crisis

Posted by PITHOCRATES - August 28th, 2012

History 101

Ben Franklin’s Post Office struggles to Stay Relevant in a World where Technology offers a Better Alternative

Once upon a time people stayed in touch with each other by mailing letters to each other.  Benjamin Franklin helped make this possible when he was America’s first Postmaster General of the United States.  And it’s in large part due to his Post Office that the American Revolutionary War became a united stand against Great Britain.  As news of what happened in Massachusetts spread throughout the colonies via Franklin’s Post Office.

In America Samuel Morse created a faster way to communicate.  (While others created this technology independently elsewhere.)  Through ‘dots’ and ‘dashes’ sent over a telegraph wire.  Speeding up communications from days to seconds.  It was fast.  But you needed people who understood Morse code.  Those dots and dashes that represented letters.  At both ends of that telegraph wire.  So the telegraph was a bit too complicated for the family home.  Who still relied on the Post Office to stay in touch

Then along came a guy by the name of Alexander Graham Bell.  Who gave us a telephone in the house.  Which gave people the speed of the telegraph.  But with the simplicity of having a conversation.  Bringing many a teenage girl into the kitchen in the evenings to talk to her friends.  Until she got her own telephone in her bedroom.  Then came cell phones.  Email.  Smartphones.  And Texting.   Communication had become so instantaneous today that no one writes letters anymore.  And Ben Franklin’s Post Office struggles to stay relevant in a world where technology offers a better alternative.

As Keynesian Monetary Policy played a Larger Role in Japan Personal Savings Fell

These technological advances happened because people saved money that allowed entrepreneurs, investors and businesses to borrow it.  They borrowed money and invested it into their businesses.  To bring their ideas to the market place.  And the more they invested the more they advanced technology.  Allowing them to create more incredible things.  And to make them more efficiently.  Thus giving us a variety of new things at low prices.  Thanks to innovation.  Risk-taking entrepreneurs.  And people’s savings.  Which give us an advanced economy.  High productivity.  And growing GDP.

Following World War II Japan rebuilt her industry and became an advanced economy.  As the U.S. auto industry faltered during the Seventies they left the door open for Japan.  Who entered.  In a big way.  They built cars so well that one day they would sell more of them than General Motors.  Which is incredible considering the B-29 bomber.  That laid waste to Japanese industry during World War II.  So how did they recover so fast?  A high savings rate.  During the Seventies the Japanese people saved over 15% of their income with it peaking in the mid-Seventies close to 25%.

This high savings rate provided enormous amounts of investment capital.  Which the Japanese used not only to rebuild their industry but to increase their productivity.  Producing one of the world’s greatest export economies.  The ‘Made in Japan’ label became increasingly common in the United States.  And the world.  Their economic clot grew in the Eighties.  They began buying U.S. properties.  Americans feared they would one day become a wholly owned subsidiary of some Japanese corporation.  Then government intervened.  With their Keynesian economics.  This booming economic juggernaut became Japan Inc.  But as Keynesian monetary policy played a larger role personal savings fell.  During the Eighties they fell below 15%.  And they would continue to fall.  As did her economic activity.  When monetary credit replaced personal savings for investment capital it only created large asset bubbles.  Which popped in the Nineties.  Giving the Japanese their Lost Decade.  A painful deflationary decade as asset prices returned to market prices.

Because the Germans have been so Responsible in their Economic Policies only they can Save the Eurozone

As the world reels from the fallout of the Great Recession the US, UK and Japan share a lot in common.  Depressed economies.  Deficit spending.  High debt.  And a low savings rate.  Two countries in the European Union suffer similar economic problems.  With one notable exception.  They have a higher savings rate.  Those two countries are France and Germany.  Two of the strongest countries in the Eurozone.  And the two that are expected to bail out the Eurozone.

While the French and the Germans are saving their money the Japanese have lost their way when it comes to saving.  Their savings rate plummeted following their Lost Decade.  As Keynesian economics sat in the driver seat.  Replacing personal savings with cheap state credit.  Much like it has in the US and the UK.  Nations with weak economies and low savings rates.  While the French and the Germans are keeping the Euro alive.  Especially the Germans.  Who are much less Keynesian in their economics.  And prefer a more Benjamin Franklin frugality when it comes to cheap state credit.  As well as state spending.  Who are trying to impose some austerity on the spendthrifts in the Eurozone.  Which the spendthrifts resent.  But they need money.  And the most responsible country in the Eurozone has it.  And there is a reason they have it.  Because their economic policies have been proven to be the best policies.

And others agree.  In fact there are some who want the German taxpayer to save the Euro by taking on the debt of the more irresponsible members in the Eurozone.  Because they have been so responsible in their economic policies they’re the only ones who can.  But if the Germans are the strongest economy shouldn’t others adopt their policies?  Instead of Germany enabling further irresponsible government spending by transferring the debt of the spendthrifts to the German taxpayer?  I think the German taxpayer would agree.  As would Benjamin Franklin.  Who said, “Industry, Perseverance, & Frugality, make Fortune yield.”  Which worked in early America.  In Japan before Japan Inc.  And is currently working in Germany.  It’s only when state spending becomes less frugal that states have sovereign debt crises.  Or subprime mortgage crisis.  Or Lost Decades.

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Morse Code, Telegraph, Binary System, Bit, Byte, Bitstream, Dialup Modems, Broadband, Cable Modem and Coaxial Cable

Posted by PITHOCRATES - August 8th, 2012

Technology 101

One of the First Improvements in Communication Speed was Morse Code sent on a Telegraph

The Battle of New Orleans (1815) was a great American victory over the British.  General Andrew Jackson with a force of about 4,000 repulsed a British force of some 11,000.  It was a huge American win.  The biggest in the war.  And a humiliating British defeat.  Now here’s an interesting side note about that battle.  The war was already over.  We had already signed a peace treaty with the British.  And were already repairing that special relationship between the United States and Britain.  So why was there even a Battle of New Orleans?  Because there was no Internet, television, radio or telegraph back then.  There was only ink and paper.  And foot, horse and boat.  Making communications slow.  Very, very slow.

The American Civil War, like the Crimean War, was a war where the technology was ahead of the tactics.  Four years of fighting with modern weapons using Napoleon tactics killed over half a million Americans by 1865.  After General Grant flushed General Lee from the Petersburg defenses he chased him as Lee fled west.  With General Sheridan’s cavalry in hot pursuit.  Cutting in front of Lee’s army to bring on the Battle of Sayler’s Creek.  Where the Confederates suffered a crippling defeat.  General Sheridan telegraphed General Grant, “If the thing is pressed, I think that Lee will surrender.”  President Lincoln was monitoring the military wires in Washington.  When he read Sheridan’s message he quickly sent a wire to General Grant.  “Let the thing be pressed.”  Grant pressed the thing.  And Lee surrendered at Appomattox Courthouse.

In 50 years time communications went from taking weeks.  To taking as little as minutes. The benefit of faster communications?  At the Battle of New Orleans approximately 2,792 people were killed, wounded or went missing.  In a battle fought after the war was over.  Only word hadn’t gotten to them yet.  So fast communications are a good thing.  And can prevent bad things from happening.  And one of the first improvements in communication speed was Morse code sent on a telegraph.  A wire between two places.  With a key switch and an electromechanical device at each end.  When an operator tapped the switch closed an electrical current went down the wire to the electromechanical device at the other end of the wire, inducing a current in it that opened and closed a device that replicated the keying at the other end.  Thus they could send a series of ‘dots and dashes’ through this wire.  The operator encoded the message at one end by assigning a series of dots and/or dashes for each letter.  The operator at the other end then decoded these dots and dashes back into the original message.

Getting Outside Information into your Computer was a little like Getting Information over a Telegraph

Morse code is a binary system.  Just like the ‘bits’ in a computer system.  Where each bit was one of two voltage levels.  Represented by 1s and 0s.  Eight bits make a byte.  Like the telegraph operator a man-machine interface encodes information into a series of bits.  The computer bus, registers and microprocessor ‘grab’ bytes of this bitstream at a time.  And then processes these bits in parallel blocks of bytes.  Unlike the telegraph where the encoded message went serially down the wire.  The telegraph greatly increased the speed of communications.  But a telegraph operator could only encode and send one letter of a word at a time.  So he couldn’t send many letters (or pulses) per second.  Just a few.  But when you encode this information into 8-bit chunks you can greatly increase the speed data moves inside a computer.  As computer speeds grew so did their bus size.  From 8 bit to 16 bit (2 bytes).  From 16 bit to 32 bit (4 bytes).  From 32 bit to 64 bit (8 bytes).  As a computer processed more bytes of data at a time in parallel computers could increase the speed it completed tasks.

Of course, people who were most interested in faster computers were gamers.  Who played games with a lot of video and sound information encoded in them.  The faster the computer could process this information the better the graphics and sound were.  Today computers are pretty darn fast.  They can run some of the most demanding programs from 3-D gaming to computer-aided design (CAD).  But then a new technology came out that made people interested by what was happening outside of their computer.  And how fast their computer was didn’t matter as much anymore.  Because getting that outside information into your computer was a little like getting information over a telegraph.  It came in serially.  Over a wire.  Through a modem that attached a computer to the Internet.  And the World Wide Web.  Where there was a whole lot of interesting stuff.  But to see it and hear it you had to get it inside your computer first.  And the weak link in all your web surfing was the speed of your modem.

A modem is modulator-demodulator.  Hence modem.  And it worked similar to the telegraph.  There was a wire between two locations.  Typically a telephone line.  At each end of this wire was a modem.  The wire terminated into each modem.  Each modem was connected to a computer.  One computer would feed a bitstream to its modem.  The modem would encode the 1s and 0s in that bitstream.  And modulate it onto a carrier frequency.  The modem would output this onto the telephone line.  Where it traveled to the other modem.  The other modem then demodulated the carrier frequency.  Decoded the 1s and 0s and recreated the bitstream.  And fed it into the other computer.  Where the computer grabbed bytes of the bitstream and processed it.

The Coaxial Cable of Broadband could Carry a wider Range of Frequencies than the Twisted Pairs of Telephone Wire

The speed at which all of this happened depended on your modem.  Specifically your modem.  The other modem you connected to was typically on a web server and was of the highest speed.  And on all of the time.  Unlike the early dialup modems we used in the Nineties when we first started surfing the web.  Back then surfing could be expensive as you often paid for that time as if you were on the telephone.  This was the other weak link in surfing.  Trying to make that telephone line as short as possible.  Because that was what you paid for.  The use of the telephone line.  Once you got onto the Internet you could travel anywhere at no additional cost.  So you dialed in to an available local number.  Which sometimes could take awhile.  And when you finally did dial-up on a local line but went inactive for a period of time it disconnected you.  Because others were looking for an available local phone line, too.

The first modem speeds many of us used at the beginning were 2400 bits per second (bps).  Which was a lot faster than the few bits per second of a telegraph operator.  And okay for sending email.  But it was painfully slow for graphics and sound.  And then the improvements in speed came.  And they came quickly.  4800 bps.  9600 bps.  14400 (14.4k) bps.  28800 (28.8k) bps.  33600 (33.6k) bps.  And then the last of the dialup modems.  56000 (56k) bps.  Which meant you could download up to 56,000 bits per second of 1s and 0s.  That’s 56,000 pieces of information coming out of that modem each second.  Now that was fast.  Still slower than what happened inside the computer with those wide parallel buses.  That chomped off huge bytes of data.  And processed them at rates in excess of a billion times a second.  But it was still the fastest thing on the block.  Until broadband arrived.

Today you can buy a broadband cable modem for less than $100 that can download at speeds in excess of 100,000,000 bits per second.  That’s over 100 million pieces of information each second.  It is only data rates like this that let you live stream a movie off the Internet.  Something that the 56k modem just wouldn’t do for you.  And it’s always on.  Costing you a flat fee no matter how long you spend surfing the web.  You turned on your computer and you were connected to the Internet.  What allowed those greater speeds?  The wire.  The coaxial cable of broadband could carry a wider range of frequencies than the twisted pairs of the telephone wire.  Providing a greater bandwidth.  Which could carry more encoded information between modems.  Allowing you to download music and videos quicker than it took a telegraph operator to send a message.

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