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Russia Gives Up On Dollar
LondonYank has been running the Dollar Dump series (more links within that last diary) about Central Banks giving up on the dollar, and today we have news of one more:
Russia is ending its de facto dollar peg and moves to align rouble with euro
Russia said yesterday it had abandoned efforts to tie the rouble’s movement closely to the dollar and switched to shadowing both the euro and the US currency.
The move heightened expectations that other countries operating de facto dollar pegs, such as China, could follow suit.
With 81 per cent of Russia’s oil exports currently sold to Europe, the move also provoked fresh speculation that Russia could decide to denominate its oil in euros. Russia is the world’s second-largest oil exporter, behind Saudi Arabia.
If it becomes common wisdom that the dollar can only go down (as it seems is happening now), the temptation to be the first out and limit your losses becomes irresistible; this then becomes a self-fulfilling prophecy (big dollar holders selling means a weakening of the dollar, thus encouraging others to do the same; this can easily turn into a run on the currency).
Alan Greespan still holds some influence on the markets and is now using his credit to fight this trend (he managed to push the dollar up 2 cents with upbeat comments on the twin deficits and the dollar) but this will be an uphill struggle if Central Banks and portfolio managers start reallocating oh-so-slowly but irreversibly their holdings towards less dollars and more euros.
As I’ve written two months ago in this diary, the fundamental problem of the US economy is that it is consuming more than it produces – it thus requires foreign goods and/or foreign savings to quench the insatiable demand for more goods, more stuff, more, more, more… This has been going on for so long that it seems “natural”, but it is now reaching the limits of the trust that the rest of the world has in the word of the US government – especially when that government has been so busy bombing, blaming or bullying everybody else on the planet and has thus significantly drained the credit of the US around the world…
Get ready for the dollar crash is all I can say.
A leftist perspective on the dollar crisis and us. I’ve tried to omit a lot of detail to focus on the main theme but it is all worth a read.
Incredible as it may sound, ever since the late 1950’s, the world economy has been tossing around a “hot potato” of an ever-increasing mass of “nomad dollars” (dollars held outside the U.S.) whose actual conversion into tangible wealth would plunge the world into a deflationary crash….. We are clearly today at another key turning point, and perhaps…..at the long-delayed culmination of the whole story, when that mass of dollars, now grown to gargantuan proportions …..will be deflated, one way or another.
(snip)
A capitalist crisis like the current one resembles a poker game where the table is swept clean and all cards and chips must be redistributed for the game to continue at all. This could happen as an “orderly bankruptcy proceeding” but it will most likely happen…..chaotically, through economic blowout, class confrontation, and war….. What somehow has to happen, from a capitalist point of view, is a serious devaluation of the approximately $11 trillion dollars currently held by foreigners, and a simultaneous adjustment of major currencies to reflect new world economic realities….. This will entail, among other things, a collapse of the huge mortgage bubble and the subsequent bankruptcy of untold millions of families and individuals. The U.S. must figure out a way to balance imports and exports, which…..will above all entail a vast reduction of imports, and hence stringent austerity for American working people.
(snip)
The basic problem of every major crisis in capitalism’s history has been…..that of destroying or deflating a “bubble” of fictitious or speculative claims on wealth (stocks, bonds, property titles) and bringing those claims back into rough correspondence with the “real” rate of profit available in production…..and from “free inputs” available elsewhere (such as the looting of peasant labor and nature).,…..
(snip)
…..The simple fact of the matter is that neither we, nor the vast majority of American working people, are prepared for the depths of the catastrophe now unfolding. The levels of austerity the capitalists will demand have been unknown since the 1930’s…..
Obscure as the above economic dynamic is…..it will be even more obscured by the clear capitalist determination to avoid a “purely economic crisis”, much as Adolf Hitler chose to go to war in 1938 when his Finance Minister, Schacht, told him that the German debt pyramid and war production was on the verge of complete bankruptcy. The…..U.S. strategy….. aims at preventing any serious challenge (economic and military) from coalescing on the Eurasian land mass. Europe, Russia, China, Japan and India must all be kept at loggerheads and on the defensive, and hence incapable of challenging the increasingly obvious bankruptcy of the U.S. dominated system…..The American capitalists understand that their decline requires keeping not only all potential rivals but American working people themselves, permanently off balance. Everything will be done to make the consequences of decades of American decline appear instead as the work of terrorists, or China, or (as in the unbelievable French-bashing in the run-up to the Iraq war) even of Europe.
No less a figure than Warren Buffett has been saying for years that America’s vast, highly paid army of “financial engineers”, media CEOs, lawyers, HMO bureaucrats and myriad others populating the “FIRE” economy is collectively “kicking society in the shins”. There is no lack of “disconnect” between ordinary working people and the spectacle of business-as-usual politics and the media promoting them; our problem is rather to relocate the populist (of the right or of the left) impulse articulated by Buffett, or Nader, or Buchanan, or Tom Frank away from the widely despised “elites” to a truly radical, Marxist analysis of the dynamic of a global system of social relations.
Posted by: lonesomeG | Feb 6 2005 15:04 utc | 30
Actually, by and large the “lack of addresses” problem exists because the addresses in IPv4 were allocated by the people who developed it. For those who are interested, I’m going to explain. Everybody else can just skip this post and read something more relevant to the topic at hand.
An IP address, in IPv4, is a set of four numbers, each of which can range from 0 to 255. These are written with periods between them, like this: 1.2.3.4. If you tinker with your computer’s network settings enough, you will see at least one of these, probably more, but more commonly, these are converted to text. This site, for example, is at http://www.moonofalabama.org, but your computer knows that you are really looking at 66.151.149.10. (At least, as of this writing.)
Although you might expect there to be 4294967296 (256 × 256 × 256 × 256) addresses because of the ranges of the four numbers, there are actually fewer usable addresses, because a certain number of them are unusable by design. The number is still huge, though. So why is there a shortage?
Well, the current system was never intended for public use. (You see side effects of this all the time; the lack of authentication in the original e-mail standards—which lets spammers send messages—is another such side effect.) Since the design was going to be private, the designers only set out to make sure that the institutions creating the design would never run out of addresses, not to make the addresses extensible to the world at large. Engineers do what they are trying to do, which is not always what they really should do. They divided up the addresses into chunks of different (but large) sizes, and assigned these chunks to different groups, reserving some (but not many, compared to the total) for future expansion. Each chunk is known as a subnet.
The largest chunks, relatively speaking, were called Class A subnets. Originally, any IP address whose first number was less than 128 was part of a Class A subnet, and each Class A subnet had over sixteen million addresses. In effect, fully half the possible IP addresses were in Class A subnets, and nearly all (or possibly all—I have forgotten, and things have changed enough that it’s hard to tell now) of the Class A subnets were given away to government and corporate groups that were developing computers: ARPA, IBM, and so on. There were (and are) also Class B subnets (each with about 65000 addresses) and Class C subnets (each with about 250 addresses). Classes D and E are defined, but are not part of the original division.
Each institution was given a subnet for its own, with no requirements for sharing or prudent use. (So, for example, there was no requirement that new machines would be given addresses from the beginning of the list. If you had a Class A subnet, you could have your first machine take number 1 and your second machine take number 1000000.) It became obvious relatively early on that there would not be enough addresses to go around, because those who came early had taken so many addresses—many more than they would ever want or use.
Some institutions with overly-large subnets (like IBM, as I recall) deliberately reworked their networks to remove “bubbles” from the list of addresses, and gave back most of the pool of unused addresses to the public. Some institutions refused. To aid in reclaiming addresses, the concept of a “subnet mask” has evolved—but it would take more time to explain than it’s worth, so just accept that it lets you create a subnet whose size is smaller than that of Class A, but not necessarily that of Class B, C, D, or E.
In order to deal with the problem of the lack of addresses (the number of computers out there on the public Internet exceeds the number of publicly available addresses), a system has evolved where small networks (such as, for example, a small network in the home of a broadband user) use generic, meaningless IP addresses in one of a few ranges which are understood not to stand for anything in the wider scheme of things. When they need to receive or send data to the rest of the world, they go through a single “gateway” address. Unless you do extra work to change this behavior, this usually means that you can connect to the outside world, but the outside world can only connect to your gateway. (The basic concept of a Firewall, in fact.) When you pay for an Internet connection, by and large you are paying for a gateway address.
Internet Service Providers (ISPs—the companies who sell Internet service) like to give out dynamic addresses, not static. A static address has to potentially actually be a “gateway”. You can run services with it, such as a web server, and it will “see” the whole Internet directly. A dynamic address, though, does not—which gives the ISP a number of tools for dealing with you. They can change your address over time, or require you to activate your connection with an identifier code, or even potentially give you a generic address which has a gateway at the ISP, although I haven’t heard of any commercial ISP doing that.
So dynamic addresses are great for the ISP, okay for the casual computer user, but not so hot for computer wonks.
IPv6 uses much longer addresses; instead of being four numbers in a row, an IPv6 address is sixteen numbers in a row. That means that the number of addresses is vast—so much so that you could give every person on earth a set of static addresses as large as a Class A subnet, and still not run out. Since computer wonks (like myself) would rather use static addresses than dynamic ones, the engineers tend to brag about this. (If you are running a server, a static address is not a must, but it makes so many things simpler and faster that it is worth the extra effort. You can make a dynamic address act sort of like a static address, and build a server that works around the problems, but doing so adds a whole layer of things which slow down your connections and can potentially go wrong.)
Privacy advocates, on the other hand, like dynamic addresses, because they are harder to track. If I post a nasty note from a static address, you can find out very easily where it originated (although that may merely be a gateway, or may be a relatively anonymous machine). If I post the same nasty note from a dynamic address, though, you must pass through an extra layer of bureaucracy in the form of my ISP, which may decide to require a warrant or a subpoena before it will give up the information, which is good for privacy. I suspect that this particular conspiracy theory springs from discussion between engineers—who prefer static addresses—and privacy advocates—who either are indifferent to or actively dislike them.
In actual fact, IPv6 will probably drastically increase the number of dynamic addresses in use. One of the major features of IPv6 is that machines using IPv6 can use dynamic addresses without having to get “permission” from a server, which is how dynamic addressing works in IPv4. My suspicion is that most people, not needing static addresses, will take advantage of this capability and run with dynamic addresses at all times. A summary (for the brave) of IPv6 features as they differ from IPv4 can be found at http://www.netbsd.org/Documentation/network/ipv6/#diff_ipv4.
Posted by: Blind Misery | Feb 8 2005 7:23 utc | 67
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