by Dana Blankenhorn
Volume IX, No. XL

This Week's Clue: George Lindsay

Home | Dana's Bio | Clued-In Archive | Newsletter '05 Archive | | Subscribe!
This Week's Clue: George Lindsay
SSP (Shameless Self Promotion)
Best of the Week
The American Diaspora
ZDNet Open Source
Clued-in, Clueless

Dana Recommends The Blankenhorn Effect offers a powerful, positive message for our time. Once you understand how Moore's Law impacts every part of your life, how powerful it is, and how irresistible a force it truly is, you will have the power to predict the future and know how to change it. Buy it today, and make 2004 a better year for yourself, your business, and your family.


For the Week of October 3, 2005

It's a special responsibility to have a reserve currency.

The honor is not lightly given. History requires liquidity, military power and a reputation for sobriety before it grants the honor. The honor, once lost, can never be reclaimed.

Until the 19th century gold was the world's reserve currency. The British pound became a reserve currency only because it was believed to be tied to gold. Precious metals make good reserves because their supply is fairly fixed. They're difficult to mine and extract. Gold's ability to serve as a reserve currency in this century is being undermined, in part, by new chemical mining techniques which dramatically increase yields.

The American Indians' reserve currency of choice until the 17th century, wampum made from mother-of-pearl, was undermined by the western invention of a machine that let colonists mass produce the stuff.

The lesson is simple. A reserve currency must be supply-constrained. If it can be inflated, if it is over-inflated, it pops and ceases to have value.

The U.S. dollar has been the international reserve currency since 1945. Spending produced liquiity, our armed forces brought us victory, and our central bankers knew to take the punch bowl away when the party got going.

Democrats lost the faith of the world's other central bankers during Vietnam. By spending on both guns and butter we ran what looked like large deficits. The first Nixon budget showed a surplus. Democrats have never recovered that faith. Even the reign of Clinton was accompanied by the conservative Republican Alan Greenspan running our central bank, the Federal Reserve. By the 1990s there was no real alternative to the dollar as a reserve currency.

The result was a form of immunity, felt by the new Administration, concerning history, economics, and what is usually called fiduciary responsibility.

The assumption of immunity from economic rules was also popular in the 1960s, in New York City, which was just ending an unprecedented, debt-fueled spending spree under the leadership of Robert Moses. Most of Moses' debts were secured by tolls to use bridges and tunnels. Moses had also built huge apartment complexes for the poor, supposedly secured by rent, but that rent would no longer be paid by those fated to live in them.

Under Mayor John Lindsay, New York accelerated its borrowings. But while Moses at least borrowed to build, Lindsay borrowed to live. He borrowed so he wouldn't have to face hard choices about the failure of public housing, about the salaries of city workers, about the city's bloated bureaucracy and its various neighborhood feifdoms.

Lindsay escaped office without paying these bills but his successor, a small Jewish accountant named Abe Beame, who had long warned of the policy's stupidity, was left holding the bag. When he sought one more bailout from the federal government, President Gerald Ford refused (at first) leading to the famous headline "Ford to City: Drop Dead."

The fondest hope of George Bush is to escape office before his bills come due, to leave them to his own Abe Beame.

He won't.

For one thing, the people holding these bills aren't as nice as Gerald Ford. They're Chinese.

We've been given grace on our bills because China has its own problems. Its system is like a pressure cooker, with the fire turned high. The only way to release steam is through spending, both public and private. The IOUs we've been sending from our Wal-Mart shoppers are already being spent, on Space, on the Olympics, and on paying-off millions of officials, major and minor, in order to keep their own social ponzi scheme going.

The reckoning for both systems is coming quickly, but more quickly for us than for them. Most analysts fear that diplomacy may fail. I'm more worried that we're now borrowing more than China can absorb.

What happens when a system over-borrows is called inflation. Too many new dollars chase the world's goods, and people look for alternatives to keep their own money safe. The Euro is one alternative and Euros are now worth nearly $1.30. The British pound is another and it's now worth nearly $2. Gold is a third and it is now worth over $450 the ounce.

In the Chinese Century I posited the idea that the Chinese Yuan could become another reserve currency. China has only now taken the first steps toward this role, allowing the currency to trade in slightly wider bands. As it finds the Yuan trading to the high side of this band (fewer yuan for the dollar) the band will be expanded, gradually. Once the bands are gone, traders will be truly free to choose holdings in yuan or dollars.

The market, in other words, will then get the chance to decide the fate of George W. Bush. His fate, and ours, will be in the hands of experienced currency speculators, men like George Soros, who either do not wish us well or who don't care one way or the other about us. (You choose.)

When they choose yuan, China has us by the short hairs. They have the immunity to disaster the Bushistas now claim for themselves. With our heads in the noose, China will then control us, utterly. It won't matter whom we elect, not at all.

The holders of the new reserve currency will be able to demand we reduce our military spending, and retreat from their "sphere of influence." They can start pricing oil in their currency, not ours. Their middle class can grow in wealth, while ours decreases, in both wealth and number. Our freedom of action disappears, across the board.

A possible 2007 headline. Beijing to U.S.: Drop dead.

The title of this piece combined the names of John Lindsay and George W. Bush. The result, George Lindsay, is the name of the actor who played Goober on The Andy Griffith Show (and its successors). He was the town rube, the auto mechanic who would roll his eyes and shout "Golll-eeee" whenever the show needed a cheap laugh.

It fits, but if you're an American, or your kids are, then they and you will be Goober, from the moment China chooses to make you Goober. (Or if the markets beat them to it, as they are doing right now. I can assure you the result won't be funny.


Shameless Self-Promotion

I've got a new job. I'm now editor of Atlanta, a Web start-up aimed at building a community Web platform with a real business model. I'm also all alone in writing the Open Source Blog for ZDNet. (When this started there were three of us.)

My last non-fiction book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards. Write me for a PDF copy of my latest novel, "Baptists are for Dunking."

On my Mooreslore blog I've written a new novel, "The Chinese Century." It's a story told in real-time, with real characters, but entirely fictional, dealing with the consequences of the falling dollar. I'm beginning a sequal, "American Diaspora," exploring the themes of the first book but with more fictional characters. It's a true alternate history, but set in the present day.

You are encouraged to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...


Best of the Week

The Source of the Times' Strategy


Wrong Number, It Must Be 2005

There was just one problem.

What? I'm Retirement Age?

The retiree in this case is Jim Allchin (right), who has been the Windows guru there for years. What struck me was his age, 53. I'm going to be 51 in January. And I'm launching a start-up.

Apple Claims iTunes Fix

Apple has released iTunes 5.0.1, which it says fixes problems found on iTunes 5.0.

Who Will Audit the Red Cross?

The Red Cross was fiercely criticized for its reaction to 9-11. The criticism was bipartisan.

Google Flattens the World

Google isn't aiming at Microsoft, or at IBM. It's aiming at the entire computing-telecommunications complex, building out what I'll call the Google TeleComputing Environment.

The Internet as Shopping Mall

Americans are finally following the rest of the world toward the controlled interface of the cellular phone.

Gittin While the Gittin's Good

Naturally they call it "pro-competitive," but in the Orwellian Washington of today those with a Clue should never listen to what they say but look at what they do.

Rice Wins Again!

No, not on the football field, silly.


The American Diaspora

Table of Contents

ZDNet Open Source

Government's Role in Open Source

Are the Final Open Source Skeptics Coming Around?

Linux and Patch Management?

Two Ways of Pushing Linux Internationally

Linux Mark Institute Fights On

Make Open Source Compatible With Content


Clued-in, Clueless

Clued-in is how ESPN made itself into a paid site.

Clueless is how the New York Times tried to copy it.


A-Clue.Com is a free email publication, registered with the U.S. Copyright Office as number TXu 888-819. We're on the Web at

Home | Dana's Bio | Clued-In Archive | Newsletter '02 Archive | | Subscribe!