27 February 2006

MAD Petrodollars

The impending ribbon-cutting ceremony for the opening of the Iranian Oil Bourse is receiving scant attention - but should be front and center for every one. If the Bourse opens as anticipated in March 2006, it is likely to shake up the global order significantly.

Here is the background. In 1971, the US took the dollar off of the gold standard, essentially turning currency trading in the dollar into a confidence game. To reassure investors, the US made a (not so secret) deal with Saudi Arabia to insure that Saudi oil would be denominated in dollars; the quid pro quo was a series of security assurances. Ever since then, essentially the entire world has been buying oil on the international market for dollars. For the world at large, this means that they need to find a way to get their hands on US dollars so that they can purchase oil, and in the normal course of events this is accomplished by trading goods for dollars. On the other hand, the US can buy oil with dollars that they print themselves.

As pointed out recently in Z Magazine, this essentially allows the US to purchase oil with fiat money - bills that have value only because the issuing country says they do - as opposed to commodity money, which the rest of the world must use to purchase oil. The interesting and compelling observation is that this situation has allowed the US to run up deficits ($725 billion in 2005!!!) that would be otherwise unsustainable, especially in a world where money can move so easily.

Of course, this is the nub of the matter. So long as oil is denominated in dollars, the US economy retains its ability to dominate. But what happens if this situation changes and oil becomes denominated in another currency, Euros for example? Several people (here and here and here) have speculated that this represents the underlying reason for the invasion of Iraq, and with the looming threat of the Iranian Oil Bourse, tongues are wagging at the relationship between the threat to petrodollars and the level of rhetoric about Iran's nuclear program.

In a world awash in misinformation, it is always difficult to know what is true (and there are contrary views). However, one observation that supports this line of argument is that the US dollar has not cratered in the face of astoundingly poor financial performance. In a sense, the scenario that has developed is analogous to that which arose in the Cold War. All of the players need to keep the US dollar propped up lest their holdings of US dollars lose their value. If countries (Japan and China come to mind) stops buying oil in dollars, the entire house of cards comes crashing down and everyone loses. When the Russians were on the other end of the 'hot line', there was reason to expect that Robert McNamara's notion of Mutually Assured Destruction would stay their hand. It is worth pondering whether the Iranians will be equally prudent.

Beware the ides of March.

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24 February 2006

Relax....

Two recent news items demonstrate just how jumpy we have become. We need to get a collective grip on reality.

First came the news that scientists at the University of Texas Southwestern Medical Centre have successfully developed a vaccine against the potent toxin ricin. The science behind the experiment is elegant, and was appropriately published in the prestigious journal Proceedings of the National Academy of Sciences (subscription required). But wait a minute - there are really only two known instances in which ricin has been used in a way that might warrant concerns. The first was when Bulgarian dissident Georgi Markov was killed after being jabbed with a ricin-filled dart hidden in a KGB agent's umbrella in London in 1978. The second was when two ricin-laced letters were intercepted in 2003 by postal authorities in the USA. One of the letters was addressed to the White House. Given this rather sparse history, the question arises: who is going to take a ricin vaccine?

The second piece of exaggerated news arises from a report released by the National Academy itself. Writing in MIT's technology review, Emily Singer describes the prospect of terrorists 'hijacking your brain' with new generation chemicals. Perhaps disruption is possible, but hijack is just a tad hysterical.

While it is understandable to be vigilant, this level of paranoia is just plain silly. Not only does it demonstrate that otherwise level-headed folks are getting a bit carried away, the noise that it generates has the potential to blind us to real threats which should be judiciously minimized.

Relax.

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17 February 2006

Take a Media Holiday

A well-dressed man in a 3 piece suit walks out his front door with briefcase in hand, kisses his wife and walks purposefully down the pathway apparently leading to the street. One more step and he disappears off a cliff, the camera following him as he plummets down the canyon, a parachute opening just before he lands next to an SUV. The marketing guys sure know how to get your attention. But what really interested me was the disclaimer at the bottom of the screen as the man opens the car door: Professional stunt man. Do not try at home.

Are people really as stupid as the mythical lemmings that follow each other over the cliff? More to the point, are we unable to distinguish between the drivel shown on TV and reality? Sadly, the answer is yes, and, as I have written about previously, the fact that our sense of well-being derives from how we stack up against our peers causes a fair bit of unhappiness. This is particularly the case when our peers are idealized media darlings.

Given how appealing our media-infested world is to our attention-seeking brains, it is hard to imagine this situation improving any time in the near future, at least on a large scale. A personal solution that a wise person offered up some time ago is to take a media holiday from time to time. No TV. No Internet. No Newspapers. I have tried it and can report that not only was I able to survive such deprivations, but remarkably the world continued to revolve on its axis with the same wobbliness as it had before I took my little media holiday. As for me, it seemed to provide excellent fodder for Clear Thinking.

08 February 2006

The quest for truth

The growing reliance on functional magnetic resonance imaging (fMRI) to examine the brain in action is leading, inexorably, to the search for better lie detectors. At least two companies, No Lie MRI and Cephos are developing variants of this technology with several applications in mind.

At issue in all of this, of course, is the accuracy of the tests. Before anyone runs off and gets too excited about this new technology, it would be worth reading at least the abstracts of the academic papers (here and here) upon which the commercial strategies rest. It turns out that using fMRI provides accuracy in the range of 85-90%. Not bad, but hardly foolproof.

Of course, the reason that this is important is because of the famous case of Aldrich Ames, the CIA spy who was convicted for sying for the Ruskies in 1994. Ames succesfully deceived investigators using a polygraph, and has continued to watch the field of lie detection from Allenwood federal penitentiary. He sent a fascinating letter to Steven Aftergood at the Federation of American Scientists that is worth a read (I prefer the handwritten version, but you may wish to see the transcribed version). It seems that in the intelligence business, polygraphs are often used to coerce confessions from people, a conclusion that is hardly surprising given the current climate of paranoia.

The 'yuk factor' derives from the fact that this technology might breach a sanctuary that we all cherish, the privacy of thought. It may be only a minor comfort, but the truth of the matter is that scientists are still a long way off from reading your mind. So rest well.