Month: December 2012

Prefiguring the Hacker…and the American Surveillance Society

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Perhaps the first piece of fiction to feature a computer-systems hacker is Poul Anderson’s 1953 story Sam HallPlace and date of birth. Parents. Race. Religion. Educational, military, and civilian service records…The total signal goes out over the wires. Accompanies by a thousand others, it shoots down the last cable and into the sorter unit of Central Records. The distorted molecules in a particular spool show the pattern of Citizen Blank, and this is sent back. It enters the comparison unit, to which the incoming signal corresponding to him has also been shunted. The two are perfectly in phase; nothing wrong. Citizen Blank is staying in the town where, last night, he said he would, so he has not had to file a correction.

Thornberg has certain reservations about the totalitarian regime which is now running America, but he is not actively disloyal. His political awakening begins when Jimmy, the son of his second cousin, is arrested on suspicion of treason, and Thornberg remembers some of the forbidden history which he has read.

The intellectuals had been fretful about the Americanization of Europe, the crumbling of old culture before the mechanized barbarism of soft drinks, hard sells, enormous chrome-plated automobiles (dollar grins, the Danes had called them), chewing gum, plastics…None of them had protested the simultaneous Europeanization of America: bloated government, unlimited armament, official nosiness, censors, secret police, chauvinism…

In order to protect the career of his son Jack, an officer in the regime’s military…as well as his own career…Thornberg decides to alter Matilda’s records and delete any relationship with the arrested Jimmy.

Thornberg toiled at the screens and buttons for an hour, erasing, changing. The job was tough; he had to go back several generations, altering lines of descent. But when he was finished, James Obrenowicz had no kinship whatever to the Thornbergs…He slapped the switch that returned the spool to the memory banks. With this act do I disown thee.

Thornberg’s rising bitterness reminds him of an old English ballad:

My name it is Sam Hall
And I hate you one and all

…and he uses his access to Matilda to create records for a fictional citizen by that name, a tough kid who has held a variety of unskilled jobs. Thornberg initially creates Sam Hall only as an outlet for his anger and to prove to himself that he can do it…but when a probably-innocent man is arrested for murder of a security officer…and Thornberg knows the man will be found guilty, whatever the true facts, in order to protect Security’s reputation for infallibility…he decides to establish a trail of records that will implicate the fictional Sam Hall as the murderer.

This is the beginning of Sam Hall’s career of murder and mayhem, as Thornberg repeatedly alters records to identify his fictional citizen as the author of real crimes across the country. Sam Hall is soon promoted to Public Enemy Number One…and his exploits soon inspire a range of copycat crimes against the government, with the attackers identifying themselves as “Sam Hall.”

The “Sam Hall” meme soon grows into a full-scale rebellion against the government. Thornberg helps things along by using his access to Matilda to spread mutual suspicion among government officials, turning the widespread distrust which is a feature of totalitarian societies against the regime itself.

Eventually, the rebels triumph and the totalitarian regime that is ruling America is overthrown. It seems a happy ending. Thornberg looks forward to destroying Matilda (after she is used one last time on behalf of the rebels “to help us find some people rather badly want” and “to transcribe a lot of information..strictly practical facts”) and to retiring Sam Hall to “whatever Valhalla there is for great characters of fiction.”

The story ends with the following sentence:

Unfortunately the conclusion is rugged. Sam Hall never was satisfied.

I wonder what on earth could possibly have reminded me of this old SF story?

History Friday – The English Visitor

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You cannot hope to bribe or twist (thank God!) the British journalist. But, seeing what the man will do unbribed, there’s no occasion to.

The English visitor, a lawyer and pamphleteer named Nicholas Doran Maillard landed up in Texas early in 1840, when the Republic of Texas had just achieved four years of perilous existence . . . and inadvertently provided the means for an exception to Humbert Wolfe’s stinging epigram. In that year, Texas was perennially cash-broke but land rich, somewhat quarrelsome, and continually scourged by Comanche depredations from the north and west, and the threat of re-occupation by Mexico from the south. Texans had first seen immediate annexation by the United States as their sure and certain refuge. But alas, that slavery was permitted and practiced within Texas – so and annexation was blocked by abolitionists.

Read more

A Couple of Interesting Links

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On-line content for a wide range of magazines, some of them dating back to the 1830s, also some books and videos. Via Rick Darby, who notes that Google Books also has an extensive old-magazine collection.

The Jewish Museum has an extensive collection of medieval Hebrew, Arabic, and Latin manuscripts from the University of Oxford’s Bodleian Libraries. Via Suzanne Fields.

Low Interest Rates and Side Effects

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I was recently at a bank as part of a non-profit (else I rarely step foot in a bank) when I was talking to the banker about setting up a new account and we started discussing the interest rates that each of the potential accounts would receive. After a bit of discussion I said

At these rates, it doesn’t matter

Basically interest rates on savings accounts and non CD accounts are effectively zero unless you have an immense amount of money in that account. For example, the Chase “savings” account offered .01% – which means that if you have $100,000 in the account all year long, you are going to make $100. That is the definition of negligible. Certainly you can shop around a little more and get a higher interest rate, but you aren’t going to get near 1% unless you buy some sort of vehicle with other conditions (i.e. locking up your money for a period of time). The woman at the bank was apologetic but I knew that there was no reason for her to be – it wasn’t her fault that the nation had undergone a massive ZIRP experiment.

One side effect is that banks have now effectively become a vehicle for 1) making transactions 2) providing services. They are no longer really a vehicle for making money (i.e. earning interest, especially compounded interest, that is meaningful over time). Thus your money now is more of a way to avoid charges on those services (free checking, or avoiding low balance charges, or access to certain types of transactions without fees) than a means of making money.

The traditional function of banks is to take your deposits and turn around and “leverage” that money to make loans to others. Since banks can count on not everyone to show up and demand their deposits back on the same day (unless there is a bank run), and they should be able to earn money on the difference between the cost of the money to them (they can borrow at the lowest rates) and what they charge loan customers, this should fund much of their profits.

The newspaper industry is dying because they provided journalism as a service but made their money selling advertising (effectively as a local monopoly for many years). When businesses and individuals stopped buying advertising (hello, Craigslist), the “service” that they provide, journalism, had to pay the bills. As a result this industry has gone into free fall since then.

Banks and many other financial institutions generally do a lot of services but make their money on the spread between what they pay you and what they pay for interest in terms of their cost of money. Then they take that difference and it generally subsidizes everything else. If that difference becomes negligible, then the financial institution has to make money in some other manner, or see their profits wither like the newspaper industry.

With interest rates so low and money washing into their doors, banks should be able to make up for everything on loans. However, everyone is conservative about loaning money right now unless it is secured, and the home equity loan pipeline has mostly dried up since many houses have lost their equity buffer. I don’t have direct experience with this but have heard that it is generally not easy getting a business loan, the type of loan that is riskiest unless it too is essentially secured in some other manner (property, receivables, etc…).

As a customer, if in the medium to longer term, if you assume that interest rates will stay very low, then you have options that you probably wouldn’t have considered otherwise. For one – you may just want to consider taking a portion of your money out of the bank and just convert it into gold in your safety deposit box. The biggest argument against gold historically is that it doesn’t produce a return – it just sits there, and has storage costs to boot. While both items are true, a safe deposit box is cheap to rent each year (mine is about $100) but on top of it keeping your money in a financial institution has transaction costs, as well. You can do the same thing by buying GLD the Gold ETF which may have other advantages with regards to transaction costs and sales taxes.

Another alternative is to purchase foreign currency and put it in your safe deposit box. This traditionally has been a terrible strategy because it earns nothing but in an era of almost zero returns on major currencies around the world the side effects of this strategy are lessening almost by the day.

Since the banks can only make so many loans that are basically secured and there hasn’t been a lot of impetus by them to move into more risky types of business loans, they are basically awash in cash. In some circumstances, they have considered paying negative interest rates for large blocks of cash, and this has happened with short term debt instruments quoted in some markets, as well.

The last part of this is to strip the concept of “compound interest” out of your heads. One of my blogs is for teaching kids about investing and if I was starting this years ago I would have made a big pitch for the advantages of investing your money for long periods of time and watching it grow with the “magic” of compounding interest. It is hard to make this case with interest rates far below 1% unless you have large quantities or buy specific vehicles which take you near 1% and even that is a gigantic time frame to “double” your money. If you assume 1% / year then it takes about 70 years (give or take) to double your money – better than the straight-line model of 100 years but in all cases virtually irrelevant for practical purposes (nice calculator here).

Thus some interesting side effects for me are

1) the lost “opportunity cost” of holding cash in gold is now negligible

2) the lost “opportunity cost” of physically holding non-US currencies is now negligible

3) the margin that financial institutions receive on interest is now very low and they will need to either expand into riskier non-secured loans (which they haven’t done) or start charging for services and transactions (or see their margins crumble)

4) with 3) above and interest rates near zero the real “value” of your money with the bank is in avoiding / minimizing transaction costs and being able to take advantage of better services

5) the concept of “compounding interest” is basically dead on risk-less instruments, and for riskier instruments it is but one component of total return (probably the least essential component)

Cross posted at Trust Funds for Kids