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@CloudExpo: Opinion

Can Cloud Computing Save Us from the Fed?

Our Leaders Don't Know Jack about IT; Apparently Not About Economics, Either

As I wrote recently, our political and entertainment leaders have, in essence, no clue about technology. They'll know what a Blackberry is and what iApple devices are, and one or two of them may have even successfully set up an email account on their laptop. But it's not their core competency; I've always imagined that the late Sen. Ted Stevens was among the more savvy members of Congress, and I continue to view Larry Ellison's appearance on Oprah as the strangest pairing since Richard Nixon and Elvis.

Oh, it's neat that the federal government has an official CIO, Vivek Kundra, and that he has been tasked with spending at least a little money on Cloud experimentation.

Another point of light was provided by a recent CTO Forum held in Washington that featured Sens. Mark Warner and Susan Collins, two of the more enlightened members of the august body. But even they felt compelled to focus on cybersecurity, cybersecurity, and cybersecurity--in other words, on what people can do to Cloud Computing rather than what Cloud Computing can do for people.

A Little Help!
But generally speaking, we need to help these folks see the light when it comes to IT.

And apparently, we also need to help them see the light when it comes to economics.

I am speaking here of "QE2," or quantitative easing, a recent effort by the Federal Reserve Bank to, in essence, print up $600 billion in new money, apparently just because it can. (Print that out in $100 bills, lay them end-to-end, and they would stretch to the moon and back, then take four laps around the Earth for good measure.)

The Fed already did this sort of thing last year (thus, the "2" in QE2). The idea is to drive interest rates down so that folks can just borrow all sorts of money to buy things (like houses and cars) again, and so companies can borrow all sorts of money to invest in all the stuff that folks will buy.

Crock is the Nicest Word I Can Find
This idea is, simply, a crock.

Americans are now "deleveraging," ie, trying to get rid of their credit card debt, as fast as they can. The last thing they want is more debt. And even if they wanted to buy a new house, banks won't lend to most of them. The banks do have millions of foreclosed properties on their hands, but clearly don't want to sell those houses until the cavalry (the Feds) comes riding in again and take all of those crappy, toxic home loans off their hands. No fault of theirs, in their opinion, that they've been supremely hurried, arrogant, and incompetent in amassing said foreclosures.

Meanwhile, businesses are sitting on an estimated $1 trillion in cash, not wishing to invest to produce something that they know they can't sell.

This is what will transpire: the increased, unwanted cash will just weaken the dollar further and give no one an incentive to invest in the American economy. Oh sure, there will always be currency speculators around the edges who will try to make a quick buck by buying up weak dollars when they things have bottomed out, but this is a fool's game.

History will probably prove the Fed right about its first round of QE. Credit markets were iced over, frozen solid. But no more. The second round is a big, big mistake. Nobody's going to invest seriously in the US economy until its leaders show some confidence. Raising rates would be the precise type of chutzpah that's needed. Traveling to India to beg for business would not be what's needed.

Should the Fed suddenly decide to do what appears to it as the contrary thing, ie, start to raise interest rates, it will signal a stronger and more confident America. This is what the world needs. It is pathetic now that the Obama administration is counting on a weak dollar to make American products and services cheaper, so that people in places like China, India, Brazil, and Indonesia will buy them.

Well, It Didn't Happen Overnight
But what does the US export? Not much, despite protestations that's it's still a leading producer of valued goods and services. Get away from planes and weapons, food, entertainment, and travel, and what do you have?

Software and iPads, to be sure, but how price-sensitive are they? How can software that's stolen be price-sensitive anyway? And trust me, from what I've seen in the developing world, people are forgoing food and clothes to get their hands on the latest Apple gadgets. I'm not commenting on whether this is a good thing or a bad thing, but price is not the main issue.

So, what is price sensitive? Boeing 747s? Missiles and satellites? List price isn't the key part of the deal with these things.

Will people from Europe or Asia put off that vacation to the US if it suddenly becomes a little more expensive? I don't think so. Will they stop watching the latest Hollywood chick flicks and action adventures because the price goes up 25 cents? (Note: you can buy a ticket to see an American for $2 to $3 in many developing countries.)

Will a stronger dollar hurt food exports, another big area for the US? Hmm, since price subsidies already make this a problematic issue, I'm going to say no.

Time to Wake Up!
In addition to believing in the fantasy that a weaker dollar will spur an increase in US exports and restore the US economy to its glory days, the Obama administration is also seemingly unaware of the tremendous ill will it is generating worldwide. It can blame China's tradition of currency manipulation all it wants; what people see, from the street-level view to the highest levels of government, are alarming increases in the value of their local currencies.

This trend that does, in fact, have the potential of killing off economic progress in developing nations. Leaders from South Africa, Brazil, and throughout Southeast Asia are very, very concerned about this. The potential damage is also of high concern to resource-rich nations such as Australia, Canada, South Africa (again), and Russia.

Cloud Computing productivity is, as I've written many times before and will write again, the key to restoring the global economy on a sound footing. But even its wonders will not be able to trump disastrous moves like the one the Fed, with the full support of the Obama administration, is making now.

The Fed, by adding even more cash into an economy that doesn't want it in this form, is doing the exact opposite of what it should be doing. Its leaders are acting like confused pilots who pull on the yoke when the plane stalls, instead of pushing it so that the plane picks up speed and regains power. Stop pulling on that lever, Ben!

More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.

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