the tech meltdown continues, there is more to this story than the
spectacular collapse of the tech-laden NASDAQ stock index. Indeed,
manufacturers of computer and telecommunications equipment have
posted terrible financial results as have many wireless telecommunications
companies. As Greg Ip wrote in his August 20, 2001 page 1 Wall
Street Journal article ("A year Into Slowdown, Economy's
Last Pillars Show Signs of Stress"), even commercial real estate
developers are being stung right across the street from my office
in downtown Bellevue, WA (more on this later). How could so many
intelligent businessmen make such huge errors in such a compressed
timeframe? One answer has to do with the hyperreality created by
the three-way collision of our left-leaning educational establishment,
the internet, and inflationist Federal Reserve policy. From this
collision emerged "Homo Digitus": the new cyber-man who
had to be wired twenty-four hours a day, seven days a week. The
following is a brief story of this mythical man and his monument
to malinvestment in Bellevue, WA (the Bellevue Technology Tower).
reading Murray Rothbard's wonderful book Education,
Free & Compulsory, it became all the more clear to me
how thoroughly left-wing and pro central government the teaching
profession has become. Heck, in public school, I was "taught"
that FDR personally rescued our country from the ravages of the
capitalist-induced depression. Additionally, my teachers "taught"
me how to become a good environmentalist through having us parrot
Woodsy the Owl's wise words of "give a hoot don't pollute".
In looking back at my public-school education, I have no doubt that
I was being indoctrinated to become a good citizen. If this sounds
implausible, Murray Rothbard's aforementioned book contains a wonderful
quote from the great philosopher Herbert Spencer (as follows):
what is meant by saying that a government ought to educate the
people? Why should people be educated? What is education for?
Clearly, to fit the people for social life — to make them good
citizens. And who is to say what are good citizens? The government:
there is no other judge. And who is to say how these good citizens
may be made? The government: there is no other judge. Hence
the proposition is convertible into this — a government ought
to mold children into good citizens…It must first form
for itself a definite conception of a pattern citizen; and,
having done this, must elaborate such system of discipline as
seems best calculated to produce citizens after that pattern.
This system of discipline it is bound to enforce to the uttermost.
For if it does otherwise, it allows men to become different
from what in its judgment they should become, and therefore
fails in that duty it is charged to fulfill.
this being said, it is important to understand that there is a general
belief that mankind is moldable and can be transformed. This subtly
Maoist mindset permeates the teaching profession. Indeed, it even
appears that this mindset permeated high-tech companies throughout
an accident of history, the internet emerged and was gaining widespread
popularity just at the same time the Federal Reserve was inflating
the money supply in dramatic fashion (in the late 1990s). In particular,
the Federal Reserve inflated the money stock after the Long Term
Capital Management debacle (in 1998) and then again (in 1999) in
anticipation of a Y2K disaster. As a result of this loose-money
policy (by the Federal Reserve), banks, venture capitalists, and
many individual investors were awash in cash and, thus, willing
to fund any scheme involving the internet. Internet IPOs were abound
and internet stock valuations were heading to the moon. Not much
longer after the rate of increase in the money stock peaked in 1999
(as measured by MZM, M2, and M3) the NASDAQ peaked in March of 2000.
In August of 2000, construction of the Bellevue Technology Tower
began in earnest.
investors awash in cash (thanks to the Federal Reserve), a hyperreality
emerged in which the internet was credited with playing the central
role in the seemingly effortless creation of wealth (i.e. via surreally
high valuations for internet and related tech stocks). Undoubtedly,
a new hyperreal man had emerged in which virtually any information
could be transformed into money. The true believers, in this alchemy
of the internet, believed they had transformed into a new man (Homo
Digitus) fit for the wonders of wealthy cyber-living.
others to follow, and to be transformed, it would be necessary for
the masses (and for high-tech corporate leaders) to share the vision
of an internet-transformed cyber life. If teachers can mold students
into good citizens, then why can't a person mold himself into Homo
Digitus? With the help of Palm Pilots, powerful PCs, and internet
accessible cell phones, "information" could be turned
into money (especially through day trading on the stock market).
With a fury, high-tech corporate America responded by producing
a myriad of electronic gizmos and by placing millions of miles of
fiber optic cable underground. High-tech corporate America's response
reflected a faith in man's ability to transform.
natural response, to markedly increased business activity, is to
construct new buildings to house new companies. Here in downtown
Bellevue, WA, three notable construction projects began last year:
The Summit project ($100 million range), Lincoln Square ($350 million),
and Bellevue Technology Tower ($118 million). In particular, the
Bellevue Technology Tower was designed to house the companies of
the future. Homo Digitus could come to work in a high-tech building
with such features as:
space for transformers and associated switchgear
space for back-up generators
conduit entries and cable risers
radio rooms for satellite electronics
Bellevue Technology Tower was to be a glorious new building fit
for our new cyber-world.
Greg Ip wrote in his Wall Street Journal article, the Bellevue
Technology Tower project has been halted "…with only the parking
garage completed…" Mr. Ip's view is that this ill-fated construction
project was a victim of the dot.com/high-tech crash. Naturally,
the article implies that this project may be resurrected if the
Federal Reserve's interest rate cuts perform their magic (perhaps
the Fed's .25% rate cut on August 21, 2001 will be enough to get
the Bellevue Technology Tower project going again?).
is a better explanation as to what happened to the Bellevue Technology
Tower. It ties together the Fed, the internet, and the illusion
that humans are moldable as plastic. The Federal Reserve's aforementioned
easy-money policy made it appear that money could be plucked effortlessly
from cyberspace. After all, the Federal Reserve does create money
out of thin air. This money creation lead to a Fed-induced mania
revolving around the internet and its promise to transform mankind.
Dr. Paul A. Cantor does an excellent job of describing the connection
between hyperreality (mania) and the Federal Reserve.
modernity is characterized by a loss of sense of the real, this
fact is connected to what has happened to money in the twentieth
century. Everything threatens to become unreal once money ceases
to be real…That fact is ultimately to be traced to the biggest
counterfeiter of them all — the government and its printing press…
Inflation is that moment when as a result of government action
the distinction between real money and fake money begins to dissolve.
That is why inflation has such a corrosive effect on society.
Money is one of the primary measures of value in any society,
perhaps the primary one, the principal repository of value.
As such, money is a central source of stability, continuity, and
coherence in any community. Hence to tamper with the basic money
supply is to tamper with a community's sense of value. By making
money worthless, inflation threatens to undermine and dissolve
all sense of value in a society.
there you have it. Creating money out of thin air can dissolve all
sense of value. The Federal Reserve induced the internet mania.
Moreover, especially in a mania, people can even be fooled to believe
that mankind can remake himself (once again an unfortunate vestige
of Maoism and embraced, perhaps unwittingly, by educators). Correspondingly,
in the highly tangible world of construction, an easy-money policy
(by the Federal Reserve) can fool a developer into constructing
a building that should not have been built in the first place.
collapse of the dot.com/high-tech bubble began by the second quarter
of 2000. By this time, there had been a long fall in the rate of
increase in the money supply. The bubble had run out of fuel yet
construction on the Bellevue Technology Tower was underway (by the
summer of 2000). The "medicine" of lower interest rates
(i.e. more money creation) Alan Greenspan is currently dispensing
to the American economy, is the exact same medicine that prompted
the Bellevue Technology Tower's developer to undertake this unnecessary
project in the first place. Bellevue has its monument to Homo Digitus
whose myth emerged as a result of the hyperreality spawned by the
Federal Reserve. This monument is not a completed garage as reported
by Mr. Ip (it is actually partially complete). Fittingly, the monument
to Homo Digitus is a huge hole in the ground that I can see from
my office window. Really!
Englund [send him
mail], who has an MBA from Boise State University, is a surety
bond underwriter in downtown Bellevue, WA.