Canadian Pacific and Kansas Southern

Terry Cantrell for Wikipedia

Canadian Pacific Railway Limited and Kansas City Southern today announced they have entered into a merger agreement, under which CP has agreed to acquire KCS in a stock and cash transaction representing an enterprise value of approximately USD$29 billion1, which includes the assumption of $3.8 billion of outstanding KCS debt. The transaction, which has the unanimous support of both boards of directors, values KCS at $275 per share..

Following the closing into a voting trust, common shareholders of KCS will receive 0.489 of a CP share and $90 in cash for each KCS common share held.

so reports Business Wire.

Some thoughts:

  • Kansas Southern has one of the most compelling color schemes in railroading, a field noted for compelling color schemes.
  • Arthur Stilwell founded Kansas Southern.

His writing attracted attention because in them he maintained that he had based many of his life and business decisions on the whispers of what he called fairies or brownies. In his memoirs published in 1927 he reframed this as hunches.

He also founded Port Arthur, Texas.

  • CP CEO Keith Creel is a protege of Hunter Harrison, the king of railroad executives. He seems to have a reputation as a very effective railroad runner.
  • The map of the combined rail lines is so pleasing. Imagine one unified train line from Vancouver to Mexico City
Combined Network Map: Creating the First U.S.-Mexico-Canada Rail Network (CNW Group/Canadian Pacific)
  • The merger has to be approved by the Surface Transportation Board, as well as Mexican regulators. I know very little about the Surface Transportation Board. From FreightWaves:

“The regulatory consideration is an important one because in 2016, during CP’s attempted takeover of Norfolk Southern (NSC), the attempt ended after heightened scrutiny from the Obama administration on antitrust issues,” said Deutsche Bank analyst Amit Mehrotra. “But we note at that time NSC rejected CP’s offer, whereas [this] announcement is a friendly deal, and KSU is only about one-fourth the size of NSC from a revenue standpoint — i.e., pro forma for the deal CPKC will still be the smallest Class I rail.” CPKC stands for the name for the new company.

from High Plains Journal:

Some rail analysts have said STB approval is more likely because in this case, there is no overlap in the route networks that would be merged. “Whenever a merger or acquisition is proposed, red flags are particularly raised among customers when the two companies have a similar geographical footprint. This does not guarantee that significant portions of service will be disbanded or eliminated, but it often portends that,” said Steenhoek.

However, he added, “As one can see from reviewing the current Canadian Pacific and Kansas City Southern network maps, the two railroads currently have very little service overlap. This provides some degree of encouragement among customers–including agricultural shippers—that this particular proposed merger may result in increased service options.”

I see here an estimate of the chance of the deal going through at 67%

  • some financial analysis of the deal.
  • Today, Tuesday March 30, you can buy a share of KSU for $258.76. If the deal goes through, you will get .489 share of CP plus $90, something like $275. An 8% gain after about a year and a half. That may not be especially attractive, with your money tied up for awhile, most of the investors I can find who analyzed it on Twitter pass. But, the puzzle of calculating and weighing the risk reward there and comparing to other alternatives is kind of interesting. If the deal doesn’t go through, you’d still own part of an obviously valuable railroad network. It’s hard for me to think of a better example of an economic moat than an enormous railroad with no competition. Anyway, I’m not giving financial advice, I just like thinking about this magnificent railroad!


humorous chart

from The Wall Street Journal, “Robinhood Trader’s Battle Cry: ‘It’s All Just a Game to Me’,” Intelligent Investor column by Jason Zweig.

If this is what the charts and information are, can you blame these bros for ignoring?

(actually, very good analysis in the piece, respect for Zweig, I understand he is being semi humorous:)

As of March 23, 95.9% of the slightly more than 3,000 stocks in the Wilshire 5000 Total Market Index had a positive total return over the prior 12 months, according to Wilshire. No other one-year period has come close to that since the end of February 2004, when 93% of stocks had positive 12-month returns.

You could have made good money even with bad stock picks. It was like being invited to bet on black, without limits, at a roulette wheel on which 37 of the 38 pockets were black.


Reedy, The Twilight of the Presidency: From Johnson To Reagan

former Nixon and Reagan aide has just told his Miller Center oral history interviewers a long story about the Nixon administration:

Young
So, what is the moral of that story?

Anderson
The moral of the story, I think, is in the White House people don’t realize the extent to which the President of the United States is forced to delegate enormous authority. You know how busy you can get during the day, try multiplying that by 100 times, 500 times. The pressures that come in are incomprehensible. So when he says, Do something, he usually thinks, Well, maybe it will get done. Most of the time, it doesn’t get done, but he says, Maybe it will get done. And he doesn’t have time to follow up.

He doesn’t have time to sit down and say, Ehrlichman, what happened with Anderson? And whatever Ehrlichman tells him, he may say, Well, Anderson wasn’t interested, which is probably what he told them. Now, he’s not going to pick up the phone and call me and say, What happened? and follow through on all this. You can talk to Dick Allen. Similar things happened to Dick Allen, in terms of he gave instructions to have Dick do certain things, and Dick was never told and then the President was told that Dick hadn’t done it.

There’s a wonderful book called The Twilight of the Presidency by Reedy. You ever read that?

Young
George Reedy.

Anderson
In which he says, If you try to understand the White House—most people make the mistake, they try to understand the White House like a corporation or the military and how does it look, with the hierarchy. He said, The only way to understand it, it’s like a palace court. And if you can understand a palace court, then you understand the White House. I think that’s probably pretty accurate. But those are the things that happen. So anyway, I didn’t go back. So I missed Watergate.

Asher
Darn.

Reedy’s book is fascinating, Reedy was himself Press Secretary and a special assistant to LBJ.

This is the bitter lesson we should have learned from Vietnam. In the early days of that conflict, it might have been possible to pull out. My most vivid memories are the meetings early in Lyndon Johnson’s presidency in which his advisers (virtually all holdovers from the Kennedy administration) were looking to him for guidance on how to proceed. He, on the other hand, felt an obligation to continue the Kennedy policies and he was looking to them for indications of what steps could carry out such a course. I will always believe that someone misread a signal from the other side with the resultant commitment to full-scale fighting.

Reedy argues that the presidency is such a powerful and weird job that in effect it always creates something of a monarchy, dependent on the personality of the (so far!) man.

When stories leaked out that Richard Nixon was “talking to the pictures” in the White House, it was taken by many as evidence that he was cracking up. To anyone who has had the opportunity to observe a president at close range, it is perfectly normal conduct.

The tone of Reedy’s book is pretty scholarly, but he’s also a skilled, entertaining presenter:

For many years, a corporation sold a popular mouthwash to the American people on the basis that it would inhibit bad breath. The slogan under which the product was merchandised – “Even your best friends won’t tell you” – meant that the subject was too delicate to mention and that a person could exclude the foulest odors without being aware of the fact. As far as the mouthwash was concerned, the slogan was somewhat misleading: not only your best friends but your worst enemies will tell you if you have bad breath. But the concept that “even your best friends won’t tell you” about unpleasant things applies with tremendous force to the president.

Reedy argues that, even in his boyhood, the President wasn’t really that important, or at least not a constant topic in national life:

For those who have lived long enough to have some political consciousness from the pre-Franklin Delano Roosevelt ere, there will be memories of local politicians who had far greater name identification than the president, even among educated people… the press spent very little time covering presidents.

What changed that? The radio, and TV cameras, and national level communication. Reedy mentions how the TV crews in the Johnson White House started keeping the cameras “warmed up,” a huge advantage that gave LBJ the power to give a TV briefing whenever he wanted. What would Reedy make of Twitter?

On the rise of Henry Kissinger:

When a crisis would break out anywhere in the world, Nixon would call his Secretary of State, who would promise to get “my people” together and report back. The president would then call Kissinger, who would give him at least ten answers before hanging up the phone. Presidents like answers.

would hang out w


NFTs, digital artifacts

Somebody asked me* if I have any opinion on NFTs, or if I’d be doing an episode of Stocks: Let’s Talk about them. Truth: I do not understand them. I’m trying to gain insight. Why you’d pay lots of money for “ownership” of a digital artwork, or even stranger, pay $2.9 million for “ownership” of Jack Dorsey’s tweets, I don’t get. I’ve read through a lot of message boards and arguments that tend to cycle through the same stuff:

  • why would you own something anyone can look at?
  • well what about “owning” the Mona Lisa, anyone can look at that but it’s still valuable?
  • why would you need to “own” a Picasso, just for bragging rights, this is same as
  • what about Walter Benjamin’s “aura”?
  • there’s too much money around
  • the art market has always had an element of money laundering
  • it’s a speculative bubble, it’s like the Dutch tulip craze (contra: we don’t understand the Dutch tulip craze, there was no Dutch tulip craze)

Here’s my one attempt at an original thought, or at least a thought I haven’t seen before: what if people are speculating is that these early NFTs (Beeple’s art, or Jack Dorsey’s tweet) will someday be valuable as digital artifacts, as early works from a new scene, or even a new kind of art?

There’s a scene in the movie Basquiat where Andy Warhol (David Bowie) flips through some postcards offered by Basquiat. I’ve watched that scene and thought, damn, a Basquiat has sold for $110.5 million, if you had just one of those postcards from back then you could at least trade it for enough cash to buy a sweet beach house!

I’ve also pondered in idle moments whether Madonna, who dated Basquiat, has more wealth in the form of Basquiat paintings than she does in her own music catalog. Surely it’s possible she has four or five of her ex-boyfriend’s paintings lying around, which could equal $100 mill easily. (Worse, what if she destroyed them in a fit of grief or jealousy?)

What if people are just betting that the NFT, or the ownership of the image of a tweet, or something, will someday be valuable just as an artifact or sample from this insane time, a time that was pretty interesting in terms of its invention?

The authentication of art has always been an issue, and a challenge. Consider John Berger talking about how much time is spent proving a Leonardo is a Leonardo at the National Gallery:

The Museum of Fine Arts in Boston has so many Impressionist paintings they don’t know what to do with them all, they’ve got a Van Gogh they keep in storage.

At the time the MFA’s greatest patrons were acquiring art, a Van Gogh wasn’t even that valuable. What was considered valuable art at that time, I once asked a curator there? Stuff like this, she said:

Maybe this is all just marketing spend for crypto/blockchain speculators, as someone suggested somewhere, I can’t remember.

Art speculation is hard! My guess is that NFTs will end up about as valuable as a complete set of 1986 Topps baseball cards, which I once speculatively bought myself as a youth.

Good luck to all the players.

*always funny when someone uses “since people have asked” or “someone asked me” as a setup for writing. In this case I swear I being honest! It was Eben!


Nomadland

We started out as nomadic. It may be the most natural state for human beings. We’re kind of returning to people freedom they lost starting in the Dark Ages. It was with the discovery of seeds that people ceased being nomadic—and my opinion, by the way, is that people remain nomadic by nature—but it is for economic reasons that we became fixed in our location.

Craig McCaw talking about wireless phones, quoted here by Tren Griffin. This 2013 Vanity Fair piece by Elise O’Shaughnessy, about tycoons of the new media/wireless world at Herb Allen’s Sun Valley summit, seems to be the original source, and it’s full of interesting stuff.

Ovitz showed up with the world’s best-trained orangutan, which had been carefully coached to hold a microphone and lip-synch a speech in imitation of Allen & Company Inc. managing director and master of ceremonies Jack Schneider.

depraved.

As America’s military-industrial supremacy has waned, the nation is emerging as an information-and-entertainment superpower. “It’s a little bit like the advantage Henry Ford had at the turn of the century,” Malone points out. “Only America was big enough to justify building mass-production centers for Fords. So, here, in the latter part of the century, our market is the only one large enough to justify building the next Microsoft Windows software, or the next Terminator 2, Jurassic Park. That gives us, as an exporter, a huge edge.”

more:

“Ted Turner is the classic four-year-old and man in the same body,” says Craig McCaw. “He’s pure. . . . People who are pure, like Ted, are required to do the obvious, because by the time it becomes completely obvious, people like him have already done it and the other guys haven’t. You’ve got to ask yourself why, what conceivable possible reason, is it that Ted Turner is the first man to do a news network. I mean, it blows your mind.”


Food scene in Honolulu

Our post about the food scene in Papeete, Tahiti was one of the most popular posts ever on this site. The obvious conclusion: I should become a South Pacific food critic. You may think I’m not qualified, because I’ve spent no more than 25 days or so in the South Pacific, and that’s generously assuming we count New Zealand and Australia. You may think a South Pacific food critic should be a big jolly rotund character who loves food, not a picky eater with a skinny frame. But, we must follow where called, so here is our latest dispatch, on the food scene in Honolulu.

Above are the dumplings of the day (a spiced beef, on this particular day) at Koko Head Cafe, Lee Ann Wong’s (of Top Chef) brunch spot in the cool, chill Kaimuki neighborhood. Fantastic for post-hike feasts.

The Don Buri Chen is no joke, and the fish eggs are serious as well.

Shave ice, of course, this is at Kokonuts:

Obama’s flavors are said to be Lemon Lime and Cherry, went with Lemon Lime and cocoanut, maybe because they were toasting cocoanut inside which aromated the strip mall joint in a most pleasing way.

Musubi, Japanese seaweed and rice-wrapped pyramid sandwiches, very solid. I’m not into the classic spam musubi, ground beef and tuna both solid and satisfying:

That’s from Mana Musubi, which was sold out by Friday around 11 am. What a packable food!

Piggy Smalls, offshoot of The Pig and the Lady, is making incredible new Vietnamese food in a former burger joint location:

Failed to photograph the Burmese Tea Salad before devouring. We intended to visit the legendary shrimp trucks of the North Shore, but were stopped by torrential downpour, luckily this hit us just as we rolled up on Aloha Shrimp Truck in Hauula. (Remember when pronouncing Hawaiian words: there are no silent letters).

Simple? Yes. Excellent? Yes.

A beloved Oahu institution is Zippy’s fast food, which has a pretty extensive menu and some baked goods as well. Had to try the Zap Pak and the Surf Pak.

Look, is it delicious? Kind of. Is it convenient? Also kind of.

Fête in downtown Honolulu rules:

Ridiculous Italian food with local Hawaiian-raised meats and ingredients.

The queen of Oahu foodstuffs however must be the poke you can buy by the pound at the counter in the back of Tamara’s liquor store, there are several locations:

You eat that on a cracker and you’re having a great time. This is the classic tuna in Tamara’s sauce. I became a poke convert.

For some Hawaiian food/plate lunch classics, Highway Inn, several locations.

source

A good poi introduction.

The Oahu institution we failed to try was Leonard’s for malasadas, but Pipeline, around the corner from Koko Head, seemed excellent.

source: Wikipedia

For freshness, invention, and wild array of influences, Honolulu gotta be in the conversation as a food destination. The cuisine skews a bit fatty and decadent, I must say, a salad seems harder to come by than a mai tai, but if you’re cutting loose on vacay and pairing with some outdoor adventures, it’s pretty grand.

Maximum mahalo to friend and local guide Kim H. for knowing all the spots!

Hawaii has kept low Covid #s in part by taking great care in letting people in, you must produce a negative Covid test taken within 72 hours of departure. And not just any Covid test, a Hawaii-approved test. Don’t be like this knucklehead and take the wrong kind of test!

Look, once you get the original Hawaii 5-0 theme in your head, it’s hard to get out, but man, is that the best TV opening ever?


Serial killers: the podcast in history and the future of podcasts

This post is best enjoyed read to you by “Remy” on Spotify, see link above.

When did the podcast first enter your life? Really settle in? Was it with Serial? Hardcore History? Radiolab? Scharpling? One of the Earwolf shows?

Wikipedia, on the page for Podcast, uses an image of Serial being played on an iPhone. That moment, 2014, seems like a breakthrough, when podcast became a word you could say without flinching. OK, maybe there’s still some flinching.

“The podcast producer, who is often the podcast host as well, may wish to express a personal passion, increase professional visibility, enter into a social network of influencers or influential ideas, cultivate a community of like-minded viewership, or put forward pedagogical or ideological ideas (possibly under philanthropic support).”

Viewship? The fuck are we talking about here? It’s an audio format, Wikipedia. Anyway. One motive you won’t find listed is “to entertain and amuse, to have fun with friends and create something joyful.” That was the motivation behind the creation of Great Debates, and I suspect many another podcast as well.

There’s a whole separate Wikipedia page, “History of Podcasting,” and I won’t attempt to replace or summarize it here. A few tidbits do jump out: in August of 2000, the New England Patriots launched the first “IP radio show,” offered on Patriots.com. The journalist Ben Hammersley has a good claim on coining the term “podcasting,” he used it in The Guardian in February 2004. By a year later, USA Today was reporting on “amateur chatfests.” Apple added podcasts in June 2005. By the next month, President George W. Bush’s radio addresses were appearing as podcasts. Those must be a lot of fun to listen to, maybe I’ll go back and check those out.

The table had been set of course for personality driven radio with This American Life. Radio shows are nothing new. But now that you could get them on demand, they were enabled to narrow, rather than broad, cast.

In that 2005 USA Today piece, it was noted that the most popular podcast at the time was “The Dawn and Drew Show,” and I learn from their Wikipedia page that Dawn and Drew have been inducted into the Academy of Podcasters Hall of Fame. Did you know podcasting had an academy? I did not. To get into the Hall of Fame you need to have been involved with and have promoted the art of podcasting for at least ten years. The Great Debates will be eligible in the year 2024, October 17, 2024 to be specific. I’m not telling you to do anything with that, I’m just telling you that, it’s just a fact.

Marc Maron aka WTF, Hollywood Handbook, My Favorite Murder, Joe Rogan, Call Her Daddy, Reply All, 99% Invisible, Planet Money, The Daily, Chapo Trap House, How Did This Get Made?, Red Scare, “Cumtown,” Fiasco, those are just a few of the shows I’d feel obliged to mention if I were trying to write a cultural history of the podcast. I’m sure there are so many I’m leaving out, sports podcasts, podcasts in foreign languages. Filip and Fredrik was my favorite for years, but they’ve gone back to Swedish, a tragedy for the English speaking world. Lately, as I’ve developed my podcast Stocks Let’s Talk, I’ve been listening to investing podcasts. Jim O’Shaughnessy, with his podcast Infinite Loops, and Patrick O’Shaughnessy, with his Invest Like The Best, are the first example I find of father-son podcasts.

Looking at the Chartable Apple Podcasts list for this week, I see six out of the ten are true crime shows. There are two dueling podcasts about The Office TV show, batting for the 23rd and 24th spots. Conan O’Brien, Bill Simmons, Megyn Kelly, Levar Burton, Jordan Peterson, and Michelle Obama all stay in the top one hundred, but at the moment a Catholic priest, Father Mike Schmitz, is way ahead of them all. Can we really trust these charts? Spotify has their own rankings. Over there Deep Sleep Sounds from Slumber Group ranks number fourteen, and “Relaxing White Noise” beats Ben Shapiro. It sure does in my book! That shows you some of the range of the medium. Leo, Taurus, Aquarius, and Scorpio Today all make it into the top fifty.

Podcasts are intimate, and potent. Passionate audiences will turn up for live shows. In the last conversation I ever had with writer, comedian and podcast star Harris Wittels, I mentioned how so many people seemed to feel like they knew him. “That’s all because of podcasts,” he said. Of all the popular podcasts, I can’t think of one that doesn’t really lay bare the peculiarities and passions of the hosts. Maybe The Daily? I don’t know, I don’t listen to that one.

By the time Spotify brought in Joe Rogan for a reported $100 million dollars, the word was out that podcasts were now a business. I heard that WME Agency has four agents devoted to podcasts. Celebrities have podcasts. Rob Lowe has a podcast. The amounts of money made on Patreon by Chapo and the Doughboys are repeated and passed around among media and comedy people like medieval legends of Cockaigne or hobo songs about Big Rock Candy Mountain.

A living can be made. But much like among the musicians on Spotify, I suspect the money will be top heavy and bottom thin. The top 1,000 (or maybe 500, or maybe 100) will take the bulk, while everybody else either struggles or does it for love. The Rogan deal reminded me of Howard Stern’s deal with Sirius XM, for 500 million dollars. On news of this deal, in October 2004, Sirius stock jumped from around 3.7 to around 7.4. Spotify stock behaved in a similar way after the Rogan deal. Today Sirius stock is around five dollars. How many Sirius XM personalities make a living? When I listen, it seems like mostly celebrities. For awhile The Great Debates, our podcast, was on Sirius. A nice paycheck, but we didn’t quit our day jobs.

Spotify may have made a better bet. CEO Daniel Ek – Sweden again – has made it clear his goal is to dominate audio, worldwide. That includes podcasts, it includes music, it’ll probably include audiobooks someday soon. Apple, as far as I can tell, somehow lost their dominance in podcasts and let their milk get stolen by a hungry competitor.

Podcasts are a little too easy to make. Apple used to put just the right amount of bureaucracy in the way of getting one up and listed, but that’s mostly fallen away. As a result of the ease of starting one, podcasts may never have too much prestige. Jokes about “podcast boyfriends” and so on appear on my Twitter just about every day.

These words were typed by me, Steve Hely, into my “blog,” or website, Stevehely.com, which is run by WordPress. I run the site to promote my books, maintain a space for myself on the Internet as an independent writer beholden to no one, and to share information and ideas about topics rattling around in my craw. I’ve always felt the site’s been good for me, because I can tell stories or recount discoveries that interest me without boring acquaintances at parties with my ramblings. Find it if you want, and quite a few people have, and I’ve been glad of it.

Through Spotify’s podcast platform, Anchor, I can now generate a podcast that’s just a robotic voice reading my words. There are two voices to choose from, Remy or Cassidy. I chose Remy. Remy reads the words and makes a podcast, all I have to do is type, like Stephen Hawking or something. Remy has glitches for sure. For instance, she reads blocked quotes with the odd phrase “greater than,” as in:

four score and seven years ago our forefathers

You get the idea. For that matter, “Remy” won’t distinguish stuff that’s quoted versus the post’s original content. Most of my posts aren’t suited to perfect podcasts, because they’re full of pictures. But still, cool technology, I want to keep playing with it.

If podcasts are this easy to make, it’ll most likely keep the market pretty saturated. But it will also allow a world of weird, unusual voices. Today I listened to a podcast that was a school project by two eleventh graders about the history of Hawaii, done for Ms. Patrick’s class at Impact Early College High School in Baytown, Texas. It was fun and short, and came up when I looked into Hawaii history on Spotify. Will we live in a world of enthusiastic amateur radio? I was interested in Malcolm Gladwell mentioning that books, audiobooks, and podcasts can kind of blur together. He specifically cited Jordan Peterson, who wrote a bestselling book, but which a majority of his “readers” took in as audio. He’s an audio personality as much as a literary one. Where did I hear this interview with Gladwell? I’m not sure, but I know it was on a podcast.

I predict there will be labels, studios, brands, that have some credibility. They’ll have to be careful: I see that Vox media has two hundred “active shows” in its podcast network. Well that’s too many.

Much like bestselling books, celebrity will be a big help. I’d like to see some hyperlocal podcasts. Something like a Reader’s Digest of podcasts could be a success. I wouldn’t mind some kind of randomizer button, where I could tune around, hear strange voices from across the 5G, like what you hear clicking around the dial in a rental car driving around Arizona or New Mexico or Nebraska late at night. I wonder if there will be “podcasts” that include more and more music and audio fun to distinguish themselves from the chatterboxes.

Listening to an automated robot voice doesn’t connect as much as hearing a great human voice, like say Ken Layne of Desert Oracle, or Karen Kilgariff of My Favorite Murder or Desus and Mero, the Bodega Boys. So I’ll end this here, and send Remy back where she came from. Go ahead and subscribe to the Helytimes podcast here on Spotify to see what we come up with next. Robots doing our audio? Yeah, we’ll experiment with that. You can record your own audio with Anchor, I could’ve done that, but where would I find eight minutes or so in MY busy schedule? Forget it. That’s a Remy job.

Why don’t let Remy take us out with some nice sleeping sounds?

zzzzzzzZZZZZZZZZZZZZzzzz. Mmmmmmmmmm. Mmmm. MMMM. Zoooooonumnumnumnewnewnew. Ahhh.

Goodbye.


Bretton Woods Is No Mystery and The Nixon Shock

Breaking the Breton Woods agreements, the American president said that the dollar would have no reference to reality, and that its value would henceforth be decided by an act of language, not by correspondence to a standard or to an economic referent.

That’s from The Uprising: On Poetry and Finance, by Italian communist Franco “Bifo” Berardi, published by semiotext(e). That book is full of interesting ideas.

Everywhere I turn these days, from the new Adam Curtis documentary to the Bitcoin-heads on Twitter, I hear about Sunday, August 15, 1971. On that evening, Richard Nixon, after conferring with his advisors in a weird weekend at Camp David, went on TV and announced he was taking the US dollar off the gold standard, ending the “Bretton Woods system.”

I’ve always had an interest in the Bretton Woods system, because it was worked out at the Mount Washington Hotel in Bretton Woods*, New Hampshire. My dad and I used to go cross-country skiing up there.

rickpilot_2000 for Wikipedia. It doesn’t look like that in winter.

The hotel shut up for winter had a grand, imposing, and spooky quality.

President Franklin Roosevelt proposed the conference site, the Mount Washington Hotel, as a ploy (successful, as it turned out) to win over a likely opponent of the pact, New Hampshire senator Charles Tobey.

That’s from Michael A. Martorelli’s review of Benn Steil’s book about the conference, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order.

The conference happened in July 1944. The Allied forces were still stalled in the bocage of Normandy, but the leadership was already planning for the postwar order. The famed economist John Maynard Keynes, who’d studied the disaster of the last postwar peace, was trying to avoid some of the same mistakes while also attempting to save the status and dignity of the UK Keynes suggested the world switch to a new global currency called Bancor. The US, represented by Harry Dexter White, militarily and financially dominant, had the strongest position. The US proposed a system that would ultimately leave the US dollar, pegged to gold, as the world’s reserve currency.

Deeply indebted to the United States after the long, costly ordeal of World War II, the United Kingdom inevitably lost the battle. To secure one key victory, however, White had to resort to stealth. In the waning hours of the conference, he and his assistants replaced the phrase “gold” with “gold and US dollars” in the agreement, thereby enshrining the US currency as the international medium of exchange. Keynes confessed that he did not read the final version of the document he signed.

You think there aren’t thrills in a book about a 1944 economic conference whose results have mostly been overturned? Guess again:

In one noteworthy coup, [Steil] disproves Keynes biographer Robert Skidelsky’s claim that Keynes was assigned Room 129 in the Mount Washington Hotel.

The summit does sound kind of exciting. The Soviets brought a bunch of beautiful female “typists” to seduce everyone.

One committee of delegates took a 15-minute recess in the bar each night at 1:30 to watch the “titillating gyrations of Conchita the Peruvian Bombshell.” Afterward, reinvigorated, they would negotiate for another hour or so. The long arguments left White increasingly short-­tempered on less than five hours of sleep a night. Keynes, already weakened by the heart disease that would kill him within two years, was soon holding court from his bed, tended (and guarded) by Lydia, his eccentric Russian ballerina wife. At one point, a rumor spread that he was near death; when he then appeared at dinner, the delegates spontaneously stood and sang “For He’s a Jolly Good Fellow.” 

from a different review of a different book about the conference:

I’ve now taken a look at both Steil and Conway’s books. The Summit by Conway is a lot more fun and easy to read, and focuses more on the wild details – what he calls the “noises off” stuff – from the conference. The drunken songs, the parody newspaper about the “International Ballyhoo Fun,” the pleasure the delegates from wartorn countries took in huge plates of “chicken Maryland” and enormous bowls of ice cream, the South Africans chilling and playing golf once it was clear gold wouldn’t be replaced by silver, the results of the Soviet vs USA volleyball game (USSR won), that’s in Conway.

The details of the conference are interesting, but in a way the outcome was inevitable. The US was more or less the last power standing as World War II wound down. The UK was tremendously in our debt (literally). What we ended up with was the system we more or less devised, that left the dollar as the default world currency.

The true significance of the conference was noted by Keynes in a speech at the farewell dinner:

We have shown that a concourse of 44 nations are actually able to work together at a constructive task in amity and unbroken concord. Few believed it possible. If we can continue in a larger task as we have begun in this limited task, there is hope for the world.

If you read one review of one book about the conference, I recommend James Grant’s review of Steil in the Wall Street J (behind a paywall I suspect, they’re no fools about money at the WSJ):

Gold figures largely in these pages. The ancient metal was deeply rooted in the psyche of Keynes’s contemporaries, including that of Lt. Col. Sir Thomas Moore, a British Conservative member of Parliament. In parliamentary debate, Sir Thomas said that he had “the impression, not being an economist, that currency had to be tied to or based on something; whether it was gold, or marbles, or shrimps, did not seem to matter very much, except that as marbles are easy to make, and shrimps are easy to catch, gold for many reasons possessed a more stable quality.” For the soundest doctrine expressed in the fewest words, Sir Thomas was hard to beat.

Grant, if you can’t read it, isn’t too boosterish on the Bretton Woods system:

Rare among nations, America pays its overseas debts in money that it alone may lawfully print. Naturally, being human, we Americans have printed to excess. Not since 1975 has the United States exported more goods and services than it has imported. There is no institutional check to square up accounts. We buy Chinese merchandise with dollars. The Chinese, in turn, invest those dollars in U.S. government securities (the better to suppress the value of the Chinese currency). It’s as if the money never left the 50 states. In possession of the “reserve currency” franchise—White’s dream fulfilled—America has become the world’s leading debtor nation. At Bretton Woods, it was the world’s top creditor.

I mentioned the Nixon Shock to a bud who works at a hedge fund, and he put me on to WTF Happened in 1971, which takes a darker view. I love the idea that this is the moment everything went wrong and reality broke, but I’m not totally convinced. What about the Triffin dilemma? Was Nixon changing reality, or acknowledging it?

Consider how things worked before Bretton Woods. Both Conway and Stiel note that FDR would sometimes dictate the dollar price of gold from bed in the morning, once suggesting raising the price by twenty-one cents because that was a lucky number. This was hardly more “real.”

A crazy element of the conference is that the leader of the US delegation, Harry Dexter White, was secretly communicating with the Soviets. To what extent he was a traitor, a spy, vs kind of backchannel communicating with our wartime ally is unclear. But declassified transcripts make clear he was a Soviet asset known at “Jurist” or “Richard.” That’s if you trust our own NSA. Who knows?

White testified in front of HUAC that he was not a Communist, then had a heart attack. He went up to his home in New Hampshire and died four days later.

Is it possible White sabotaged the US team in the Bretton Woods volleyball game? Perhaps to provide a propaganda win for his Soviet masters? The Russians got a lot of concessions at Bretton Woods to induce them to sign on to the agreements, but I don’t see in Steil or Conway any strong case that White’s possible connection helped them unduly. Conway is more of a skeptic on the spy stuff, suggesting that yes, it looks pretty fishy, but it’s impossible to prove White “betrayed his country.”

One person who would’ve known White had been a spy? President Richard Nixon.

Following Alger Hiss’s perjury conviction in 1950, Representative Richard M. Nixon revealed a handwritten memo of White’s given to him by Chambers, apparently showing that White had passed classified information for transmission to the Soviets. Yet his guilt would only be firmly established after publication of Soviet intelligence cables in the late 1990s.

The IMF and World Bank still linger as Bretton Woods legacies. Conway in his epilogue notes how even after the demise of the Bretton Woods system, the IMF is still imposing the “Washington Consensus” on the developing world in return for loans, with mixed results. Maybe someone should activate the Coconut Clause:

Conway also notes that after the demise of the system, US and British banks became vastly more profitable.

In the United States, by the turn of the millennium banks now accounted for around 8 per cent of the country’s total economic output – more than double their zie when the Bretton Woods system ended… Until 1970, an investor in a UK bank could expect to make about 7 per cent a year on his investment. After 1970, the return on equity roughly trebled to 20 per cent, a figure maintained without a break until the financial crisis of 2008.

There is no single, simple explanation for this astonishing rise of the financial sector; however, there is no doubt that one important element is the sudden change in the international monetary architecture following the collapse of Bretton Woods. Almost immediately after the demise of Keynes and White’s system in the early 1970s, every single measure of the size, profitability, and leverage of the banking industry has begun to increase at unprecedented rates.

The big banks in the USA tried to stop Bretton Woods at the time,

After the Bretton Woods conference, the countries involved still had to sell it to a confused public. One method the USA used was to produce a pamphlet called Bretton Woods Is No Mystery, illustrated by the New Yorker cartoonist Syd Hoff. I’m on the trail of a copy, I can only find a few images online.

It’s heartbreaking to hear the names bandied about for the world currency, and think what might’ve been. From Conway:

among the suggestions were Fint, Proudof, Unibanks, Bit, Pondol, and Keynes’ favorite, Orb. Months later, Keynes sent round a note to his Treasury colleagues asking: “Do you think it is any use to try unicorn on Harry?”

What do you guys think will be the world’s reserve currency in 2031? Dogecoin?

*an archaic name for what’s now part of Carroll, New Hampshire.


Buckle up Tony

from this Talks at Goldman Sachs discussion with Stanley Druckenmiller. How about this?: