years ago, when i had a modicum of belief in the system, i thought this individual, karl denninger, to be a bit wacky but in the intervening years i've come to recognize how accurate and prescient he is;

The Warning I Put Forward Years Ago

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Since I started this column, first on Blogger (and then on Serendipity, a blogging platform, which I eventually discarded and moved to my own code that is what is running today) I've warned that the so-called "interconnected free-trade economy" is not what it appears, and in fact it is wildly fragile -- and thus stupid.

Of course this is not what you're sold.  Supply "diversity" is allegedly good; you make this over there, this over here, that in your own town, all comes together and its all good.  People think of it like the Internet; all interconnected and, no matter where you physically might be you can read this column.

Wrong.

The Internet was originally designed to work around cable cuts and even nuclear war.  Indeed that was DARPA's concern; communications in a time when the Soviet Union and United States might blow each other up -- quite literally.  TCP is thus designed to retry and routing protocols were designed to find the "best" available route from one place to another, which might be different than it was 15 minutes ago.  After all, that city which was there might not be anymore.

As time has gone on we've severely damaged that model.  It didn't begin that way and it came in small fits and starts, but centralized control, which was present even in the 1990s, made for trouble.  I was on an advisory committee related to Internet infrastructure for a short while, saw what I believed was wild corruption in-process being used to help one company and screw another via what was allegedly a transparent and fair mechanism, and when I was unable to get anyone to give a crap about it other than by bringing legal process (and not being an interested party I had no financial interest that would pay off if successful) I walked out on it.

It hasn't gotten better since; in fact it has gotten worse.  Aggregation means that even cutting off entire nations can be a matter of one configuration line in an IpV6 routing file.  Technical considerations make this sort of capacity inevitable and without strong measures to insure it won't happen, which might have to include government sanctions such as cutting off financial ties or even the use of force there is little that can be done as interconnectivity grows in size and complexity.  Simply put an N x N problem rises at the square of N; this is something that ought to be obvious to anyone who passed first-semester algebra!

As a result there is always an attempt to flatten that structure, because you have to.  Nobody has infinite resource, computer or otherwise.  Sure, we've wildly expanded said resource and performance over the last 20 years, but it hasn't expanded at the square of connectivity.  Nor can it for long, no matter what you do.  Power functions are never sustainable.  Period.

Unfortunately that "flattening" has wound up everywhere.  TSMC, for example, is a Taiwan company that accounts for about fifty percent of all semiconductor fab revenue worldwide.  The United States used to be responsible for about 40% of chip capacity in 1990 but today is responsible for about 12%. 

What happens if a critical part of that fab capacity is either blown up or embargoed?

You literally can't make anything electronic and given the enormous percentage of the whole it would take years, perhaps even a decade or more, to just replace US demand for said chips.  Until that could be done you'd get nothing.

Realize what "nothing" means in this context:.............read more.........