"if the entire universe is composed of just these two watches, how can I tell that the second mirror is the one that is moving away from the first to the right, and not the first mirror that is moving away from the second to the left? It's impossible to tell"
A point in geometry is a location. It has no size i.e. no width, no length and no depth. It makes no sense to say that two points (or two pointlike clocks) move relatively to each other. Clock moves in a reference frame of observer and dilates relatively to the reference frame (or set of physical reference points) of observer. Hence, observer needs at least two spatially separated clocks, let’s say C1 and C2. Observer synchronizes these clocks by light. If one way velocity of light is considered to be c, this is Einstein synchronization. Moving clock passes by clock C1, and these clocks compare readings in immediate vicinity. Then moving clock passes by C2 and they compare readings again.
Single clock measures shorter time interval, than two spatially separated clocks. Time in reference frame from the point of view of the single clock is running gamma times faster instead.
http://www.pstcc.edu/departments/natural_behavioral_sciences/Web%20Physics/Chapter039.htm "Two spatially separated clocks, A and B, record a greater time interval between two events than the proper time recorded by a single clock that moves from A to B and is present at both events."
All that goes straight from the Lorentz transformations.
$ T = \frac {t'_{x'}+ \frac {v'} {c^2} x'} {\sqrt {1-( \frac {v} c)^2}} $ (1)
$T$ is clock readings that belongs to reference frame $K$, taken in point $x'$ at moment of time $t'_{x'}$ of reference frame $K'$, and $t'_{x'}$ reading of clocks that belongs to reference frame $K'$ in the point $x'$ of reference frame $K'$
How to interpret Lorentz transform for time?
Transformation demonstrates, that time $T$ of reference frame $K$ (in which it does not depend of $x$ coordinate or any other coordinate) is universal in reference frame $K$ and each point of this frame.
Now let's fix point $x'$, for example $x'=0$. In this case this transformation will look like that:
$T= \frac {t'_{0'}} {\sqrt {1-( \frac v c)^2}}$ (2)
$T$ is clock reading of reference frame $K$ taken in point $x'=0$ (in the origin $O'$ of reference frame $K'$), and $t'_{o'}$ is time in the reference frame $K'$, in particular in the origin $O'$.
We can take $\frac {dT} {dt'}$ when $x'$ is fixed and will get ${dT}/{dt'} = \frac 1 {\sqrt {1- \frac {v^2} {c^2}}} $
According to (2) it is not time $t'_{o'}$ which is showed by single clock in the point $O'$ runs slower, but time $T$ , which is "distributed" through all reference frame $K$ and taken in the origin $O'$ of reference frame $K'$ runs faster (relatively to time $t'_{o'}$ that is in the origin $O'$ of frame $K'$). Time dilation comes by means of transfromation of (2) into:
$t'_{o'}=T \sqrt {1- {\frac {V^2} {c^2}}}$
It is correct that $T>t'$ and $t'<T$. It is also true that $T'>t$ and $ t<T'$. But that $t<t'$ and $t'<t$ from different points of view is nonsense.
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