9.13.2019 Weekly Newsletter: Why We Fight
by Zach Marsh on Sep 13, 2019
Why We Fight
Sometimes you stumble across an article or news item which captivates your attention for the mere reason that it runs contrary to all of your preconceived ideas and experiences. For example, say you read this headline: “Boston Red Sox’s fan buys Derek Jeter rookie card for $1 million” you’d probably read at least the first paragraph. Similarly, if you read the headline: “Nancy Pelosi endorses Donald Trump for President” you’d have to read it to make sure you were reading an “Onion” article. This is sort of what happened to me, while eating my breakfast, Tuesday morning.
In Tuesday’s paper edition of the Wall Street Journal, George Soros wrote an opinion piece, in which he announced his support for Trump’s trade war with China. The sub-headline read, “His China policy is a great achievement. He may undermine it in pursuit of a deal with Xi Jinping.”
This is the same George Soros who was an initial donor to MoveOn.org, a political action committee, that has historically supported liberal candidates and causes. The same George Soros who donated more than $20 million to Democratic candidates in 2016. And oh, by the way, the same George Soros who is a multi-billionaire investor. So, when someone who’s political ideology appears to run completely counter to the President, and counter to other Wall Street investors, appears to support one of his initiatives, especially in today’s culture of divisive politics, I had to read the article.
In the first paragraph, Soros describes “Trump’s Trade War” as “a coherent and genuinely bipartisan policy…(and) rightly declared Beijing a strategic rival and placed Huawei, China’s multinational telecommunications giant, on the Commerce Department’s so-called ‘entity list’ as a security threat.” I was hooked. Soros’ main critique of China, in general, and Huawei, in particular, centers on China’s announced policy of a “social-credit system.”
Soros believes that the fate of a free and open society hangs in the balance with the expansion of the social-credit system, and that preventing Huawei from winning the 5G war is critical to that end. What is the social-credit system? Picture an even more dystopian Orwellian view of the future brought to life. I admit I was relatively in the dark about China’s policy, announced to roll out in 2020, until reading Soros’ article.
If you are curious to read more about it, The Nation wrote an article on January 23, 2019 laying out many of the details. You can find the article here, The Nation: Discipline and Punish. If you prefer the Cliff’s Notes version here it is:
- The program has been in development since 1999.
- In its infancy it functioned much like our own credit-scoring system.
- The 2020 rollout, as it is currently being beta-tested across 43 cities in China, will include “data from all social networks or smartphone apps…(and) sophisticated video surveillance.”
- President Xi has cloaked the program under the guise of providing enhanced security for the population.
- Ways to score or lose points in the system include failing to stop for a pedestrian at crosswalk (minus 3 points), letting chickens out of their coop (minus 10 points), pruning a neighbor’s tree (plus 1 point), taking an elderly person to the hospital (plus 1 point). These are just a few of the hundreds of ways to win or lose points.
- High scores may gain you access to better airline tickets, entry to better schools, and better lending rates. Lower scores will reduce your access to the above, plus have your name added to a public list for shaming.
One could argue, as I’m sure the Chinese government would, that living in a clean city where everyone goes out of their way to be friendly to their neighbors, is a society towards which we all could aspire. But it sort of conjures up images from the movie, “Pleasantville.” The movie centered on a pair of modern teens who were zapped into their TV set and into a “Father Knows Best-esque” TV show. All seems fine and dandy, with people more helpful and friendly than they are in modern times, until the kids realize that all is fine and dandy only so long as all follow the same rules and moral code.
And that is what the social-credit system is all about, obligating citizens to adhere to a strict social construct. What starts off as creepy quickly wanders into the realm of thought shaming and political manipulation. These are already arenas that we, ourselves, are struggling with in the modern era of social media. Frighteningly, it isn’t too much of a stretch to say that, without even a governmental order, Facebook and Google may already be leading a birth of a social-credit system here at home.
George Soros shines a light on what is at stake in the “Trump Trade War,” which we have been fighting for nearly 2 years now. As investors it is easy to get caught up in the day to day stock market fluctuations surrounding the tariffs. We become myopic and single-minded in our focus on gains and losses. But perhaps more is at stake than just stock market returns over the next 6 months.
In a democracy, developing a coherent message for the purpose and benefit of going to war—armed or, in this case, financial—is vital. The “Why We Fight” is as important as the “How We Fight.” War fought by a democracy is about sustaining the will to endure the struggle. The challenge for a democratic leader is to either shorten the conflict or convince the populous of its necessary purpose. Roosevelt knew this in WWII and George H.W. Bush understood this in the first Gulf War. The former won the initiative the latter narrowed the scope, each was effective.
Now it is upon Trump to more effectively articulate the reasons why we are fighting, then maybe we have a chance at winning this thing—with victory, not measured by the current account deficit, but rather by victory of freedom and democracy against the rising tide of totalitarianism and oppression. And maybe this battle for individual liberty needs to be fought on all fronts, foreign and domestic.
All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. Tax laws are complex and subject to change. Calibrate Wealth LLC, does not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Calibrate Wealth. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.
This material does not provide individually tailored investment advice. It has been prepared without
regard to the individual financial circumstances and objectives of persons who receive it. The strategies
and/or investments discussed in this material may not be suitable for all investors. Calibrate Wealth
recommends that investors independently evaluate particular investments and
strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a
particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Investing in commodities entails significant risks. Commodity prices may be affected by a variety of
factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii)
governmental programs and policies, (iii) national and international political and economic events, war
and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities
and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other
disruptions due to various factors, including lack of liquidity, participation of speculators and
Foreign currencies may have significant price movements, even within the same day, and any currency
held in an account may lose value against other currencies. Foreign currency exchanges depend on the
relative values of two different currencies and are therefore subject to the risk of fluctuations caused by
a variety of economic and political factors in each of the two relevant countries, as well as global
pressures. These risks include national debt levels, trade deficits and balance of payments, domestic and
foreign interest rates and inflation, global, regional or national political and economic events, monetary
policies of governments and possible government intervention in the currency markets, or other