This is one of those articles that make no sense to me. Why does everything have to be an ideological competition? The failure of the US is “bad for democracy’ only because people have made *everything* into some sort of ideological competition.
The US has a health care system that’s fundamentally broken. So fix it. I have this weird idea that maybe the US should deal with the COVID-19 situation not to make some sort of political statement, but because it’s the responsibility of a government to serve its citizens.
One thing that I find maddening is the lack of any real economic discussion about what’s going on. Because, Trump has decreed that it’s all going to be good before May, the Republicans cannot ask “so what if it doesn’t.” The Democrats aren’t much better since they just want to return to the era of Clinton and Obama, and that’s not going to happen.
Let me start with an obvious observation. Most Chinese households have money in the bank. Most Americans don’t. This means that if you have to shut down the economy for three months, most Chinese households have cash in the bank that can time them over. Most Americans (particularly young Americans) are in debt, and if they lose their job, it’s a complete disaster.
If you look broader that reveals another dirty secret about the United States. The United States is only able to maintain it’s standard of living through massive borrowing from China, Russia, and Saudi Arabia. As long as you had an interconnected economy this system would work. China would provide the US with cheap goods. Russia and Saudi Arabia would provide the US with oil. The US would print dollars to buy the goods, and then China, Russia, and Saudi Arabia would recirculate the cash back to the US.
But that system has collapsed. China is going to have to do massive economic restructuring, so it’s going to have to use its savings for domestic use. This completely cuts off foreign lending to the US, and so the US is going to make a lot of hard decisions. In particular, I do not see how the US can continue to spend nearly a trillion dollars a year on defense without destroying its economy the way that the Soviet Union did.
In previous economic crisis, the rest of the world bailed out the US. This is not going to happen this time. Basically, the military hawks have annoyed China and Russia enough so that they won’t supply funds, and the Saudis have their own worries since the oil is not going to last forever. One thing is that the US *could* undertake a program of recreating a manufacturing base, but that’s going to require trillions of dollars in investment. As far as science and technology, a lot of the science and technology infrastructure was provided by Chinese and Indian graduate students. If you remove the welcome mat from those groups because they are “spies” then you end up killing the US science infrastructure.
So the US is going to have to make some hard decisions. The good news is that I think the system will work, and that something sensible will happen. What is going to be tempting is to *blame China* and I worry a bit that things will go out of control. But the logical consequence of that road is nuclear war, and I think people have too much sense for that.
But the first thing that you have to do is to face harsh reality. I expect that this will happen by early June at the latest.
https://www.theatlantic.com/magazine/archive/2020/05/mcmaster-china-strategy/609088/
This is the type of nonsense that is destroying America.
So the basic misunderstanding is that China has absolutely no strategic interest or ideological interest in exporting its system of government. After a century of misery, China has found a political system that basically works for China, but if other countries want to have basically different political systems, that’s fine.
The problem is that by obsessing over China and this ideological battle that doesn’t exist, the US government is forgetting to fix America, and by not focusing on fixing the United States, the US is making extremely terrible errors that make the US system of government less attractive.
Right now, everyone is basically looking at the United States and wondering how the richest most advanced country in the world can’t get basic personal protection equipment for its hospitals, and a lot of this is that the US government has been spending far too much of its time in this crazy ideological battle rather than worried about the domestic economy.
And seeing everything in ideological terms also has some terrible impacts. First of all, if you try to make the world think you are perfect, you can’t deal with the fact that you aren’t. The US is forced to argue that everything about the US is good, whereas everything about China is bad. And the world just does not work this way.
Second, once you make everything about democracy versus authoritarianism, then you can’t learn from other people’s mistakes. The Chinese government severely mishandled the early phases of the COVID-19 outbreak, but because this is seen as “authoritarianism versus democracy”, there was a failure to realize that some of the things that China did wrong were also mistakes that the US government made. There was a period of about two weeks, in which you had a lot of bureaucratic denial and inertia, but that ended when Beijing realized that they were in a bad situation, and dealt with it. However, the factors that led to the slow response are *exactly* the same factors that existed within the US and EU.
Right now it’s difficult for me to listen to Trump because when I read the People’s Daily, I’m struck at how *rational* the Chinese government is about the post-COVID world. There appears to be a decision that the focus of the economy after COVID will be on anti-poverty, and that the goal will be to pull up the poor parts of China. The proposed economic measure seems sensible, and it’s sort of refreshing to have a political leader that can think in complete sentences.
By contrast, Trump is very delusional. He is wasting his time with conspiracy theories that were discredited months ago. The idea that the virus was some accident from the Wuhan laboratory circulated in Chinese social media in early February, and the Chinese government managed to deal with the rumours by having the director of the lab denounce those rumours and also by having the investigative journalist who broke the Wuhan story look into it and they found nothing.
One thing about the Chinese press is that the government has this tricky balance with the press and social media. They do not want the press or social media to be “kingmakers” but at the same time the Chinese government wants a limited about of press freedom so that *they* know what’s going on. This leads to a tricky balance, but in this case it worked. The whistleblowers in Wuhan were able to raise the issue to Beijing, and once they saw that there was a mess, they acted. It turns out to be a system that’s very different from the West, but it basically works for China, and if you don’t like it, then you don’t need to adopt it, China doesn’t care.
As a Chinese-American, I ultimately have faith in the common sense of the American people and that the American political system will correct itself. Rather than admit mistakes, Trump is trying to deflect blame for his own errors to China. I think this is a very highly dangerous game, because I’ve seen in Hong Kong how easily you can open pandora’s box, and how quickly politicians can lose control of public anger.
But I think that common sense will prevail, and that once people start asking questions about how the US got itself into this economic and political disaster, that something sensible will happen. At the same time, there are some stupidly dangerous people in the US government that are driving the US off a cliff, and I’m just hoping that some common sense will prevail.
The thing that China learned from the fall of the Soviet Union, is that you are better off developing your internal economy, and that it’s a bad idea to get too ideological. The mistaken lesson that the US learned was that the US system is “inherently superior” and that it’s not necessary to fix the domestic economic problems. The sad thing is that the political idiots basically shot themselves. By spending trillions of dollars on wars in Iraq and Afghanistan, and on 12 carrier battle groups rather than spending money on healthcare and education, the idiots created a situation in which the US has lost a considerable about of political and economic power, and they are still in denial about what a hard road its going to be to get the US out of this hole.
Trump seems to think that this is all going to be over by May. This is nonsense. Even if the virus trends down, you are still looking at trillions of dollars that are needed to fix the economy. There is absolutely no way that the US can afford to spend the money that it need to restructure it’s economy and afford a cold war with China.
The good thing about idiots is that they end up destroying themselves. The bad thing is that when they blow themselves up with a nuclear bomb, they can to a ton of damage in the process.
Well I’m back. It’s been a hell of a year, and it’s even getting more interesting. I haven’t posted in the last year, because things were just too depressing. But the world is changing, and I’ve gotten back in stride. I don’t feel good, but the old world has fallen apart, and I’m moving into the new one.. And then new one doesn’t seem that bad.
So I’ve reconnected with the MIT alumni network, and I’ve gotten into brokering medical supplies. One thing that has happened is that when I look at the world, I’m not longer depressed. I’m angry, but the good thing about anger is that it gets you motivated to do stuff. I’m looking at the complete mess that exists in the world, and the fact that people are dying because they can’t get basic medical supplies, and the sheer magnitude of institutional incompetence just causes me to go crazy.
The thing about makes me angry is that there is absolutely no freaking reason, we should be low on supplies. We aren’t talking about diamonds or plutonium, we are talking about equipment that shouldn’t be that hard to manufacture. So what I’ve been doing is to develop some networks to get supplies from point A to point B. And in order to organize this, I’ve come up with a set of forms that I’m beta testing. The idea is that someone that needs supplies or has supplies should be able to fill out a one page form that gets passed around.
There is some deep theory behind all of this. I’ve started with the forms and systems used by FEMA in the Incident Command System. However, the issue with FEMA is that it assumes that supplies are prepurchased and stockpiled. We are in a situation, where the stockpiles are empty so you have to order supplies direct from the factory, and that means that you have to include not just the supplies but the funding mechanism. So you need to put in not only the FEMA request but also something that looks like an ISDA term sheet.
I’ve got about five or six suppliers of medical equipment, and so part of the reason I’m creating a bureaucratic system is so that I can organize this effort. Right now I’m doing a quick beta test of the forms, and will publish them in two or three days, once I get some feedback.
There’s also some deep history. China has had a bad century, but one thing about history is that you have stories about how people organize in response to crisis. So I’ve been reading a lot of Mao Zedong to understand how to conduct a people’s guerilla war against the virus.
But what makes me angry is that we are in deep crap if I’m having to organize this. I’ve got a ton of very inflamatory thoughts and feelings about the COVID situation, but I’ll save some of that, since it can get pretty ugly and nasty if I let it all out.
Vastly different. History never repeats because history happens. Occupy 3.0 can’t be the same as Occupy 2.0, because Occupy 2.0 happened.
The big differences….
People are simply not as angry or upset as they were in 2014. The economy is picking up. Rents aren’t totally crazy. It’s not great, but you don’t have the level of frustration that you had in 2014.
The Chief Executive is not that unpopular. One problem that the previous CE had was that the pro-establishment people never liked or trusted him, and when the pan-democrats turned against him, he had no one. The current CE has the very strong backing of the pro-establishment camp.
You have large segments of the Hong Kong population that were fed up with Occupy 2.0 and can be expected to be against Occupy 3.0. The particularly segment are working class blue-collar people, bus drivers, construction workers, taxi drivers, policemen. These people are people that would vote for Trump if they were in the US. The thing about this group of people is that they are doing economically quite well. During Occupy, this group of people were not mobilized until late in the day, whereas they provide “silent majority” support for the government.
The students are leaderless. Occupy 2.0 were lead by two student groups. Scholasticism under Joshua Wong and the HK Federation of Students. Neither group exists now, because after Occupy, they had vicious internal fights that lead to them collapsing. Also the extradition bill is not something that arouses a huge amount of passion on students. It’s a “please sign this petition to save the whales” as supposed to “I will stand in front of the tank.”
The people that tried to organize this set of protests are the pan-democrats. These are middle aged sensible people with kids, jobs and mortgages. The trouble with having middle aged sensible people leading a demonstration is that they very quickly lose control to “angry youth” that start throwing bottles and trying to storm Legco. A lot of motivation for “angry youth” is rebellion, but they aren’t going to take orders from the sensible pan-democrats any more than from Carrie Lam.
The police have a lot better tactics. The big one is that the police have discovered that smart phones exist. In 2014, the demonstrators were able to coordinate using smart phones and chat groups, and the police had no idea that they were there. This time the police were monitoring the chat groups. Encryption and secret chats don’t work, because the purpose of the group is to broadcast a message getting thousands of people to come to location X, and if you limit the people that read, you defeat the purpose. Also, in 2014, the police had static formations (and I suspect that this comes from the 1967 riots). This time they used the static locations as base areas, but they were willing to move forward. Also, you had tons of reporters following the police, which helps with the media war, and some of those reporters were very pro-police. In the meeting of a police action, it’s easy to get really graphic pictures, but if you have sympathetic reporters also taking pictures, you get them from a different angle.
Will be posting questions from quora.
OK. I have a reputation for being grumpy. Let me explain why.
I’m trying to attend a blockchain conference (it actually doesn’t matter which one.)
Unfortunately, they only take eventbrite/paypal. It turns out that I do not have a Hong Kong credit card, because all the banks canceled my personal accounts because I do bitcoin. I do have a US bank account and debit card, but paypal can’t deal with the concept of a HK resident with a US bank account.
Also while I’m doing this, google realizes that I’m interested in fintech, so I get all these ads from banks talking about the stuff they are doing with fintech, and these happen to exactly the same banks that won’t open accounts for me. It’s really annoying to get an ad, that makes you angry, and having no way of writing back “this ad makes me even more angry, so please stop sending them.”
So I’m spending two or three hours trying to get blockchain. So when I start going to the conferences and dealing with VC’s and blockchain people, I’m often in a really bad mood. Having people talk about the wonderful future sometime gets annoying when you talk about the annoying present.
Also the main goal of customer service in that situation is to “deflect anger.” It turns out that I know why the systems are they way they are. I can tell you how the payment systems work, so explaining the system doesn’t help.
I’ve been unsuccessfully trying to do STO’s for a few years now. So I’ve got quite a bit of experience on what doesn’t work. One way I think about myself is that I’m like one of the Wright Brothers in 1899. I don’t have yet the gasoline engine that will let me build an airplane, but I’ve been building gliders and wind tunnels. What I’m trying to build right now is a “virtual box” that you can put stuff in.
So let me talk about the two types of STO’s and the two legal structures for them. So suppose a thief breaks into my house and steals some paper from my safe. They could steal cash, or they could steal bank statements. If they steal cash, then the cash is gone. If they steal my bank statements, then that’s annoying but the thief doesn’t get very far.
So that results in two type of tokens with two types of legal structures. For non-negotiable tokens, you’d want a GP/LP structure with the tokens corresponding to LP shares, and with the GP’s to have power to order forced transfers. For negotiable tokens, you’d want a trust with the holders of the tokens being the beneficiaries. These turn out to be radically different structures, but cash and bank statements are both paper, but they are very different types of paper.
I’m more interested in non-negotiable tokens, because my interest it to raise money for small companies and for BRI projects. Once you deal with stocks and bonds, it is going to be extraordinarily difficult to get negotiable tokens working, not so much because the tech is hard, but because the government really, really, really does not want negotiable tokens for stocks and bonds to move money, and they’ve spent decades making sure it doesn’t happen. If you try to move stocks and bonds into a negotiable box, then the government will invalidate the transfer. Yeah, I can try to fight them, but why bother, I’d just use bitcoin.
Negotiable tokens might be quite useful for moving art and maybe real estate. Art is cool. I look at things from a physicist’s eye. So when I look at a HK cash bill or coin, I see art. When I look at a painting, I see money. It turns out that they are the same thing for the same reasons. If you are a famous artist in this part of the world, you are basically printing money, because one of the main uses of art is to store and move money quietly. The difference between art and real estate on the one hand and stocks and bonds on the other is that you can “possess” art and real estate. I can take a piece of art and hang it somewhere, and if I’m setting in the apartment, then I’m possessing the property. I can’t possess stocks and bonds. If the government says that I don’t own the stocks and bonds, then I don’t own the stocks and bonds. Once you try to STO art, I’m pretty sure that the government will try to crack down on negotiable tokens, but in the end I think they’ll fail.
Now that there interesting in STO projects, I’m seeing a lot of people looking for services for STO’s, and some of them are making the same mistakes that I’ve seen in the past. It’s natural to make the same mistakes, because there are some things that seem simple and logical, but just don’t work.
A lot of my thinking on STO platforms have to do with two sets of failed attempts:
- Otonomos – This was a failed effort to put corporate filings on the blockchain. The people involved were motivated and very will meaning, and I have personal experience as a client. But it turned out to be a mess, and I had to spend a lot of time and energy unwinding the mess that it caused me, but it was good experience because I learned what doesn’t work.
- Asset tokenization platforms – There are a lot of asset tokenization platforms that raised money via ICO. Right now, it looks like the one that is heading in the right direction is polymath.
The fact that I end up spending a lot of time with tech that doesn’t work is useful stuff, and I don’t mind too much. A few years back, the Company Registry had a pretty nifty interface for entering in corporate filings. It turned out that after six months, the CR found out that their system had giving them garbage, and I had to refile.
So the natural effort is to provide a single end-to-end solution that’s easy to use and integrates with everything and saves time and energy.
Here is why it doesn’t work…
- Vendor lock-in. What happens if the platform goes down, or is abandoned? In my case, Otonomos went out of business, and then I had to spend the effort finding another corporate filings company, and do transfers. Also, because I’m busy, it turns out that my filings were late, so I had to pay a lot of late fees. One of the situations is that if I could keep track of my filings, I wouldn’t need to pay a vendor to do it.
- The importance of human beings – A lot of these services try to remove the human element. However, with financial services (even minimal ones) you want to increase the human element. I’m now using a corporate filing service (ask me which one if you are interested) that consists of one human being during everything by hand with paper. The important thing about having a human being is that he knows me, and knows when to ping me that something important needs to be done.
- System integration. Having an integrated system with an “easy to use” front end, in fact causes more problems. The problem is that people have existing systems, and it turns out that trying to integrate your new system with old business practices causes more time and effort than anything this can possibly save. For example, Otonomos had a corporate dashboard which allows the board of directors to do resolutions online. Great. What happens if you have one director that just refuses to do that? It turns out that even getting someone to fill out a form or log in is not a minor thing. And if you *require* people to use an interface, then it’s impossible.
- Lack of flexibility – The cool thing about paper is that it’s flexible. If I have to do something different, I take a pen and write something. Most every system that I’ve seen tries to optimize a single workflow, but if you have to do something outside that work flow then you are gone. For example, Otonomous couldn’t handle Chinese company names. Opps
One important thing about security tokens is that the “thing” that is being traded is not the actual object being traded. Suppose I give you a bar of gold. You now possess the thing of value. Now suppose I give you the keys to my apartment. You have possess the keys, but you don’t possess my apartment. If I hand you a bar of gold, I just hand you a bar of gold. Now if I’m handing you keys to my apartment, since the thing that I’m giving you is separate from the key, I can and should be able to rekey my apartment.
If someone hits me over the head, and takes the bar of gold in my bag, they win. If someone hits me over the head, and they take the keys to my apartment, I’ll just immediately rekey the apartment. If I can’t rekey the apartment, or if I can’t just throw out the old lock and get a new security system, then I have a problem.
So one thing about STO’s that makes it different from cryptocurrencies and ICO’s, is that any platform that I put the STO’s on are like the security system for an apartment. I should be able to move everything off system A, and completely reissue the tokens, and then everything goes forward.
The other mistake that people are making is that they aren’t generalizing the tech. Now suppose I want to type up a private placement memorandum. I just bring up Microsoft Word and start typing. If I want to calculate stuff, I just use Excel. The thing is that I have a program that can *only* type PPM’s or calculate cap tables, this is sort of useless. I might have a PPM that I want to fix in some random way, and I can do this with Word. If it turns out that someone needs to print something, I can do it.
Now as far as *why* people are doing it. It’s because of business model. Every VC wants to become the next youtube or google. The problem is that for anything business critical, you don’t want to get locked into youtube, and you can’t do everything on google. The trouble is that if you decentralize, then it becomes hard to figure out where the toll booth is.
tl:dr – It doesn’t make any sense to have a sandbox, when you are playing on a beach.
One thing that I find fascinating is that there is this obsession in Hong Kong with regulatory sandboxes, when they in fact make absolutely no sense in Hong Kong.
So let’s start with where this obsession comes from, and this comes with British colonialism. One of the problems with the HK bureaucracy is that it has a “colonial mindset.” In the colonial era, all of the important decisions were made in London, and the job of the HK government was to carry out directives that were made elsewhere. The unique thing about the Hong Kong government is that the colonial institutions and mindset survive to this day. The Hong Kong government is simply incapable of doing anything new and original, and so when they talk about innovation, they have to just copy somewhere else. And so when Mother England comes up with a “regulatory sandbox” the natural reaction is to try to set one up in Hong Kong.
But Hong Kong is just different from London and Singapore One of the difficulties that the English had setting up a bureaucracy in Hong Kong was that they were just overwhelmed in the 1950’s. In the 1940’s, the British figured that they would be turning Hong Kong over to Chiang Kai-Shek after the war. By the time it turned out that this was not happening, they had to deal with millions of refugees from the Mainland. The response on the colonial government was to just figure out what they could regulate, and this minimal the role of the government out of necessity. By a happy accident, this resulted in a optimal balance between order and chaos, and all of this was frozen by the Sino-British Joint Declaration in 1984 and the Basic Law of Hong Kong.
So the net result for financial regulation, is that in London and Singapore, you start by regulating *everything* and then deregulating certain parts. So you absolutely *need* a regulatory sandbox because everything is regulated. In Hong Kong, everything is not regulated, so you don’t need a sandbox.
Once you see this, then it becomes obvious how crazy the SFC’s proposals on using a regulatory sandbox to regulate crypto-exchanges is. So crypto-exchanges are not regulated *and legally cannot be regulated* under HK law. So you create a sandbox so that the cryptoexchanges can be voluntarily regulated, and then you provide exceptions to reduce regulations that they can opt-out of regulations that they voluntarily opted-in. You provide an exception to regulations that are exceptions to non-regulation.
Huh?
The other thing is that there is a huge amount of paternalism here. We want to protect the consumer. This assumes that the regulators understand the consumer which isn’t a good assumption. People ask, who is going to protect grandmothers from getting ripped off, and my answer is that a grandmother’s grandkids are going to protect her better than any regulator can.
bitquant 