Can manufacturing jobs come back to the US?

There have been many political figures in the US campaigning for being the next US president, especially on the Democratic Party's side. The Democratic Party just had its first round debate on the 26th of June and the candidates spoke out about their ruling plans for the US if they get elected. After watching the debate, I think that the Democratic candidates agree on many issues and only disagree on some minor details. The main focus of the Democratic Party is to narrow the wealth gap in the society. Many candidates propose higher taxes on corporation and super wealthy individuals and provide more social care including higher minimum wages and better health care for more people. Moreover, some candidates propose creating more jobs and bringing in back manufacturing jobs to the US. In the previous presidential candidate, the current president, Donald Trump, also promised to bring back manufacturing jobs. However, how likely are these manufacturing jobs coming back to the US?

I completely agree with the Democratic candidate, Elizabeth Warrant, that corporations are only loyal to profits. Therefore, if they can make more money by keeping manufacturing jobs in the US, they will do so. Then the key question is whether companies can make more money if they bring back manufacturing jobs to the US or not. I do not think that any company can make more money from bring back manufacturing jobs under most circumstances. There are only two circumstances which I think can bring back the manufacturing jobs to the US. The first circumstance is to set up tariffs to make the prices of importing from overseas and manufacturing in the US equally expensive. The other circumstance is to give subsidies to companies and make manufacturing in the US more attractive. Both options are bad. Even if we ignore the potential political tension caused by these acts, these two methods are not going to produce an economic efficiency in the US economy. The US economy has much greater advantages in other fields, especially in the cutting edge technology; focusing too much on the basic manufacturing sector can weaken the investment in the field which the US is much better at or needs much more.

Overall, bringing back the manufacturing jobs to the US makes much more political sense than economic sense.

The come back of cryptocurrency

The price of Bitcoin is heading to $13,000; many commentators believe the ongoing price surge is boosted by the marktet enthusiasm surrounding the Facebook's ambition in the cryptocurrency field. Facebook is not an ordinary player in the cryptocurrency world and it is one of the leading tech companies in the world. This definitely gives the cryptocurrency believers a lot more confidence. Moreover, some people think that some investors begin to use more cryptocurrency as a safe asset to counter the highly uncertain global political and economic environment instead of the traditional gold reserve.

However, as I mentioned previously, Facebook's plan about its cryptocurrency, Libra, makes it different from the traditional cryptocurrencies. The value behind Libra is based on fiat money that Facebook plans to use low risk assets including the US Treasury bills and deposits of various currencies as reserves to back Libra. Therefore, the value of Libra does not necessarily reflect the values of other cryptocurrencies. Furthermore, the uncertainty in the world is about a process of deglobalisation. The ideas of globalisation and removing borders are the same as the ideas supporting the cryptocurrency; therefore, a process of deglobalisation should potentially reduce the value of cryptocurrency.

Overall, I do not think that there is any fundamental factor change behind the rise of Bitcoin price.

Tax on the super wealthy

Several billionaires, including George Soros and Chris Hughers, back the plan of taxing on the super wealthy (the top 0.1%), they believe that this tax can be helpful to many aspects, such as environmental issue, health care and others. However, some billionaires dislike the idea for the obvious reason. Politically, the Democratic Party is fully behind this plan and several Democratic presidential candidates even propose some very radical plans about how they are going to tax the super wealthy if they can win the presidential election next year.

If an economy seems to be full of opportunities, then people will generally dislike this idea, because each individual sees themselves may get super rich one day in the future, then the heavy tax on the super tax is seen by people to be the tax on their futures. Therefore, high tax rates may not be popular in the rapidly developing economies, and high tax rates are not helpful for generating rapid economic development. However, in a stable economy where the economic growth is stable and relatively low, people have much fewer opportunities to climb up their social ladder, many people are locked in their social classes. Under such circumstance, the wealth gap within the society becomes a significant issue which can lead to social instability, and a tax on the super wealth which can narrow the wealth gap significantly seems necessary.

I think that the billionaires who back the plan see the necessity of the tax in the US society and they also want to guide how the government uses the tax collected from them.

Independence and accountability

There are some institutions which people want to be independent, such as central banks, because people want these institutions to focus their tasks without distraction from the outside environment. Being independent has some obvious advantages that they can focus on their tasks and maximise the benefits in long run. However, the disadvantages are also obvious. When making an organization completely independent, it is very likely to make it accountable. Then here comes the contradiction between independence and accountability. 

Sometimes we want both; however, this is definitely impossible. Accountability and independence are almost exactly opposed against each other. Accountability means some degree of punishment is possible when necessary. Punishment involves a cost of conducting the activity and it will have a negative impact on the punished party. Of course, giving the independent organisation the power to monitor itself and even punish itself when necessary is not helpful for holding the organisation accountable. Then another party is needed to be pointed to monitor the organization. However, being a regulator does not mean the necessity of being held accountable as well. Therefore, another party has to be pointed to monitor this regulator, this story will go on and on. This will either end up with a closed cycle or someone who has enormous power to monitor everything. 

Overall, it is impossible to be independent and held accountable at the same time. Only dictator is completely independent; on the other hand, a closed cycle means people hold each other accountable, but with some form of collaboration, no monitor is done and all are independent.

Sovereign Wealth Fund

The size of sovereign wealth funds has increased dramatically over the last decade; the top three sovereign wealth fund associations in terms of total assets are Norway Government Pension Fund Global, China Investment Corporation, and Abu Dhabi Investment Authority. Norway Government Pension Fund Global has total assets worth $1,072,840,000,000, according to Sovereign Wealth Fund Institute. Traditionally, sovereign wealth funds invest in relatively assets with low risks as an insurance for the circumstance of their economies not performing very well; however, recent years, some sovereign wealth funds are involving in some relatively risky investment projects, including venture capitals. In addition, the silicon valley has attracted billions of dollars from the sovereign wealth funds, many large tech companies including Tesla, Alphabet, Apple have received investment from these sovereign wealth funds.

We can see that definitely some sovereign wealth funds have switched their strategies. These funds' returns can be very volatile under the strategies. This is not necessarily good or bad, this will depend on the goals these funds are established for. If the fund is established for providing pensions for its population, then such strategy may be concerned to be too risky, as the fund is likely to fail to provide stable returns in order to pay pensions to its population. However, the funds can serve many different purposes. One purpose I think is something which can make a huge difference to the economy as well as the country. Sovereign wealth funds can serve as subsidies to support these innovative companies. Some innovative companies may not be able to earn sufficient profits to support themselves at early stage but have huge potentials to push the development in terms of economy, technology and various ways. Moreover, it can help the development in the sectors where both risk and benefits for the public (private benefit may not be high enough) are high, if lucky enough, the private sector may find a more efficient way to make itself richer as well as the public life improved under the support from sovereign wealth fund.

To conclude, the tradition way is investing against risk, and the new strategy which is carried out by some sovereign wealth fund I think is investing in future.

When should companies invest in 5G?

In the UK, EE has provided 5G services in several cities already and other telecom companies are also planning to release their 5G services later this year or early next year; furthermore, BBC used the 5G to live stream Trump's state visit to the UK. Meanwhile, in China, the state controlled telecom companies are launching 5G services in several major cities. However, some countries seem late to join the 5G party.

At the moment, Huawei is the leader in the 5G sector, and it can reduce the cost of building a 5G network significantly. This is why some of America's allies insist on using Huawei equipment to build their 5G networks. However, even with using Huawei's equipment, it is not cheap to build a 5G network to replace the current 4G network. Then despite the fast speed and other benefits brought by 5G, the companies and countries always have to analyse both the cost and benefit. Is it wise to build the 5G network right now?

For the private telecom companies, it is a difficult choice. Building a 5G network can help them to win the competition against those which are reluctant of providing 5G services; however, the risk is also obvious. First, in many Western countries, their governments are facing pressure from the US, so there is a probability that their governments may ban using Huawei's equipment, then the cost of building a 5G network will increase significantly and the time of finishing building the network is also likely to be delayed. Secondly, at the moment, the application of this technology is at its very early stage, the market knows 5G has a great potential but does not how exactly people can take advantage of this new technology. How long it takes for the market to figure out the most effective application of this technology is another uncertainty. If it takes too long, it means the telecom companies will suffer a long period of losses from providing 5G services. Thirdly, how many customers are willing to upgrade their services once the companies build their 5G network right now. At the moment, if someone wants to get 5G service, he or she does not only need to upgrade their services with their network providers, but also needs to get a smartphone which supports 5G and such smartphone is not cheap. So how many people are willing to pay for 5G services right now means how much cash these providers can get after burning so much cash for building the services.

However, for governments, the story is much more straightforward. Although we are unsure about how we are going to use 5G, it is almost certain that 5G has enormous potential. Governments should focus on the benefit of the entire population in the long run; based on this belief, they should invest in building the 5G network. Helping to build a 5G network can reduce the private sector cost, so it will be faster to provide 5G services for its population and potentially lower the costs for its population. More importantly, the application can only gain development when 5G is there and gets enough users. If the number of 5G users is very insignificant, it is unattractive for the private sector to invest in technologies and products relating to 5G.

Overall, I think that 5G network should be built as early as possible and the government should help the private sector to build the network by subsidies and/or other policies since the private sector may not have sufficient incentives to build a 5G network to cover the entire population.

Libra

Facebook has revealed its plans for a new digital cryptocurrency, Libra; before the release, the public already heard about this new cryptocurrency and speculated for months. More details will be released in the coming months. There has been a plenty of articles summarizing the details which have been released so far, so I am not going to do another summary. However, I still want to point out some important facts which interest me.

First, the mainstream payment companies (such as Visa, Mastercard, and Paypal) are backing this new cryptocurrency. This can certainly help to strengthen the popularity of this digital cryptocurrency once it appears in the market. Secondly, it seems the plan does not only attract the online platforms and stores (e.g Uber, Booking Holdings and Spotify), but also attract some telecom companies as well. Moreover, this plan also gets local businesses such as convenience stores involved. Therefore, it is unlike other digital cryptocurrencies which focus the online platform. Thirdly, it is not a much less revolutionary scheme. Although it adapts to the blockchain system, the network will be governed by a Geneva-based independent non-profit association called the Libra Association and the independent association is planned to be run by 100 "diverse" members with equal rights, and there have been 28 initial members including Uber, Lyft, Spotify, Mastercard, Visa, eBay and Paypal. Therefore, it is a relatively centralised system. Moreover, this digital cryptocurrency is not independent of fiat money, it is backed by a reserve of low-risk assets including US Treasuries and bank deposits in various currencies.

These three important facts I think make Libra more doable in the real world and more likely to seek approval from governments. However, I still cannot be optimistic about this plan, since I do not think any government would be willing to support any cryptocurrency and give away one of its important policy tool, money, though Libra is backed by the fiat money system.