Inflation and Government Financial Threats Will Fuel the Rise of Bitcoin

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While most articles predict mass adoption of cryptocurrencies by focusing solely on the merits of blockchain technology (which certainly looks promising), this article focuses on the two most immediate real-life events that will push the majority of the world toward lightning-fast adoption of cryptocurrencies, with Bitcoin predicted to be the biggest winner. 

Reason #1: Inflation as a result of flawed government response to COVID-19 pandemic 

Reason #2: Geopolitics, rise of government tyranny and debanking of dissenters, both domestic and international. 

Let’s start with the reason #1. While the current Administration blames inflation on Russia, the truth is inflation in the United States started well before Russia became the 24/7 topic on the news. While the economics of inflation are rather complex, the three main causes of inflation are: 

Demand-pull inflation: is the upward pressure on prices that follows a shortage in supply where too much money is chasing too few goods. This drives the aggregate demand for goods and services in an economy more rapidly than the economy’s capacity to produce. The government’s response to the pandemic caused both the increase of money supply (the government printed 40% of ALL U.S. dollar supply in 2021), and the economy’s reduced capacity to produce (the extended business lockdowns and vaccine mandates decimated the U.S. economy). All of a sudden, the U.S. economy (people) had 40% more cash, to spend on a vastly reduced amount of goods produced. The 7% inflation we are experiencing right now is only the beginning. 

Cost-push inflation: (aka wage-push inflation) occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Higher costs of production can decrease the aggregate supply (the amount of total production) in the economy. Since the demand for goods hasn’t changed, the price increases from production are passed onto consumers creating cost-push inflation. 

Built-in inflation: describes what happens when people expect inflation rates to continue going up for the foreseeable future. For example, workers demand higher wages to be able to afford those higher prices (this has been happening ubiquitously during the past two years, with multiple states passing high minimum wage laws). This makes inflation a self-fulfilling prophecy. If workers demand higher wages, the cost of production goes up, which means that operators will raise prices for the consumers, in order to maintain their profitability. 

The past two years have created the perfect storm for record-level inflation in the present and the near future. The annual inflation rate in the U.S. accelerated to 7.9% in February of 2022, the highest since January of 1982. 

As consumer inflation and asset inflation is rising to at historic levels, smart money is looking to hedge against this inflation with a liquid asset that has a hard cap on supply, and an independent monetary policy: Bitcoin and possibly other cryptocurrencies. 

The other reason why Bitcoin is a very attractive option in 2022, is because Bitcoin is apolitical, and no government, foreign or domestic can confiscate your Bitcoin or shut down your Bitcoin wallet. 

The biggest unreported story of 2022 is the impact Western governments’ actions will have on the U.S. Dollar and the Western banking system in general. 

Two events stand out: 

  • Canadian Prime Minister’s Justin Trudeau’s decision to invoke the never-before-used Emergency Act to outright confiscate citizens’ cash and freeze their bank accounts for protesting against his COVID-19 policies. This short-sighted action sent the message to Canadians as well as Americans and others around the world, that the government has the power, authority, and most important, the will to shut down your account and take your money, for simply protesting. This is outright tyranny. 
  • The U.S. and Europe-led sanctions against Russia. In another shortsighted move that will have long-lasting effects, the U.S. and EU confiscated Russia’s FX reserves, confiscated Russian citizens’ moneys and assets in the Western hemisphere, and kicked Russia out of the SWIFT banking system. These actions have effectively sent a unified message to the world: The U.S. Dollar is no longer an asset; it is now a liability. It can get confiscated and taken away at will, for going against the will of the U.S. government. 

The largest impact of these sanctions (which still have not stopped Russia’s invasion of Ukraine), is that they undermine the credibility of dollar debt as an international savings device. For decades, the dollar has been considered the safest form of collateral in the world for two reasons. First, because most of countries of the world have to buy U.S. dollars, in order to purchase energy (Petrodollar). Second, because the U.S. dollar has never been used as a weapon. 

It might have looked like a smart move to weaponize the U.S. Dollar and the Western banking system against Russia, but with its actions, the Biden administration has officially forced the de-dollarization of the world. 

At the international level, other countries are watching with increasing concern how the U.S. or Europe will confiscate their reserves, default on their debt, and punish their citizens by stealing their monies and assets, if these other countries dare disagree with U.S. or Europe’s foreign policies. 

The message was heard around the world: if you ever want to have a dissenting opinion internationally, your country will get punished, and potentially canceled out of the monetary system. 

Their solution is understandable: they will de-dollarize their assets and wealth. They will sell their dollar reserves, divest their investments and holdings away from America, from Canada, from Europe. 

In divesting away from the U.S. dollar, other countries and governments have two options: align with a different dominating currency (i.e. China’s Yuan), or decide on an apolitical asset that is out of reach and cannot be controlled by other countries and politicians; something that cannot be taken away by anyone else: Bitcoin. 

Efforts of moving away from the U.S. Dollar system and breaking the U.S. Dollar’s dominance in the world are already underway. In a devastating blow, Saudi Arabia indicated they are now considering pricing oil in Chinese Yuan as opposed to U.S. Dollars. This might have barely made the news, but it could be the final deathblow to the Petro Dollar system – the very system that had backed the U.S. Dollar ever since President Nixon took the Dollar off the Gold Standard. This action alone will severely reduce U.S. influence in the world in an unprecedented way, if acted upon, as it is estimated that almost 80% of all global oil sales are priced in dollars. 

While choosing a different currency as the dominating trading tool of the world could happen in the short term, the reality is most countries are exploring ways of introducing their own national cryptocurrency (i.e. digital dollar, digital yuan). However, all those national cryptocurrencies are expected to be issued by each country’s central bank, giving their respective governments an even tighter control over their currencies. 

While I do not believe Bitcoin will become the world currency anytime soon (if U.S. Dollar falls, it looks like the Yuan will take over), I do believe Bitcoin will become an asset used by most countries and individuals to store their wealth, as opposed to FX accounts, Swiss bank accounts, and other financial instruments. This makes sense for all the reasons listed above: Bitcoin is apolitical, no one country can control its price, no governments control access to Bitcoin in order to kick others out, and equally as important, it is liquid and has a hard cap on its supply – no one can dilute it. 

With individual citizens as well as governments all over the world looking for alternative ways to store their savings and assets, in this new world of financial threats and monetary cancellations, Bitcoin could be the biggest winner, with a large portion of citizens’ and countries’ financial reserves looking for a safe home. 

However, before the adoption of a cryptocurrency as a potential world reserve currency there are formidable problems that must be overcome and the required change in infrastructure are intimidating. All foreign-exchange marketplaces where the dollar is the world reserve currency would have to be necessarily modernized, and supporting a new reserve currency can’t be achieved overnight. 

There are also numerous problems and obstacles associated with any cryptocurrency serving as the world reserve currency that would preclude them from being a sovereign, effectual, and universally acknowledged as the unit of exchange. A cryptocurrency system based on blockchain is fundamentally 

burdened with high-tech problems (i.e.: ledger size, power consumption, limited supply, computing power, etc.), price volatility and anonymity relating to regulatory issues (banking insurance, taxation, and illegal usage) that must be overcome. 

In short despite its advantages, cryptocurrency as the unit of value replacing the U.S. dollar has a hard and long road to travel before its universal acceptance as the worlds reserve currency. 

Resources:

  • Trading Economics – United States Inflation 
  • CoinDesk – Inflation Worries Top Concerns before Fed Meeting 
  • Policy – Saudia Arabia Considers Using the Yuan instead of Dollar for Oil 
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Redrawing the American Economic Map

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The American economic map is going to be redrawn by American citizens in the coming months and years. The way governors and mayors handled the COVID-19 crisis, as well as the way they ran their cities/states for years before COVID-19, led to millions of Americans to re-think where they choose to live.

Most headlines about COVID-19 relief are about forbearance, economic stimulus ($1,200/person), loans, relief packages and grants, etc. Those are useful, but they do not begin to scratch the surface of the real issues that slow down our entrepreneurs and businessmen: high taxation and high regulatory business environments. The best way to support entrepreneurs and businesses is not through grants and handouts; it is through sound economic policies and lower taxes. The system and infrastructure in which they operate must be business friendly.
Oddly enough, the states that were historically the home to the largest companies in the U.S., and where entrepreneurs from all over the world would risk everything to go to, such as New York, California, and Illinois, have grown over the years to be the least business-friendly states in America.

COVID-19 ravaged our country, economy, and way of life, but most of the damage was done through the over-reaction from state and local governments. The severe, extended lockdown rules and the arbitrary (and unfair) mandates allowing some businesses to function, while others were forced to shut down, without any real and consistent reasoning, have forced millions of American citizens to seriously rethink the state they live in.
Most professionals used to flock to places like New York and California because they provided many tangible career advantages, most important of which are opportunities and talent. Whether you wanted to pursue a career in finance, technology, medicine, arts & sciences, entertainment, the food industry, etc., states like California and New York dominated the pool of talent, and career opportunities. But not anymore.

It is estimated that half a million residents left New York since Coronavirus lockdowns started in March, and most of them refuse to come back. United Van Lines CEO Marc Rogers claimed that 61% of residents moving out of Manhattan are earning over $100,000 annually. According to a report from New World Wealth and Webster Pacific, the combined wealth in New York City fell by $336 billion in the 12 months ending June 30.

Meanwhile, tax collections in New York City dropped 46 percent in June, even while revenues generated in other parts of the state and the country recovered. That decline follows a 32 percent drop in May and a 23 percent decline in April. In May 2020, the state’s comptroller said the economic devastation facing New York had not been seen since the Great Depression.
Billionaires such as Carl Icahn (NY), Leon Cooperman (NJ), David Tepper (NJ), Paul Tudor Jones II (CT), Eddie Lampert (CT), Barry Sternlicht (CT), and President Donald Trump (NY), and many others, all left New York and the Northeast for states like Florida, where taxes are much lower and business regulations are significantly less stringent.

California is no better. California entrepreneurs and businesses are leaving the state by the thousands. In just 2018 and 2019— which were some of the highest economic boom years— almost 800 businesses said goodbye to California. Another 13,000 companies have left between 2009 and 2016.

Charles Schwab also announced they will leave San Francisco next year. Joe Rogan, the top podcaster in the world recently moved his headquarters in Texas, citing the insanity that California and Los Angeles have turned into, especially during the pandemic lockdowns. Elon Musk announced he is building a $1bn Tesla facility in Texas, after he was harassed by California officials for refusing to shut down his business in California. Musk intends to move all his operations from California to Texas in a short period of time.
The reasons for all these? Economics and draconian lockdowns.
Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth” ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures.
States like New York, New Jersey, Maryland, Illinois, and California consistently rank between places 45-50 out of 50. They are officially the least entrepreneurship/business friendly states in the U.S. On the other hand, states like Texas, Wyoming, Nevada, and Florida consistently rank in the top 5 states in America, as they provide the top environments and incentives for businesses and entrepreneurs.

Therefore, it is no coincidence that the 5 states at the bottom of the index have lost a total of $28.3 billion in Adjusted Gross Income, according to the latest IRS reports, while states like Texas and Florida have gained most of that income.

States like California and New York are headed for economic despair unless they do a complete reversal of their policies. Especially after COVID-19, for two reasons: First, people are not as tied to a place for work anymore as before – most people will not have to go back in the office like they used to do. The telecommuting trend growing in the US allows most people to choose where they wish to live, regardless of how far from work they are. And second, the draconian lockdown rules and the shutting down of businesses, woke up a lot of Americans who are not willing to put up with another government mandated lockdown, when they see other states in the country with much less stringent lockdown rules. It just does not make sense for them anymore.

Businessowners and entrepreneurs – research the best states to live and work and go there. The chaos that ensured from this lockdown created the perfect time to move to another state. Most rents and/or home prices have gone down, and people are more open to negotiating then before. Smart mayors and governors across the country are taking advantage of this fluid situation and are offering real tangible economic incentives to move to their cities/states. If you are serious about your business and have long-term plans, stop letting politicians and bureaucrats bully you.

Governors and mayors – Instead of demonizing businesses and entrepreneurs, constantly fining and taxing them, creating roadblocks through over-regulations and policies, the local laws should incentivize the creation of new businesses, new jobs, new revenues. Use tax incentives to promote cities that need economic growth. There are plenty of examples all throughout America, of cities being completely transformed through economic policy.
Economics, at its core, is the art of incentives, and so are economic policies: how to get people to do what you want them to do. If you want them to stay in your state, you need to provide the right incentives. Places like California and New York show a clear lack of leadership, and a clear mismanagement of incentives. Instead of attracting the best and brightest professionals, the governors of these states are literally driving millions of people away. It is clear something needs to change. The only question is, how soon or late will it be?

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Colleges Tax-Exempt Status Needs to Be Re-Evaluated

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As COVID-19 disrupts virtually all aspects of society, it forces us to reinvent our institutions that serve us. One of the biggest impacts COVID-19 had on our education system is to expose the flaws of the US college system, and the overwhelming negative consequences it has on our country and our citizens.
Most people do not know this, but most of our colleges and universities enjoy the benefits of a 501©3 organization, which makes them tax-exempt. The reasoning for the tax-exempt status of these institutions is based on the expectations that they benefit our society through the following:

  1. Educated citizenry essential to democracy
  2. Highly educated, skilled, and productive workforce – critical to a nation’s competitiveness
  3. New Innovations and technologies that improve our quality of life, strengthen our security, and fuel economic growth

The above might have been true a few decades ago, but it does not describe reality anymore.

  1. Our students are not educated anymore – they are indoctrinated. The average ratio of liberal to conservative faculty at most educational institutions is 17-1. There is no real diversity of thought, and if someone dares disagree with liberal logic, they risk being ostracized. Most students come out of colleges with tangible hatred for the United States and a noticeable misunderstanding of the capitalistic system that advanced our world, technologies and economies to where we are today. A quick search on Google will produce millions of results detailing the myriad of times conservative personalities were boycotted and banned from appearing at universities in schools. There is little to no freedom of thought: adhere to the liberal logic, or there will be consequences.
  2. Most colleges and universities teach a highly outdated curriculum, in a highly outdated way. Our students graduate highly educated in terms of classes and degrees, but with little relevant skills for our current economy and business environment. First, most colleges/universities must constantly update their curriculum to stay on top of the latest progress in the marketplace, which is virtually impossible under the current educational system. Second, most curriculums must take advantage of technology, and its speed and computational capacity. Most degrees should not take 4 years. They could easily be learned by students in 18 months with a laptop and Wi-Fi connection. As a society, we must seriously question whether colleges/universities create a productive workforce anymore.
  3. Our higher education system is supposed to contribute new innovations and technologies that improve our quality of life, strengthen our security and fuel economic growth. Again, this is no longer true.Instead of strengthening our security and fueling economic growth, the student debt colleges burden our students with acts like a cancer on our society, slowly paralyzing our young people and their drive for a better life. Instead of graduating college ready to take on the world and achieve their dreams, our students graduate, move in with their parents and feel lucky to get a job that allows them to pay back their student debt over one or two decades.

Because of these reasons, most universities and colleges should no longer enjoy the tax-exempt status of a 501©3 organization. They no longer meet the standards. Their net externalities to society have turned negative and no longer serve our nation’s best interests.

Instead of using their resources to reinvent the higher education system to serve our students and enable them to drive our nation to prosperity, colleges and universities are creating a generation of overly educated, debt-ridden hopeless citizens. They must be put under scrutiny and forced to explain why they should enjoy financial benefits at the expense of the taxpayer, when they no longer serve our country and citizens.

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Congress Must Pass the SAFE Banking Act

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We are now approaching an important and pivotal point in the future of the US cannabis industry and things must keep changing fast. The often discussed and rarely understood SAFE Banking Act is now moving closer to becoming by far the most important piece of federal legislation regarding the cannabis industry that has ever been approved by the US Congress.

THE SAFE BANKING ACT

It is officially named HR 1595 The SAFE Banking Act of 2019, and it allows banks and credit unions in the US banking system (almost all in the US) to conduct commercial banking with cannabis companies for the first time.

Presently most cannabis companies do their banking with actual paper currency. No checks or cards—they pay their employees, vendors, rent and taxes with bags of cash. It is dangerous and impractical. Most importantly, this lack of financial infrastructure is as a serious impediment to the cannabis industry. It makes it difficult to leverage loans, raise capital, deposit cannabis stocks with broker dealers and list on the major exchanges, among many others.

The SAFE Banking Act does not, in itself, end cannabis prohibition. That will require additional legislation or an official rescheduling of Cannabis, which seems likely in 2020. Also, it does not get rid of US Tax Code 280E, which prohibits claiming deductions or credit for any business involved in cannabis or hemp.

Nonetheless, the passing of the SAFE Banking Act will accomplish something very valuable: it is universally considered to be extremely positive for the US cannabis companies and industry generally and it will create enough momentum to effectively bring the end of prohibition with an immediate rescheduling and passage of the STATES Bill allowing states to decide on cannabis (just like alcohol after prohibition in 1937).

The stamp of authenticity and credibility of the US Congress will make it so that cannabis will not be perceived as an illicit industry under the risk of unpredictable federal intervention, but as a brand new industry with virtually limitless demand and uses in our society, from healthcare, pain management, to mental health, clothing, food, and many more.

THE CURRENT STATE OF THE CANNABIS MARKET

Despite the current laws and the recent 6-month downturn in the public markets, the cannabis and hemp industries are booming, and will continue to do so for a long time. The THC/CBD industry growth projections are continuing to increase and are now as high as $400 Billion.

New Frontier Data (the authority in on the global cannabis industry), released their Global Cannabis Report: 2019 Industry Outlook, and estimated that the current global total addressable cannabis market (regulated and illicit) is at $344 billion. This only takes into account the approximately 263 million people worldwide (3% of total population) currently using cannabis.

The same study estimates 1.2 billion people worldwide suffering from medical conditions for which cannabis has shown therapeutic value. It is evident then, that the adoption of medical cannabis treatment by even a small percentage of the 1.2 billion patients would contribute to create an even more massive cannabis market.

These same patients are the reason why there must be high urgency for the Senate to pass the SAFE Banking. There is ever-increasing research detailing the drastic health benefits cannabis can have upon severe illnesses such as cancer, Alzheimer’s disease, ALS disease, seizures, etc. The sooner the cannabis industry is allowed to develop the right financial infrastructure, the sooner this industry will grow in size and efficiency, and become a much-needed commodity, accessible and affordable for anyone needing cannabis treatment and pain relief.

THE SAFE BANKING ACT STATUS

The voters have spoken in state after state, and current legalization is working. The American Bankers Association (ABA), the American Bar Association, 38 state attorney generals, bipartisan governors from 30 states, and many more are now supporting the federal legalization efforts. The 85-year period of cannabis and hemp prohibition has been exposed as senseless, and not based on facts, and legalization is happening at a fast pace.

On September 25, 2019, the US House of Representatives passed the SAFE Banking Act with overwhelming, bipartisan support (321 to 103). The next step is for Senate Majority leader Mitch McConnell to bring it to the Senate floor for a vote.

THE SENATE MUST BRING THE SAFE BANKING ACT BILL TO A VOTE

Senator McConnell has a long-standing anti-cannabis stance, but he has been an ardent supporter of the Hemp Farming Act of 2018 and he recently met with Cannabis executives in Southern California to tour facilities and consult with some of the industry’s top leaders. His interest in this industry must transform into action on the SAFE Banking Act, to at least bring it on the Senate floor for a vote, regardless of whether he actually votes “yes.”

This bill has significant support on both sides of the isle, and it will most likely pass – if a vote is allowed. This bill needs a simple majority (51 votes). It is then up to President Trump who has 10 days to sign or veto or let it become law without a signature.

The Trump administration has not taken a clear stance on cannabis yet, but some members of his administrations, such as AG William Barr and Secretary of Treasury Steven Mnuchin have indicated on multiple occasions that they would not prosecute cannabis businesses in states where it is legal.

IMPLICATIONS FOR THE PRIVATE MARKET: ENTREPRENEURS AND INVESTORS

The result of passage of this bill will be a cascade of capital flooding into the industry. Literally billions of dollars of global investment capital have been on the sidelines waiting for some definitive signal from the US government that it will allow this industry to grow and flourish. The passage and signing of the SAFE Act will be that signal—and the response will far exceed what most investors are expecting.

And the publicly traded cannabis stocks – particularly the US operators – will likely trade at significantly higher valuations and with much higher trading volume, allowing them to access capital markets for the billions that will be required to build the estimated $50 billion in infrastructure needed.

Until this bill passes, although not so obvious, the limitations and legal impediments the cannabis companies are dealing with allows them the perfect opportunity to build solid foundations for their businesses. This federal prohibition of cannabis forces entrepreneurs to only move one state at a time, as they become legal. This creates discipline, that would likely not be required if cannabis was federally legal – there would be too many options, too much chaos and confusion.

During this time, entrepreneurs must work on their business blueprint and fundamentals, because once the SAFE Banking Act passes, there will be an ultimate green rush in capital, investors, and new business activities. Lots of opportunities and capital, lots of chaos and riding high. Only the most prepared entrepreneurs and investors will be able to ride the wave the farthest and build legacy companies in this new industry.

Informed investors that have been waiting for the right time to establish a position in this dynamic new industry may be wise to take advantage of the current decrease in cannabis stocks and establish a position for the long term bull market in cannabis that is likely to come with the passage of the SAFE Banking Act and the probability of the complete end of cannabis prohibition in 2020.

We urge Congress and the Trump administration to pass the SAFE Banking Act as soon as possible; in the meantime, the smart entrepreneurs and investors must make use of every moment until then and make the arrangements necessary to be in the best position for when the green wave comes.

SOURCES:

• New Study Estimates the Global Cannabis Market at Over $340 Billion
• SAFE Banking Act – House Final Vote Results
• American Bankers Association – In Landmark Vote, House Passes ABA Backed SAFE Banking Act
• Mitch McConnell Meets with Marijuana Executives and Tours Cannabis Facility in Hushed California Visit

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The U.S Must Win the 5G Race by Any Means Necessary

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WHAT IS 5G?

5G stands for fifth generation cellular wireless. 5G will introduce three new revolutionary features in our world: exponentially greater wireless Internet speed (up to 100x faster than the current 4G), lower latency (will be more responsive), and the ability to connect lots of devices at once (for sensors and smart devices). To give an example, with 4G it would take 6 minutes to download a 2-hour movie. With 5G, it will take all of 3.6 seconds.

The race to 5G is a race that will dictate the world leaders of the next decade. For example, when US won the race to 4G in 2010, US experienced tremendous economic and job growth. 4G technology allowed the US wireless industry to increase related jobs by 84% from 2011 to 2014, which added $125 billion in revenue to American companies, with $40 billion coming from app stores. The first 4G phones in the US appeared in 2010, which enabled 4G applications that changed our world, such as Snapchat, Uber, AirBnB, video calls, etc. If the US would’ve lost this race, these industries, advances in technologies and revenues would have gone to other countries.

As the world’s long-time leader, the US wireless technology industry employs almost five million professionals and contributes $475 billion per year to the American economy. Winning the 5G race could cause those numbers to explode in the near future. Studies show that 5G has is likely to create almost three million new jobs— and add $500 billion to US economic growth. It is a big deal.

5G IMPORTANCE ON ECONOMY/WORLD/COMPETITION

As our world turns digital, wireless technology becomes the most important competitive advantage between nations. The race to 5G is the most important thus far because our essential infrastructure in this country will be built using wireless technology. Our civic, commercial and military life depends on it.

100x faster wireless speed than 4G and reduced latency, will allow us to exponentially improve our connection with all devices. This will create new opportunities in manufacturing, transportation, health care, education, agriculture, and more. 5G will enable new services that will drive economic growth and job creation for years to come.

Historically, Europe won the 2G era, Japan won the 3G era, and of course, the US won the 4G era. But now, China poses a severe threat to winning the 5G era, which will have countless negative implications for the U.S. At a hearing before the Senate Committee on Commerce, Science, and Transportation in 2018, Mississippi Sen. Roger Wicker stated that “failing to win the race to 5G would not only materially delay the benefits of 5G for the American people, it would forever reduce the economic and societal gains that come from leading the world in technology.”

5G-CURRENT AFFAIRS-CHINA-TRUMP-HUAWEI:

Although US has a great reputation for its mobile technologies, Asia is dominantly leading the way regarding 5G. Four of the world’s five most 5G advanced nations are China, South Korea, Japan, and India.

However, no one can tell with certainty who will win the 5G race. A 2018 Cellular Telecommunications Industry Association (CTIA) report claimed that US was in third place in the 5G race, behind China and South Korea, while a 2019 CTIA report claimed that U.S. now shares the number one spot with China. Other reports put China as the clear winner, with functional 5G technology by 2020, while they claim that the U.S. is 5 years behind. AT&T Chief Executive Officer Randall Stephenson declared in March 2019 that China isn’t beating the United States on 5G – but then again, AT&T deceptively branded their new 5G E network pretending it uses 5G technology, when it used the regular 4G technology.

While these reports do not provide any clarity, these investments will. Starting in 2015, China has doubled down on investments in 5G technology, and has outspent the US by $24 billion to construct 350,000 new, 5G-compatible cell towers. During the same time, the US has built only 30,000 towers.

The reason China has prioritized development of 5G is because they understand that the race for 5G is a race for world-wide control. Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, explained that China’s goal is to become the global innovation leader, and will do everything in its power to achieve this goal, legally or illegally.

One of the most important weapons for China to win the 5G race is the Chinese company Huawei. Currently, Huawei is spending a tremendous amount of resources on R&D (almost 40% of their workforce), most of which is dedicated to 5G. This is more than Microsoft, Intel or Apple’s R&D efforts.

In addition to superior dedicated resources, Huawei has a long negative history of operating outside the international law and order. Huawei currently faces bans in Japan, Australia, New Zealand and the U.S. over fears that China’s government could use its systems to spy on their countries. The CIA, FBI and NSA publicly warned against Huawei. The Pentagon banned Huawei and its products. Huawei has long been accused of espionage, and for doing illegal business with Iran. Most recently, Canada helped the U.S. arrest Huawei’s CFO Meng Wanzhou, and President Trump signed an executive order banning any US company from doing business with Huawei.

It is extremely important that President Trump, the U.S. and its allies stop or slow down Huawei’s influence and operational capabilities throughout the world. As stated earlier, winning the 5G race will allow the development of exponential technology and booming economic growth for those who employ this technology first.

CONCLUSION:

If Huawei and China win the 5G race, they will undoubtedly use this technology to win over allies and dominate the world for a long time to come. They will offer this technology to other countries in exchange for trade deals, military partnerships, and economic prosperity. They could also choose to offer this technology to all US enemies, except for the U.S., leaving our country unable to compete. Thus, it is of the utmost importance that the United States wins the race to 5G.

President Trump must continue to put pressure of China and Huawei, in an intelligent way. There is no easy answer to do so, especially with the US and China locked in a tariffs war. All trade talks between the two countries will definitely include Huawei as a bargaining chip.

The Trump administration, US industry and government leaders, and allies must work in concert to win this race, by any means necessary, and make sure that all (or most) other countries will receive the 5G technology from the US, rather than from China.

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