Watching and Ignoring

WHAT WE’RE WATCHING

Mike Pompeo — To succeed, a nation’s top diplomat needs three things: an ability to persuade others he speaks for the boss, the freedom to accomplish the boss’s goals in his/her own way, and good working relationships with a strong support staff. Fired US Secretary of State Rex Tillerson finished 0 for 3. No one he met during his brief tenure could believe he spoke for Trump, the president never gave him room to work, he was dogged by criticism that he ignored senior staff, and a stunning number of State Department jobs have become or remain vacant. Will Mike Pompeo succeed where Tillerson failed?


South African Land — The investor class was happy to see Cyril Ramaphosa win control of the African National Congress in December and replace Jacob Zuma as South Africa’s president last month. It was less happy when South Africa’s parliament approved legislation on February 27 that allows government to address inequality by confiscating and redistributing land without compensation. That move raised the specter again that South Africa might follow Zimbabwe down the path to racial violence and economic ruin. There’s reason to believe Ramaphosa is just giving the left wing of his party something they want in order to preserve ANC unity ahead of elections next year, and that the policy will be used mainly to redistribute unused land to black farmers. But the hostile rhetoric from South Africa’s left and from right-wing commentators in South Africa, Britain, and the US is worrisome and worth watching.

A Big Bolivian Flag — On Monday, lawyers representing Chile and Bolivia will appear before the International Court of Justice to argue about whether Bolivia should have a coastline. Bolivia lost direct access to the sea following the War of the Pacific in the late 19th century, but the country has never given up the fight to regain that land from Chile. (It still has a navy.) To cheer on the lawyers, the country has produced a 124-mile long bright blue “flag of maritime revindication.” Yes, the flag, unfurled along a highway, really is 124 miles long. We’re watching this story not because we want to see if this patriotic show can help Bolivian President Evo Morales overcome popular resistance to a fourth presidential term, but just because that’s a really big flag.

WHAT WE’RE IGNORING

Political rebranding in France — In 2015, France’s center-right party formally known as the Union for a Popular Movement changed its name to Les Republicains, boosting its candidate to a third-place finish in last year’s presidential election. Now Marine Le Pen has proposed changing the name of the far-right Front National to Rassemblement National (“National Rally”) to improve its image because, she says, the name “Front National” has become a “psychological barrier” for voters. Maybe she should change the party’s name to “Le Pen.”

Stormy Daniels — The adult film star who alleges an “affair” with President Trump is set to launch a media blitz, and the early word is that parts of her story will be particularly unsavory. We’re ignoring this story because, even if it’s deeply embarrassing for Trump, and even if an exchange of cash is found to have violated election laws, the political impact (and impeachment risk) would be greater if it told a significant number of voters something they don’t already suspect about the president. The White House will watch the projected path of this Storm, but we have eyes only for Special Counsel Robert Mueller — and what he does and does not find.

The Costco Doomsday Kit — Still worried about Kim Jong-un or Putin’s invincible zig-zagging missile? Discount retailer Costco is now selling a food kit that can help you survive “an emergency or natural disaster.” For just $5,999.99, you can have enough freeze-dried broccoli, green beans, corn, dehydrated apples, egg noodles, quick oats, cornmeal, elbow macaroni, potato chunks, instant lentils, instant black beans, freeze-dried banana slices, blueberries, and carrots to feed four people for one year. It’s a wonderful opportunity to face End Times on a full stomach. More good news: You won’t have to share with the neighbors, because the kit is “packaged discreetly for privacy in shipping.” But I’m ignoring this product because the package weighs 1,800 pounds, and I already have a bad back.

Facebook unveiled plans for a new cryptocurrency and payment system on Tuesday. It's called the Libra, and it's not-so-modest goal is to "reinvent money," and "transform the global economy" so that "people everywhere can live better lives." Ambitious much, Zuck?

This is a huge political gamble, but the rewards could be enormous. Here's a quick look at the tradeoffs:

The risks: Facebook is asking its 2.5 billion users — and government regulators — to entrust it with something that's vitally important to people everywhere and a power that governments jealously protect: access to money. And it's doing so at a time when trust in Facebook and other big Silicon Valley companies is at a low ebb.

Whether it's a concern that Big Tech has become too powerful or that it's not doing enough to protect privacy or put a stop to fake news, it's a heck of a time to launch a new techno-utopian project that could give Silicon Valley much more power — including the ability to track not just what people say they like but how they spend their money.

Mark Zuckerberg understands this — the Facebook founder is setting up Libra as a Swiss-based non-profit that will be governed by an "association" of 28 tech and financial companies and non-profits of which Facebook is just one member. He's also promising that Facebook will not mix personal data with payment information, and to cooperate with regulators.

But this will always be Zuckerberg's baby, and by launching Libra, he's painting a big new political bullseye on his own back.

The payoff: If Libra can survive the inevitable political and regulatory storm (and convince its billions of users that they can trust the underlying technology and financial stability of the new cryptocurrency) the upside could be enormous.

How enormous? The Libra website claims that more than 30 percent of the world's population — about 1.7 billion people — currently lack access to traditional bank accounts. Many more pay steep fees to transfer money using traditional payment services. Libra, by contrast, promises access to anyone in the world with a simple smartphone — and to make payments as inexpensive as sending a text message.

Plug those capabilities into a social network whose user base is roughly double the population of the biggest country in the world, and the results could be revolutionary — not just for billions of people who would gain new access to financial resources, but for Facebook's business model, and for central banks and governments that have traditionally sought to control the flow of money through their economies.

That would be a techno-utopian dream come true, but it's a power that governments won't willingly surrender.

If Willis's story on Tuesday about Argentina being plunged into darkness after a nationwide power failure didn't get you packing a flashlight and checking that your car has a full tank of gas, this one should. Over the weekend, the New York Times said anonymous US officials had revealed a US campaign to plant "potentially crippling malware" inside Russia's power grid "at a depth and with an aggressiveness that had never been tried before."

Quick thoughts:

This is a big provocation. It's the cyber equivalent of mining a harbor — an aggressive move that falls short of actual conflict but sends an unmistakable message: mess with us, and we'll mess you up.

The leak was probably intentional. The campaign fits with the new US strategy, launched under the Trump administration, of trying to deter cyber adversaries like Russia, China, and Iran from hacking its critical infrastructure. By disclosing the US campaign, US officials are effectively telling Russia (and by extension China and Iran), that they've got a loaded gun cocked and pointed at their economies.

That's dangerous. People — and governments — may not always behave rationally when a gun is pointed at their heads. Russia might be even more inclined to lash out. And unlike more conventional forms of conflict, cyber isn't a domain where the US can be sure it has an overwhelming advantage if push comes to shove.

It gets worse. The Times said US cyber officials described a "broad hesitation" to go into details of cyber operations against Russia with President Donald Trump because they feared he might cancel it or tell other governments about it. Among other things that are disturbing about this story, a lack of communication between the President and US cyber warriors could send mixed signals that further embolden US adversaries.

It's no secret that cyberattacks are becoming more commonplace. But where do most of them originate and what countries do they target most? The graphic above shows the most significant offenders and victims since 2006. Hackers in China, Russia, Iran, and North Korea account for three-quarters of all major attacks. Nearly a fifth of attacks, meanwhile, have targeted institutions or companies in the United States.

(At least that we know of: this chart highlights known attacks on government agencies, tech companies, and other operations that caused more than $1 million in economic damage. But many cyberattacks are never disclosed, and some countries are more transparent than others, so consider this a cross-section of a much bigger — and more disturbing — picture.)

China's outrage against Swiss bankers – Paul Donovan, an economist at UBS and a former colleague of your Wednesday Signal author, ended up in hot water last week after he wrote that an outbreak of swine fever that had pushed up pork prices in China, "matters if you are a Chinese pig. It matters if you like eating pork in China. It does not really matter to the rest of the world." The Swiss bank put Donovan on leave after a nationalist tabloid picked up the story, unleashing a torrent of invective from angry Chinese citizens, industry groups, and clients. Although we're a bit puzzled at the intensity of the outrage, we're following this story closely. The anger of 1.4 billion people is a powerful thing, and if the US-China standoff over tech and trade continues to escalate, US firms could soon find themselves on the receiving end.

What we are ignoring: Trump on ICE

Trump's Deportation Threats – As Donald Trump revved up his official reelection campaign in Florida on Tuesday, he took to Twitter to vow mass deportations of "millions of illegal aliens" starting next week. We are ignoring this for two reasons: First, it looks more like a campaign trail stunt than a well-thought-out plan — the scale of deportations Trump envisions would require massive logistical coordination, and it's not clear that Immigration and Customs Enforcement (ICE) can deliver it — even if the federal force got help from local police, who may be reluctant to participate in mass arrests in their communities. Second, while this type of rhetoric may play directly to Trump's base, images of crying children torn from their parents will galvanize the president's opponents — and, in particular, the suburban women crucial to his 2016 victory. We're not ignoring the pain and trauma that mass deportations would inflict on immigrant communities if Trump delivers on this threat. We're ignoring a boast that's likely to prove a political bust.