United Socialist States of America? Not Quite

by: Vitaliy Katsenelson, CFA

I spent some time on the phone with a journalist discussing my thoughts on Russia and a story of my family coming to the US from Russia in 1991. Playing a devil’s advocate he would say – “Yes, things are bad in Russia but look at the U.S.?” He’d repeat that question time after time.

This made me realize how important it is to have an appropriate frame of reference when we evaluate things. Yes, things in the U.S. will get worse in the near future, especially if your frame of reference is the recent past, late 90's and 2000s (especially 2000s). I cannot argue with that. We spent money we did not have and now it is payback time. A number of companies were socialized by our government. So how are we different from Russia then?

The difference is night and day. The US did not do it for Robin Hood(ian) reasons. It is simply playing the role of lender of last resort. Only time will tell if this was a right or a wrong move. But the US government is reluctant to socialize its private sector, and will de-socialize its stakes in private enterprises as soon as it can. In fact, it has embedded incentives for financial companies that issued preferred stock to the U.S. government to buy it back or at least refinance it within five years, as the preferred dividend rate jumps from 5% to 9%. We are not Russia where permanent socialization is taking place.

We may have to drive the same cars for a longer time, watch TV on a 42 inch TV set instead of 64 inch or, God forbid, eat out less. Most of us don’t have to worry about being able to put food on the table. My kids (my son is 7 and my daughter turned 3 a couple of days ago) were both born in this country and will not have my frame of reference from growing up in Russia – I am thankful for that. But at the same time it is my responsibility as a parent to instill a proper frame of reference in them. They don’t know how lucky they are to be growing up here. I am planning to watch Pursuit of Happyness with my son (my daughter is too young) a terrific movie starring Will Smith that will hopefully make him appreciate what he has a bit more.

Even at our worst we don’t have to fear repercussions of being critical of our government or president. We cannot be told by our government what we can or cannot write. In August I wrote a fairly critical article of Russia and war in Georgia. I never submitted the article to be published. I was going to visit Russia in September and simply did not want to take the risk. I know I am a very small fish and read by only 20 people (on a good day). Call me a coward, but even a very remote risk of being persecuted for my thoughts while I was visiting Russia did not appeal to me. We have many freedoms that we simply don’t appreciate, because fortunately (and I mean fortunately) we have a different frame of reference. We’ve had freedom of speech in this country for a long time and unlike Russia we are not looking at nationwide unrest, dictatorship and loss of personal freedom.

My conversation with the journalist brought up another sad memory of growing up in Russia. I was eight, my mother took me to sign up for chorus. The teacher was filling out an application/questionnaire. One of the questions was “What is your nationality?”. I said I was Jewish. But I vividly remember guilt and shame when I said it. I did not know why, but I knew something was wrong with me being Jewish. That was anti-Semitism in Russia for you. The freedom to be who you are is another freedom that we take for granted.

Despite this being quite a very difficult year, there are many things we should be thankful for; we just need a different frame of reference.

Wishing you a very Happy New Year!