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Macro Thoughts

Oxford University professor Doyne Farmer traces his research exposing
risks in the financial system to the roulette wheels of Las Vegas.
In the 1970s, Farmer and two fellow physics students at the University
of California at Santa Cruz built a computer small enough to hide in a
shoe that helped them predict roughly where roulette balls would land.
At casinos in Vegas, they communicated with toe-controlled switches
and transmitters, also in their shoes, about what bets to make.
The gadget was legal, but they feared their winnings—about a 20%
return on their wagers—would lead to trouble. So they quit after a
couple of years.
“We were nervous about getting our kneecaps broken,” he explains.
Today, in a more bucolic setting—the Institute for New Economic
Thinking at the Oxford Martin School—Farmer is drawing on decades of
complexity research that began with roulette. After winning acclaim as
a pioneer of chaos theory, which helps explain the unpredictability of
complex systems such as the weather, he jumped into markets,
co-founding one of the early quantitative investment firms in the
1990s.
Now, Farmer and a band of central bank researchers are focusing on the
tangled web of global finance, using a tool of the natural sciences
called agent-based models to find dangers lurking in the system and
uncover ways to avoid them.
Agent-based models, used in fields from biology to sociology, are
bottom-up, simulating the messy interactions of hundreds and even
millions of agents—human cells or attitudes or financial firms—to
explain the behavior of a complex system.
The nonlinear interplay can produce unexpected phenomena, such as
economic booms and busts, providing insights into the causes of events
and the best responses.
Epidemiologists have successfully deployed the models for years to
test strategies to control everything from obesity to the spread of
infectious diseases, including the flu.
Central banks worldwide began experimenting with the agent-based
approach after macroeconomists and their standard models were
blindsided by the 2008 financial crisis. The European Central Bank,
where Farmer is a consultant, as well as central banks in Canada,
Germany, South Africa, and the U.K. have taken the lead in building
the models to research financial risk.
The U.S. Federal Reserve’s regulatory staff is also exploring their use.
Today, central banks mostly stress-test financial firms individually.
But agent-based models are giving regulators a better read by
accounting for the systemwide impact of shocks.
In the simulations, a shock to a single firm cascades through the
network of banks and asset managers, creating feedback loops that
significantly amplify the initial losses.
It’s the kind of contagion that a decade ago spread from the U.S.
subprime mortgage market through lenders, money managers, and
insurers, creating a liquidity crisis that doomed Lehman Brothers
Holdings Inc. and infected the global economy.
“There are efforts at central banks to integrate systemic stress
testing,” says Co-Pierre Georg, a research economist at Germany’s
central bank (but he doesn’t speak for it).
“The banks are highly interconnected and highly leveraged. We now know
from Lehman that if something happens to one big bank it can be
devastating to the entire economy.”
Farmer, 67, a gray-bearded scientist whose papers have garnered more
than 34,500 citations, can be a provocateur. He sees central banks as
a beachhead for a bigger challenge to mainstream economics. In a
coming book, he says economists in academia resist new approaches such
as agent-based models.
It’s a sentiment shared by Bank of England Chief Economist Andrew
Haldane, who’s helping lead the push for alternative research.
In 2017, Haldane called his profession “insular” for its subpar track
record in citing work from other disciplines in its academic journal
papers.
Farmer says the prestigious top five economic journals rarely if ever
publish worthy agent-based model papers, including his own. The
American Economic Review says papers are evaluated on their merits
without bias.
Many macroeconomists shrug off Farmer’s criticism. He’s a physicist,
they say, not an economist, and agent-based models have yet to provide
real-world verifiable results.
“In science you need a little bit of the rebel, and Doyne is
definitely that,” says Georg, who’s also the South African Reserve
Bank chair in financial stability studies at the University of Cape
Town. “He challenges you to think about your assumptions.”
Since missing warning signs of the Great Recession, economists have
improved their DSGE (dynamic stochastic general equilibrium) models,
which remain the workhorses of central bank forecasting. The approach
is top-down, aggregating the behavior of the economy into a few
representative agents—a household, a firm, and a government.
Most precrisis versions at central banks didn’t include a financial
sector because it wasn’t considered relevant in making aggregate
forecasts for measures such as gross domestic product and inflation,
says Frank Schorfheide, chair of the economics department at the
University of Pennsylvania and a visiting scholar with the Federal
Reserve Banks in Philadelphia and New York.
Since then, some economists have added a financial sector to capture
its impact on the economy. “There were certainly many aspects of the
financial crisis that were not on the radar screen of things to
monitor by central banks that turned out to be important,” Schorfheide
says. “People quickly learned what kind of data they had to collect to
understand what just happened and how to modify the models to provide
a better narrative.”
Central banks are turning to agent-based models to exploit the wave of
new business and social data sets. One of the most data-rich models
was built by Farmer and a team including Robert Axtell of George Mason
University in Fairfax, Va.
They used data from the U.S. Census Bureau, Internal Revenue Service,
housing sales, and mortgages to set the behavioral rules for buyers
and sellers in the Washington, D.C., housing market from 1997 to 2009.
The research, which showed that mortgage lending policy was the key
driver of the housing bubble, helped establish agent-based models as
an asset for central banks.
Bank of England researchers adapted the Washington model to the U.K.
housing market and found that an increase in the size of the
“buy-to-let” rental sector could boost the volatility of house prices.
Central banks in Hungary and Denmark recently published papers based
on the U.K. model.
In 2018, Grzegorz Halaj was a financial stability specialist at the
ECB when he used an agent-based model to study liquidity shocks. He
tapped balance sheet data for 130 of the largest banking groups in the
European Union and aggregated public figures for asset managers.
In the simulation, after lenders suffer a drain on deposits, those
without an adequate capital cushion cut their interbank lending. In
some cases they also dump assets at fire-sale prices. The price drop
spills over to fund managers holding the same assets, who then suffer
client redemptions and are forced to sell more.
That further depresses prices and amplifies the banks’ losses—in some
cases possibly leading to defaults, according to the ECB working paper
by Halaj, now a principal researcher in the financial stability
department at the Bank of Canada.
“It’s part of being a scientist to do things that are novel and important”
For Farmer, the upshot is that policymakers need to develop tests that
capture the panoply of losses that financial firms face. In an April
paper, Farmer and Alissa Kleinnijenhuis, a graduate student at Oxford,
describe a preliminary model they created of a systemwide stress test
for the European financial system.
 It reveals that financial losses from shocks could be three times
greater compared with a traditional stress test and that current
capital buffers may be too small.
“From the research, we can say unambiguously that there is some
amplification of losses from shocks, and I would be very surprised if
the amplification isn’t very significant, particularly in times of
distress,” Farmer says. “So there is a serious problem to worry
about.”
While regulators are far from creating a comprehensive testing model,
the BOE is already moving down this path.
It’s incorporating feedback loops in areas such as counterparty risk
and asset fire sales into its stress tests, said a group of three BOE
researchers—Marco Bardoscia, Marc Hinterschweiger, and Arzu Uluc—in an
email to Bloomberg Markets.
Germany’s central bank has built models to assess the magnification of
losses from contagion and is now discussing whether to include them in
stress tests.
Farmer, who grew up in the wide-open desert terrain of New Mexico, is
fond of chasing big, original ideas. “It’s part of being a scientist
to do things that are novel and important,” says Farmer, who likes to
explore the mountains of his home state with a backpack and a tent.
He leaped into uncharted territory in the 1970s, when he was a physics
graduate student specializing in cosmology at UC Santa Cruz. He
switched his focus to chaos and complex systems—a subject so new that
there were no professors who could teach it.
That didn’t deter Farmer and a small group of fellow students, who
formed the “Dynamical Systems Collective” to advise one another on
their dissertations.
The Santa Cruz students joined researchers across the country to
explain why there’s turbulence in the natural world. Consider the
weather. At the time, it was assumed that weather changes came from
external disturbances hitting the atmosphere.
The scientists showed that the volatility is generated from within,
caused by chaos, in which a small disturbance in the initial
conditions of a complex system is amplified exponentially; that’s why
the weather is so hard to predict.
The discoveries, which influenced fields from math to the social
sciences, were chronicled in James Gleick’s best-selling 1987 book,
Chaos: Making a New Science.
Chaos theory eventually penetrated pop culture. In Steven Spielberg’s
1993 film Jurassic Park, Jeff Goldblum plays a mathematician
specializing in chaos.
Farmer says Goldblum called him to help prepare for the role. “He
wanted to understand how a chaos scientist speaks,” he says.
In 1981, Farmer went to the Center for Nonlinear Studies at Los Alamos
National Laboratory—where freewheeling research was the norm.
Seven years later he started the Complex Systems Group at the lab in
New Mexico, bringing together theoretical scholars who helped develop
the nascent field of complexity studies.
After a decade at Los Alamos, Farmer was lured into investing.
Scientists helped plant the seed: At conferences, they’d ask him if
he’d considered applying his insights about the nature of chaos to the
stock market.
He didn’t know how to trade, but he knew how to make short-term
predictions in complex systems such as fluid flows. So he set himself
a goal of making $5 million in five years—a sum he’d substantially
surpass.
In 1991, Farmer started Prediction Co. in Santa Fe, N.M., with two
physicist friends, Norman Packard and James McGill.
After about five years, Prediction’s automated statistical arbitrage
strategy was earning risk-adjusted returns about five times the S&P
500’s.
The company traded proprietary capital for UBS AG, and the partners
sold Prediction to the bank for $100 million in stages, ending in
2005.
Farmer had left Prediction in 1999 with the financial freedom to
follow his own research interests. He landed at the Santa Fe
Institute, where he revised a paper showing how changes in market
ecology, composed of trend followers and value investors, can cause
crashes.
He says he had several conversations with legendary hedge fund
investor George Soros about the paper. When Soros’s Institute for New
Economic Thinking formed a partnership with Oxford in 2012, the
university hired Farmer to run its complexity economics program.
Complexity economists, while few in number, have a shared ambition to
knock holes in a cornerstone of DSGE models: rational expectations,
the idea that everyone in the economy understands each other’s
decisions, and they’re mutually compatible in their pursuit of their
self-interest.
Since the crisis, mainstream economists have added “frictions” to the
models—such as lenders denying loans to creditworthy businesses—to
make them more realistic.
“How do you communicate these results with the hierarchy? That’s the
big missing piece”
Behavioral economists have shown that people aren’t perfect
calculators and often make rule-of-thumb judgments, such as concluding
that rising markets will keep going up despite other evidence to the
contrary.
This is the kind of real-world behavior that agent-based models
capture. The agents are also programmed to behave differently to
express an economy’s diversity.
Heterogeneity is the hallmark of the models. In Farmer’s Washington
housing model, 100,000 households made varying buying and selling
decisions based on their income and savings.
One challenge unmet by complexity economists is understanding the
behavior of complicated humans. Economics is harder than physics,
Farmer says.
People don’t obey rules as reliably as atoms do. In his stress-test
model of the European financial system, for instance, he had to make
assumptions about what assets bankers might dump after their firms
suffered shocks.
“They will likely sell the most liquid assets because they will lose
less money,” he says.
Agent-based models also suffer from the black-box problem. The inner
workings are so complex, with thousands of agents running in different
directions, that it can be difficult to pinpoint the main drivers of a
model’s findings.
That doesn’t sit well with central bankers who need to know the
reasons behind their decisions, says Georg of the University of Cape
Town.
“With DSGE models, we know exactly how A follows from B, and I can
explain that to my governor,” he says. “But in an agent-based model, I
can’t do that. So how do you communicate these results with the
hierarchy? That’s the big missing piece.”
Farmer says it could take years of research to make the models a
mainstay of central banking. To achieve this, researchers will need
lenders to provide them with more detailed balance sheet data showing
the linkages among them—something European banks have resisted because
of privacy and cost concerns.
He says the payoff—addressing risks before they cascade into
meltdowns—seems worth the effort.
“Agent-based models can be a game changer,” he says. “I’m convinced we
can solve these problems.”

The ‘’Zeitgeist’’ of a time is its defining spirit or its mood.
Capturing the ‘’zeitgeist’’ of the Now is not an easy thing because we
are living in a dizzyingly fluid moment.

There are no more ‘’Quaaludes’’ and policy makers will no longer be
able to pop them. ‘’In prescribed doses, Quaaludes promotes
relaxation, sleepiness and sometimes a feeling of euphoria. It causes
a drop in blood pressure and slows the pulse rate. These properties
are the reason why it was initially thought to be a useful sedative
and anxiolytic It became a recreational drug due to its euphoric
effect’’.

Home Thoughts

“A dark and powerful portrait of one man’s will”. It deals with the
construction of the 404-foot high spire loosely based on Salisbury
Cathedral; the vision of the fictional Dean Jocelin.

Jeffrey Epstein ‘’had a collection of eyeballs on his wall’’
The point is that the smart phone is ubiquitous even in the furthest
corners of the World and we are all peering at a newsreel.

"Courage!" he said, and pointed toward the land,
"This mounting wave will roll us shoreward soon."
In the afternoon they came unto a land
In which it seemed always afternoon.
All round the coast the languid air did swoon,
Breathing like one that hath a weary dream.
Full-faced above the valley stood the moon;
And like a downward smoke, the slender stream
Along the cliff to fall and pause and fall did seem.

A land of streams! some, like a downward smoke,
Slow-dropping veils of thinnest lawn, did go;
And some thro' wavering lights and shadows broke,
Rolling a slumbrous sheet of foam below.
They saw the gleaming river seaward flow
From the inner land: far off, three mountain-tops,
Three silent pinnacles of aged snow,
Stood sunset-flush'd: and, dew'd with showery drops,
Up-clomb the shadowy pine above the woven copse.

The charmed sunset linger'd low adown
In the red West: thro' mountain clefts the dale
Was seen far inland, and the yellow down
Border'd with palm, and many a winding vale
And meadow, set with slender galingale;
A land where all things always seem'd the same!
And round about the keel with faces pale,
Dark faces pale against that rosy flame,
The mild-eyed melancholy Lotos-eaters came.

Branches they bore of that enchanted stem,
Laden with flower and fruit, whereof they gave
To each, but whoso did receive of them,
And taste, to him the gushing of the wave
Far far away did seem to mourn and rave
On alien shores; and if his fellow spake,
His voice was thin, as voices from the grave;
And deep-asleep he seem'd, yet all awake,
And music in his ears his beating heart did make.

They sat them down upon the yellow sand,
Between the sun and moon upon the shore;
And sweet it was to dream of Fatherland,
Of child, and wife, and slave; but evermore
Most weary seem'd the sea, weary the oar,
Weary the wandering fields of barren foam.
Then some one said, "We will return no more";
And all at once they sang, "Our island home
Is far beyond the wave; we will no longer roam."

CHORIC SONG
I
There is sweet music here that softer falls
Than petals from blown roses on the grass,
Or night-dews on still waters between walls
Of shadowy granite, in a gleaming pass;
Music that gentlier on the spirit lies,
Than tir'd eyelids upon tir'd eyes;
Music that brings sweet sleep down from the blissful skies.
Here are cool mosses deep,
And thro' the moss the ivies creep,
And in the stream the long-leaved flowers weep,
And from the craggy ledge the poppy hangs in sleep."

II
Why are we weigh'd upon with heaviness,
And utterly consumed with sharp distress,
While all things else have rest from weariness?
All things have rest: why should we toil alone,
We only toil, who are the first of things,
And make perpetual moan,
Still from one sorrow to another thrown:
Nor ever fold our wings,
And cease from wanderings,
Nor steep our brows in slumber's holy balm;
Nor harken what the inner spirit sings,
"There is no joy but calm!"
Why should we only toil, the roof and crown of things?

III
Lo! in the middle of the wood,
The folded leaf is woo'd from out the bud
With winds upon the branch, and there
Grows green and broad, and takes no care,
Sun-steep'd at noon, and in the moon
Nightly dew-fed; and turning yellow
Falls, and floats adown the air.
Lo! sweeten'd with the summer light,
The full-juiced apple, waxing over-mellow,
Drops in a silent autumn night.
All its allotted length of days
The flower ripens in its place,
Ripens and fades, and falls, and hath no toil,
Fast-rooted in the fruitful soil.

IV
Hateful is the dark-blue sky,
Vaulted o'er the dark-blue sea.
Death is the end of life; ah, why
Should life all labour be?
Let us alone. Time driveth onward fast,
And in a little while our lips are dumb.
Let us alone. What is it that will last?
All things are taken from us, and become
Portions and parcels of the dreadful past.
Let us alone. What pleasure can we have
To war with evil? Is there any peace
In ever climbing up the climbing wave?
All things have rest, and ripen toward the grave
In silence; ripen, fall and cease:
Give us long rest or death, dark death, or dreamful ease.

V
How sweet it were, hearing the downward stream,
With half-shut eyes ever to seem
Falling asleep in a half-dream!
To dream and dream, like yonder amber light,
Which will not leave the myrrh-bush on the height;
To hear each other's whisper'd speech;
Eating the Lotos day by day,
To watch the crisping ripples on the beach,
And tender curving lines of creamy spray;
To lend our hearts and spirits wholly
To the influence of mild-minded melancholy;
To muse and brood and live again in memory,
With those old faces of our infancy
Heap'd over with a mound of grass,
Two handfuls of white dust, shut in an urn of brass!

VI
Dear is the memory of our wedded lives,
And dear the last embraces of our wives
And their warm tears: but all hath suffer'd change:
For surely now our household hearths are cold,
Our sons inherit us: our looks are strange:
And we should come like ghosts to trouble joy.
Or else the island princes over-bold
Have eat our substance, and the minstrel sings
Before them of the ten years' war in Troy,
And our great deeds, as half-forgotten things.
Is there confusion in the little isle?
Let what is broken so remain.
The Gods are hard to reconcile:
'Tis hard to settle order once again.
There is confusion worse than death,
Trouble on trouble, pain on pain,
Long labour unto aged breath,
Sore task to hearts worn out by many wars
And eyes grown dim with gazing on the pilot-stars.

VII
But, propt on beds of amaranth and moly,
How sweet (while warm airs lull us, blowing lowly)
With half-dropt eyelid still,
Beneath a heaven dark and holy,
To watch the long bright river drawing slowly
His waters from the purple hill—
To hear the dewy echoes calling
From cave to cave thro' the thick-twined vine—
To watch the emerald-colour'd water falling
Thro' many a wov'n acanthus-wreath divine!
Only to hear and see the far-off sparkling brine,
Only to hear were sweet, stretch'd out beneath the pine.

VIII
The Lotos blooms below the barren peak:
The Lotos blows by every winding creek:
All day the wind breathes low with mellower tone:
Thro' every hollow cave and alley lone
Round and round the spicy downs the yellow Lotos-dust is blown.
We have had enough of action, and of motion we,
Roll'd to starboard, roll'd to larboard, when the surge was seething free,
Where the wallowing monster spouted his foam-fountains in the sea.
Let us swear an oath, and keep it with an equal mind,
In the hollow Lotos-land to live and lie reclined
On the hills like Gods together, careless of mankind.
For they lie beside their nectar, and the bolts are hurl'd
Far below them in the valleys, and the clouds are lightly curl'd
Round their golden houses, girdled with the gleaming world:
Where they smile in secret, looking over wasted lands,
Blight and famine, plague and earthquake, roaring deeps and fiery sands,
Clanging fights, and flaming towns, and sinking ships, and praying hands.
But they smile, they find a music centred in a doleful song
Steaming up, a lamentation and an ancient tale of wrong,
Like a tale of little meaning tho' the words are strong;
Chanted from an ill-used race of men that cleave the soil,
Sow the seed, and reap the harvest with enduring toil,
Storing yearly little dues of wheat, and wine and oil;
Till they perish and they suffer—some, 'tis whisper'd—down in hell
Suffer endless anguish, others in Elysian valleys dwell,
Resting weary limbs at last on beds of asphodel.
Surely, surely, slumber is more sweet than toil, the shore
Than labour in the deep mid-ocean, wind and wave and oar;
O, rest ye, brother mariners, we will not wander more.


Political Reflections

If the neighbours attacked each other with a significant proportion of
their growing nuclear arsenals, millions would die instantly from the
blast and then firestorms would rage through cities. The fires would
send huge quantities of smoke into the atmosphere, devastating
agriculture as it blocked sunlight and cut temperatures.
Researchers considered a scenario in 2025 where militants attack
India's parliament, killing most of its leaders. New Delhi retaliates
by sending tanks into the part of Kashmir controlled by Pakistan.
Fearing it will be overrun, Islamabad hits the invading forces with
its battlefield nuclear weapons, triggering a nuclear war.
Calculating different outcomes according to whether the rivals use
their largest nuclear weapons, the researchers estimated 50 to 125
million people could die, and nuclear-ignited fires would spread smoke
across the world within weeks.
Surface sunlight could fall by 20 to 35 per cent, cooling the global
surface by 2 to 5C and reducing rain and snow by 15 to 30 per cent.
Recovery would take more than 10 years.
Agriculture would fall by 15 to 30 per cent on land, threatening mass
starvation and additional worldwide collateral fatalities.
"Unfortunately it's timely because India and Pakistan remain in
conflict over Kashmir, and every month or so you can read about people
dying along the border," Alan Robock, a professor in environmental
sciences at Rutgers University, who co-authored the paper, told AFP.

Imran Khan delivered a speech which was as effective as the reverse
swing with which he used to bamboozle the World’s best Batsman and
this time he bowled Prime Minister Modi all ends up.

There is certainly a Fin de siècle even apocalyptic mood afoot. The
conundrum for those who wish to bet on the End of the World is this,
however. What would be the point? The World would have ended.

This is the unanimous judgment of ‘The Independent Tribunal into
Forced Organ Harvesting from Prisoners of Conscience in China’ (the
Tribunal), a ‘People’s Tribunal’ formed, as others have been, to make
a decision about an important issue of public concern not dealt with
elsewhere

It is believed that there are ‘in the hundreds of thousands, and
possibly millions of Uyghurs in prison. Ethan Gutman gave evidence to
the Tribunal in December 2018 stating that ‘over the last 18 months,
literally every Uyghur man, woman, and child – about 15 million people
– have been blood and DNA tested, and that blood testing is compatible
with tissue matching.’11 Dr. Enver Tohti corroborated this in his
statement to the Tribunal, where he detailed news in June 2016 that
the CCP gave Uyghur people free national health examinations. He
suspected that the ‘CCP is building their national database for organ
trade’ and that the number of samples collected has ‘exceeded 17
million.’

One common theme is a parabolic Putin rebound. At this moment,
President Putin has Fortress Europe surrounded. The intellectual
father of the new Zeitgeist that propelled Brexit, Le Pen, the Five
Star movement in Italy, Gert Wilders in the Netherlands, is Vladimir
Putin.
In the Middle East, it is Putin who is calling the shots in Aleppo,
and in a quite delicious irony it looks like he has pocketed Opec as
well.
However, my starting point is the election of President Donald Trump
because hindsight will surely show that Russia ran a seriously
sophisticated programme of interference, mostly digital. Don DeLillo,
who is a prophetic 21st writer, writes as follows in one of his short
stories:
The specialist is monitoring data on his mission console when a voice
breaks in, “a voice that carried with it a strange and unspecifiable
poignancy”.
He checks in with his flight-dynamics and conceptual- paradigm
officers at Colorado Command:
“We have a deviate, Tomahawk.”
“We copy. There’s a voice.”
“We have gross oscillation here.”
“There’s some interference. I have gone redundant but I’m
not sure it’s helping.”
“We are clearing an outframe to locate source.”
“Thank you, Colorado.”
“It is probably just selective noise. You are negative red on
the step-function quad.”
“It was a voice,” I told them.
“We have just received an affirm on selective noise... We
will correct, Tomahawk. In the meantime, advise you to stay redundant.”
The voice, in contrast to Colorado’s metallic pidgin, is a melange of
repartee, laughter, and song, with a “quality of purest, sweetest
sadness”.
“Somehow we are picking up signals from radio programmes of 40, 50, 60
years ago.”
I have no doubt that Putin ran a seriously 21st predominantly digital
programme of interference which amplified the Trump candidacy. POTUS
Trump was an ideal candidate for this kind of support.
Trump is a linguistic warfare specialist. Look at the names he gave
his opponents: Crooked Hillary, Lyin’ Ted, Little Marco, ‘Low-energy’
Jeb — were devastating and terminal. The first thing is plausible
deniability (and some folks here at home need to remember those
words).
The second thing is non-linearity, you have to learn how to navigate a
linear system (the new 21st digital ecosystem) in a non-linear way.
Beppe Grillo, the comic turned leader of the Five Star movement in
Italy said: This is the deflagration of an epoch. It’s the apocalypse
of this information system, of the TVs, of the big newspapers, of the
intellectuals, of the journalists.”
He is right, traditional media has been disrupted and the insurgents
can broadcast live and over the top. From feeding the hot-house
conspiracy frenzy on line (‘’a constant state of destabilised
perception’’), timely and judicious doses of Wikileaks leaks which
drained Hillary’s bona fides and her turn-out and motivated Trump’s,
what we have witnessed is something remarkable and noteworthy.
Putin has proven himself an information master, and his adversaries
are his information victims.

“I’ll tell you a secret: Yes, we’ll definitely do it,” Putin said,
adding in a stage whisper: “Just don’t tell anyone.”

Trump is a linguistic warfare specialist. Look at the names he gave
his opponents: Crooked Hillary, Lyin’ Ted, Little Marco, ‘Low-energy’
Jeb — were devastating and terminal. The first thing is plausible
deniability (and some folks here at home need to remember those
words).

His linguistics actually derive from the world of wrestling and
between 1988 and 2013, he ran wrestling events, appeared ringside
(notably in the Battle of the Billionaires), and was even inducted
into the world wrestling entertainment Hall of Fame.
Despite being presented as a competitive sport, professional wrestling
is scripted. The competitors, results, pre-match and post-match
interviews — all of it is make-believe. The broadcasters give their
audience all the things you’d expect in a work of fiction: backstory,
suspense, symbolism and so forth. [Financial Times’ Stephen Grosz].
In wrestling, as in literature, names are never neutral. Naming a
character is an essential part of creating them.
There’s always a “face” (short for baby-face, or hero) and a “heel”
(villain). Hulk Hogan and Dwayne “The Rock” Johnson are faces. Jake
“The Snake” Roberts and Rick Rude are heels.
Wrestling pits good against bad, a genuine he-man against a phoney
rascal. To emasculate his opponents, Trump uses this trope: “low
Energy Jeb”, “Mr Magoo” (Jeff Sessions) “Lyin’ James” (Comey), “Rat”
(Michael Cohen), “Highly conflicted Bob Mueller”.
As part of his two-fisted swagger, Trump tweets in wrestling-speak:
“lightweight Marco Rubio was working hard last night. The problem is,
he is a choker, and once a choker, always a choker! meltdown.

#UNGA one of few platforms where William S. Burroughs’ edict “Smash
the control images. Smash the control machine.” applies and just about
everyone gets their Warholian moment. “In the future, everyone will be
world-famous for 15 minutes” Andy Warhol
Of course, Greta was referencing the feedback loop and the risks of
die back where we enter a phase of ‘’cascading system collapse’’
precisely because of the negative spillover effects of the Hydrocarbon
Century.

International Markets

Euro 1.0975
Dollar Index 98.857
Japan Yen 106.80
Swiss Franc 0.9988
Pound 1.2348
Aussie 0.6757
India Rupee 71.0395
South Korea Won 1201.74
Brazil Real 4.0807
Egypt Pound 16.3039
South Africa Rand 15.15

For example, these two countries most strikingly, account for 90 per
cent of the market capitalization value of the world’s 70 largest
digital platforms. Europe’s share is 4 per cent and Africa and Latin
America’s together is only 1 per cent.
Seven “super platforms” – Microsoft, followed by Apple, Amazon,
Google, Facebook, Tencent, and Alibaba − account for two-thirds of the
total market value.

Commodities

Emerging Markets

Real rates less tight after the 25bps cut to 5.15% but would have been
better if to 5% as it is still tight & given the contracting PMIs,
imports, slowing on all cylinder economy & not to mention corporate
tax cut of 10%, more help needed.

Frontier Markets

Sub Saharan Africa

Last week I closed by quoting the President of the AfDB, the mercurial
and Bow Tie toting Akinwumi A. Adesina who said The US-China trade war
and uncertainty over Brexit pose risks to Africa’s economic prospects
that are “increasing by the day”
“You have Brexit, you also have the recent challenges between Pakistan
and India that have flared off there, plus you have the trade war
between the United States and China. All these things can combine to
slow global growth, with implications for African countries.”
“I think the trade war has significantly impacted economic growth
prospects in China and therefore import demand from China has fallen
significantly and so demand for products and raw materials from Africa
will only fall even further,” he said.
“It will also have another effect with regard to China’s own
outward-bound investments on the continent,” he added. The US China
Trade War continues to intensify notwithstanding the Fact that Aides
have now admitted Trump Made Up “High Level Phone Calls” With China To
Boost Markets. Such a negotiating strategy is of the ‘’Cry Wolf’’ type
and its shelf life infinitesimally short. It is the increasing
intensity of the Trade War which has triggered the Surge into Safe
Havens. Unprecedented Doses of Financial Repression have created
‘’scarcity’’ in the G7 Sovereign Space, further fuelling the interest
Rate Rally. Central Bankers apparently stand ready to increase the
dosage. Central Bankers are seeking to re-imagine the Economic Cycle
and magic it away. Its not going to happen, it never does.
Andrew Mellon believed that eco- nomic recessions, such as those that
had occurred in 1873 and 1907, were a necessary part of the business
cycle because they purged the economy.
In his memoirs, Hoover wrote that Mellon advised him to “liquidate
labor, liquidate stocks, liquidate the farmers, liquidate real estate.
Purge the rottenness out of the system. High costs of living and high
living will come down... enterprising people will pick up the wrecks
from less competent people.”
The overarching macro issue forAfrica remains the Trade War and it
will remain a source of downside pressure via the China EM Frontier
Feedback Loop Phenomenon. This Phenomenon was positive for the last
two decades but has now undergone a Trend reversal.
The Fall-out is being experienced as far away as Germany Inc. The ZAR
is the purest proxy for this Phenomenon. African Countries heavily
dependent on China being the main Taker are also at the bleeding edge
of this Phenomenon. This Pressure Point will not ease soon but will
continue to intensify.
As to Brexit, The Queen approved the government’s request to prorogue
parliament. The Financial Times editorial Board pronounced “Boris
Johnson has detonated a bomb under the constitutional apparatus of the
United Kingdom.” - It is clear to me that Pri- me Minister Johnson is
the Triangulator and therefore the United Kingdom is now like the
Pound at risk of a precipitous, downside, even asymmetric move before
the recovery.
China whilst fending off Trump and a flare-Up on its Periphery will
mark the 70th anniversary of People’s Republic on Oct. 1. The DF-41
intercontinental ballistic missile will be a centrepiece of that
parade. China’s miraculous economy is slowing down.
‘’If you had said 2 years ago that the status of global geopolitics
and financial markets depended on the world’s supply of pigs you would
have been laughed out of the room. But you would have been right’’
@SantiagoAu- Fund. Pork inflation in China amid the trade war:”I’ve
never seen anything like this,” said Xiao Tong,a vendor who has been
selling pork for nearly 20 years in Beijing. “Every day the price
rises more.”
China has exerted the Power of Pull over vast swathes of the World
from Germany to Angola, from the Mekong Delta to Asia and that Power
of Pull is now ebbing. Now where does that leave Africa?
Well firstly, it places an enormous premium on nimble Policy Making
and a heavy discount on Policy Making that cannot read the signs or as
Lao Tzu put it “Men are born soft and supple; dead they are stiff and
hard. Plants are born tender and pliant; dead, they are brittle and
dry. Thus whoever is stiff and inflexible is a disciple of death.
Whoever is soft and yielding is a disciple of life. The hard and stiff
will be broken. The soft and supple will prevail.”
Let me tell you by the way who was very nimble, Abiy was. Prime
Minister Abiy has already reprofiled his debt to China.
Of course, the Continent is absolutely non-linear something which we
are seeking to address with the AfCTA and what is key in that is the
free circulation of our most valuable capital
of all our Human Capital. [As a result, population explosion in Africa
has been supercharged compared with earlier adopters of modernity in
Europe. If large numbers of people are a good thing, then this is a
case of last-mover advantage FT] However, the AfCTA whilst surely a
Silver Bullet is some ways off and we have to deal with the NOW. The
NOW looks different depending on where you look at it from. Africa
Confidential is reporting that the G7 had planned to arrange a $2.3bn
bailout for Zimbabwe, which would settle its arrears with the World
Bank, African Development Bank and the European Investment Bank. They
would then immediately release $1bn in a fresh loan (AC Vol 60 No 11,
Austerity first). The quid pro quo, insiders say, was for the
Mnangagwa government to show good will on opening Zimbabwe’s
democratic space. The bailout was not discussed at Biarritz, we hear,
probably because of Harare’s failure to follow through on this.
Remember Lao Tzu. That was the Opportunity. They have blown it. They
also blew $1.3b ahead of the election in 2018, money they did not
have. South Africa with is smack bang in the middle of Fire when it
comes the China EM Frontier Markets Loop Phenomenon, saw its stock
market witness its worst August since 1998.

The bizarre burial of Robert Mugabe saw the former Zimbabwean leader
interred in a steel-lined coffin under a layer of concrete on
Saturday, following a bitter dispute over his resting place between
government officials, traditional leaders and family members.
Twenty-two days after he died, the body of the strongman was finally
buried next to his home with second wife Grace Mugabe in Kutama,
Zvimba, the village of his birth, 55 miles north west of Harare.
His eldest nephew, Leo Mugabe, who played a central role in the
prolonged burial drama, said the coffin which brought his embalmed
body to Harare from Singapore had to be changed for security reasons.
 “People really are after his body or his body parts, so we wanted
something that is tamper-proof. That is why the casket was changed,”
he told a local radio station.
After the coffin was lowered into the ground in a private ceremony
close to the home which Grace Mugabe had built after their marriage,
concrete was laid down around it.
Mugabe's family claimed that this was the burial place he had
ultimately wanted and had spoken of in the last six months of his life
in Singapore, angry that he had been ousted from power two years ago
by his long-time ally, President Emmerson Mnangagwa.
Mrs Mugabe, 54, draped in heavy black lace for more than three weeks,
had made it clear to all who would listen that Mr Mnangagwa and his
loyalists were not welcome at the burial.
Had he been buried at Heroes Acre, the burial ground commissioned by
her late husband and the resting place preferred by the government,
she would not have been able to prevent their attendance.
Crucially, it would also have meant him being buried next to his first
wife, Sally Mugabe, still regarded by many as the "mother" of the
Zimbabwean nation.
Amid various conflicting claims over his wishes, Mugabe, who died of
cancer aged 95, had reportedly also said that he wanted to be buried
next to his mother elsewhere in Zvimba.
Leo Mugabe asserted that this was not possible due to a lack of space
- although The Telegraph ascertained that there was in fact plenty of
available ground within a few yards of his mother's ornate grave.
Last week, Mrs Mugabe had come up with another proposal, saying she
wanted her late husband buried in the grounds of their Harare mansion,
informally known by locals as the Blue Roof.
But the Harare City Council said that was not possible as the land was
not a cemetery. Mrs Mugabe then also discovered that the title deeds
of the multi-million pound home, with massive landscaped grounds, lake
and wildlife, was in the name of a company owned by the ruling Zanu PF
party.
In a late twist in the saga, the Mugabe family had finally agreed,
after negotiations with traditional leaders and the government, that
the former president could after all be buried at Heroes Acre. But
this was on the condition that a mausoleum would be built for him on
the crest of the hill overlooking hundreds of graves of his former
colleagues, mainly from the war against Rhodesian minority white rule.
Mugabe’s sons, Robert Jnr and Chatunga, agreed the site of the
mausoleum, and building began - only for the plan to be changed again.
The costs of the abandoned preparations are not known.
The official funeral service for Mugabe, attended by 11 African heads
of state, was held two weeks ago in a half empty stadium in Harare.

’Something bigger than you and me power. You don’t fool around with
power my friend’’ which I would argue was a common and overarching
thread of his 37 years of leadership.
Most of Zimbabwe’s citizens are ‘’born free’’ the fight for
independence was real but is no longer relevant is it?

Kenya

The country’s first green bond issued by property developer, Acorn
Group and PE fund Helios has attained 85 percent subscription, raising
Sh4.3 billion of the targeted Sh5 billion.
Acorn CEO Edward Kirathe said raising corporate bonds in Kenya is like
“walking through a hurricane,” adding that they had set a modest
target of Sh2 billion for the first tranche of the medium term note.
“The current bond market is very bearish and lack of confidence with
what is happening with the other bonds. It was very useful to have (
British fund) GuarantCo behind us because it gave investors comfort
that this is a good bond,” he said.