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Satchu's Rich Wrap-Up
Thursday 26th of May 2022

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Is America the Real Victim of Anti-Russia Sanctions? @tabletmag @RnaudBertrand
World Of Finance

Remember the claims that Russia’s economy was more or less irrelevant, merely the equivalent of a small, not very impressive European country? 

“Putin, who has an economy the size of Italy,” Sen. Lindsey Graham, R-S.C., said in 2014 after the invasion of Crimea, “[is] playing a poker game with a pair of twos and winning.” 

Of increasing Russian diplomatic and geopolitical influence in Europe, the Middle East, and East Asia, 

The Economist asked in 2019, “How did a country with an economy the size of Spain … achieve all this?”
Seldom has the West so grossly misjudged an economy’s global significance

French economist Jacques Sapir, a renowned specialist of the Russian economy who teaches at the Moscow and Paris schools of economics, explained recently that the war in Ukraine has “made us realize that the Russian economy is considerably more important than what we thought.” 

For Sapir, one big reason for this miscalculation is exchange rates. If you compare Russia’s gross domestic product (GDP) by simply converting it from rubles into U.S. dollars, you indeed get an economy the size of Spain’s

But such a comparison makes no sense without adjusting for purchasing power parity (PPP), which accounts for productivity and standards of living, and thus per capita welfare and resource use. 

Indeed, PPP is the measure favored by most international institutions, from the IMF to the OECD. 

And when you measure Russia’s GDP based on PPP, it’s clear that Russia’s economy is actually more like the size of Germany’s, about $4.4 trillion for Russia versus $4.6 trillion for Germany. 

From the size of a small and somewhat ailing European economy to the biggest economy in Europe and one of the largest in the world—not a negligible difference.

Sapir also encourages us to ask, “What is the share of the service sector versus the share of the commodities and industrial sector?” 

To him, the service sector today is grossly overvalued compared with the industrial sector and commodities like oil, gas, copper, and agricultural products. 

If we reduce the proportional importance of services in the global economy, Sapir says that “Russia’s economy is vastly larger than that of Germany and represents probably 5% or 6% of the world economy,” more like Japan than Spain.

This makes intuitive sense. When push comes to shove, we know there is more value in providing people with the things they really need to survive like food and energy than there is in intangible things like entertainment or financial services.

 When a company like Netflix has a price-earnings ratio three times higher than that of Nestlé, the world’s largest food company, it’s more likely than not a reflection of market froth than of physical reality. 

Netflix is a great service, but as long as an estimated 800 million people in the world remain undernourished, Nestlé is still going to provide more value.

All of which is to say that the current crisis in Ukraine has helpfully clarified how much we’ve taken for granted the “antiquated” side of modern economies like industry and commodities—prices for which have surged this year—and perhaps overvalued services and “tech,” whose value has recently crashed.

The size and importance of Russia’s economy is further distorted by ignoring global trade flows, in which Sapir estimates that Russia “may account for maybe as much as 15%.” 

While Russia is not the largest producer of oil in the world, for example, it has been the largest exporter of it, ahead even of Saudi Arabia

The same is true for many other essential products such as wheat—the world’s most important food crop, with Russia controlling about 19.5% of global exports—nickel (20.4%), semi-finished iron (18.8%), platinum (16.6%), and frozen fishes (11.2%).

Such commanding importance in the production of so many essential commodities means that Russia, like few other countries on the planet, is in many respects a linchpin of the globalized production chain. 

Unlike “maximum sanctions” on a country like Iran or Venezuela, attempting to cut the Russian link has meant and will likely continue to mean a dramatic reorganization of the global economy.

Now that President Joe Biden has publicly renounced America’s decades-old policy of “strategic ambiguity” with regard to Taiwan, it’s worth thinking about what China’s economy looks like when we remove the same blinkers with which we’d always viewed Russia.

 If we consider the Chinese economy based on exchange rates—by simply converting China’s GDP from Chinese yuan to U.S. dollars—it is valued at about $17.7 trillion (as of 2021), compared to $23 trillion for the United States and $17 trillion for the European Union.

But if we adjust for PPP, we see that the Chinese economy reached almost $27.21 trillion in 2021, compared with $20.5 trillion for the EU and $23 trillion for the United States. In terms of PPP, in fact, China’s economy overtook America’s back as much as six years ago.

And what if we reduce the proportional importance of the service sector relative to industry and commodities? 

Services account for approximately 53.3% of China’s GDP, even less than in Russia (56.7%). 

If we roughly apply Sapir’s ratio of doubling the valuation of the nonservice sector to China, we may have to consider that in a very real and relevant way, the Chinese economy accounts for something like 25%-30% of the global economy on a PPP basis, rather than the current estimates of 18%-19%. 

That would put the combined Chinese and Russian economies at about 30%-35% of the global economy (again, adjusting for PPP and the overvaluation of the service sector)—a behemoth and likely unsustainable challenge for a trans-Atlantic community that looks increasingly focused on using maximalist economic sanctions to punish bad actors and achieve desired policy outcomes. 

That challenge becomes even more daunting when we consider that the service sector accounts for roughly 77% of the U.S. economy and 70% of the EU’s—suggesting a potentially significant degree of overvaluation in Western economic heft, and far more parity in relative economic power with China and Russia.

How much does any of this hairsplitting matter? For one, the war in Ukraine and tensions in the Pacific look to be accelerating a division of the world into Cold War-like political and economic blocs. 

But whereas the West accounted for over 50% of global GDP at the beginning of the Cold War—with the United States dominating global manufacturing and running huge annual trade surpluses—the West looks to be in a weaker if more entrenched position of power today, and its major adversaries stronger in certain ways than the communist bloc was in 1948.

Before we enthusiastically embrace a new Iron Curtain, therefore, it’s worth pausing to consider how many countries in the world will voluntarily place themselves on our side. 

The countries of what we consider “the West” will—for ideological and historical reasons, in addition to economic and military enmeshment—undoubtedly remain relatively united. 

But the West only accounts for about 13% of the world’s population, with China and Russia together making up about 20%. 

That leaves about two-thirds of humanity “nonaligned,” a position that most of them would like to maintain. If we force them to choose a side, we may be surprised by many of the results.

A tally of the countries participating in current sanctions on Russia, in fact, makes it hard to say whether a new Iron Curtain is being drawn around our adversaries or around the West itself. 

Countries and nominal U.S. allies as significant as India and Saudi Arabia have been particularly vocal in their refusal to take sides in the conflict in Ukraine.

One telling barometer for this dynamic is oil. With Western oil sanctions on the world’s largest oil exporter, prices have predictably skyrocketed, rising from around $75 a barrel at the beginning of the year up to over $110 today. 

But countries that have refused to participate in sanctions are now taking advantage of the opportunity to negotiate for Russian energy deliveries at steep discounts. 

If Russia is still able to sell oil around the world, countries like India are able to negotiate for below-market prices, and Western consumers are being hammered with inflated prices, who is really being sanctioned? 

A similar principle applies to the weaponization of the U.S. dollar and the Western financial system in general: 

If non-Western countries are increasingly told that access to dollars and transaction systems like SWIFT are conditional on policies made in Washington that may not necessarily be in their own self-interest, the result may be a de-dollarization of the global economy, not a strengthening of the Western order.

None of this is to say that the brutal invasion of Ukraine has been anything less than an atrocity, and that extraordinary measures may indeed be called for in order to counter Russian expansionism and its implications for global peace and stability. 

But it’s possible that the West, in a fit of self-righteousness and a need to satisfy various domestic demands, may be diving headlong into a future in which the global South and many others besides feel increasingly pressured to make a choice they don’t want to have to make, and which may leave the West more isolated than ever before in modern times.

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The @POTUS Official Who Pierced Putin’s “Sanction-Proof” Economy @NewYorker
World Of Finance

Singh said, “We’ve made him stare into an economic abyss. But he could choose to pull back.”
The markets are where these two systems touch—the supply of buckwheat, the joint energy ventures, the price of the ruble—and within this arena the sanctions were a demonstration that Washington still had levers to pull. 

“You know, we can play chess, too,” Singh said. “It was important for us to show that the fortress could come crumbling down.”

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When sanctions miss the target
Law & Politics

There is awful lot of self-congratulatory nonsense around about the EU's cohesion after Vladimir Putin's attack. 

We are not part of that consensus. We think they have not thought this through.
The data we are getting about money flows to Russia suggest that the sanctions have proved a giant own goal. 

We have succeeded in making oil and gas much more expensive, but we failed to reduce consumption to offset the price effect. 

The result is that we have provided Putin with a massive windfall gain from energy sales. 

This is worse than if we had done nothing, or if we had imposed a complete energy embargo from day one. 

This is an example where the EU way of lazy middle-ground compromise gives rise to very worst potential outcome. During the sovereign debt crises, we noted similar phenomena.
We reported yesterday on Russia’s all time record current account surplus for the first four months. 

Robin Brooks from the Institute of International Finance calculated that the April figure alone constitute a seven-fold (!) increase compared to the average of the last 20 years. 

How is this possible, given that Russian oil should be essentially off market by now? 

Data on shipping movements suggest that Greek tankers are making this possible, according to Brooks.
Janis Kluge, from the SWP think-tank in Germany, makes another important point: Putin is getting so much money now that he may be able to afford to impose gas sanctions on us later in the year.

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Sunday, April 10 ‘You can print money, but not oil to heat or wheat to eat’ wrote @CreditSuisse’s Zoltan Pozsar.
World Of Finance

Russia essentially gave the $ and the Euro the very same exorbitant privilege that King Abdul Aziz Ibn Saud of Saudi Arabia gave President Franklin D Roosevelt aboard the USS Quincy in Great Bitter Lake in February 14, 1945 when the petro dollar economy was symbolically born.
By insisting payments are made in Russian Rubles for Russian commodities Vladimir Putin has withdrawn that exorbitant privilege.
The Russian Ruble rally is real and has much further to go.

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Unprecedented windfalls for Putin that keep rising @RobinBrooksIIF
World Of Finance

Russia's current account surplus usually declines as temperatures in Europe rise and demand for energy falls. From 2007 - 2011, the surplus averaged $9.9 bn in Jan, $8.3 bn in Feb, $8.4 bn in Mar & $6.7 bn in Apr. Not in 2022. Unprecedented windfalls for Putin that keep rising...

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Law & Politics


1-4-2-1. The first 1 refers to defending what has since come to be called the homeland. 

The 4 refers to deterring hostilities in four key regions of the world. 

The 2 means the U.S. armed forces must have the strength to win swiftly in two near-simultaneous conflicts in those regions. 

The final 1 means that we must win one of those conflicts “decisively,” toppling the enemy’s regime.

We exist in a Tripolar World and the West appears to be inviting its own triangulation.


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@georgesoros said Russia's invasion of Ukraine may have been the beginning of World War Three @Reuters
Law & Politics

"The invasion may have been the beginning of the Third World War and our civilization may not survive it," Soros told Davos, according to a text of his speech released by his office.

Soros said the European Union had to understand that Putin could turn off Russian natural gas, which currently accounts for about 40% of Europe's needs, "while it really hurts".

Soros cast Russia, by far the world's biggest country by area, and China, the world's second largest economy, as the leading members of a group of ascendant "closed societies" where the individual was subservient to the state.
Echoing U.S. President Joe Biden, who has said the West is locked in a battle with autocratic governments, Soros also added some pessimism.
"Repressive regimes are now in the ascendant and open societies are under siege," Soros said. "Today China and Russia present the greatest threat to open society."
Soros criticised President Xi Jinping's 'zero-COVID' strategy, saying it had failed and tipped Shanghai towards "the verge of open rebellion."

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14-FEB-2022 :: The End of the World is a Concept Without a Future
Law & Politics

Sunday, April 10  ‘’You can print money, but not oil to heat or wheat to eat’’ wrote @CreditSuisse’s Zoltan Pozsar.

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President for life Xi
Law & Politics

The President for Life was seeking to project a sense of inevitable forward motion and a fulfilment of the promise that Mao Zedong made on the founding of the People’s Republic of China on October 1, 1949 that China would stand up.

They have “stood up.” Xi’s model is one of technocratic authoritarianism and a recent addition to his book shelf include The Master Algorithm by Pedro Domingos. 

Xi is building an Algorithmic Society.

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@NATO vs Russia: what happens next @TheCradleMedia
Law & Politics

Three months after the start of Russia’s Operation Z in Ukraine, the battle of The West (12 percent) against The Rest (88 percent) keeps metastasizing. Yet the narrative – oddly – remains the same.

On Monday, from Davos, World Economic Forum Executive Chairman Klaus Schwab introduced Ukrainian comedian-cum-President Volodymyr Zelensky, on the latest leg of his weapons-solicitation-tour, with a glowing tribute. 

Herr Schwab stressed that an actor impersonating a president defending neo-Nazis is supported by “all of Europe and the international order.”
He means, of course, everyone except the 88 percent of the planet that subscribes to the Rule of Law – instead of the faux construct the west calls a ‘rules-based international order.’
Back in the real world, Russia, slowly but surely has been rewriting the Art of Hybrid War. 

Yet within the carnival of NATO psyops, aggressive cognitive infiltration, and stunning media sycophancy, much is being made of the new $40 billion US ‘aid’ package to Ukraine, deemed capable of becoming a game-changer in the war.
This ‘game-changing’ narrative comes courtesy of the same people who burned though trillions of dollars to secure Afghanistan and Iraq. And we saw how that went down.
Ukraine is the Holy Grail of international corruption. That $40 billion can be a game-changer for only two classes of people: 

First, the US military-industrial complex, and second, a bunch of Ukrainian oligarchs and neo-connish NGOs, that will corner the black market for weapons and humanitarian aid, and then launder the profits in the Cayman Islands.
A quick breakdown of the $40 billion reveals $8.7 billion will go to replenish the US weapons stockpile (thus not going to Ukraine at all); 

$3.9 billion for USEUCOM (the ‘office’ that dictates military tactics to Kiev); $

5 billion for a fuzzy, unspecified “global food supply chain”; 

$6 billion for actual weapons and “training” to Ukraine; 

$9 billion in “economic assistance” (which will disappear into selected pockets); and $0.9 billion for refugees.
US risk agencies have downgraded Kiev to the dumpster of non-reimbursing-loan entities, so large American investment funds are ditching Ukraine, leaving the European Union (EU) and its member-states as the country’s only option.
Few of those countries, apart from Russophobic entities such as Poland, can justify to their own populations sending huge sums of direct aid to a failed state. 

So it will fall to the Brussels-based EU machine to do just enough to maintain Ukraine in an economic coma – independent from any input from member-states and institutions.
These EU ‘loans’ – mostly in the form of weapons shipments – can always be reimbursed by Kiev’s wheat exports. 

This is already happening on a small scale via the port of Constanta in Romania, where Ukrainian wheat arrives in barges over the Danube and is loaded into dozens of cargo ships everyday. 

Or, via convoys of trucks rolling with the weapons-for-wheat racket. However, Ukrainian wheat will keep feeding the wealthy west, not impoverished Ukrainians.
Moreover, expect NATO this summer to come up with another monster psyop to defend its divine (not legal) right to enter the Black Sea with warships to escort Ukrainian vessels transporting wheat. 

Pro-NATO media will spin it as the west being ‘saved’ from the global food crisis – which happens to be directly caused by serial, hysterical packages of western sanctions.
Poland goes for soft annexation
NATO is indeed massively ramping up its ‘support’ to Ukraine via the western border with Poland. 

That’s in synch with Washington’s two overarching targets: 

First, a ‘long war,’ insurgency-style, just like Afghanistan in the 1980s, with jihadis replaced by mercenaries and neo-Nazis.  

Second, the sanctions instrumentalized to “weaken” Russia, militarily and economically.
Other targets remain unchanged, but are subordinate to the Top Two: make sure that the Democrats are re-elected in the mid-terms (that’s not going to happen); irrigate the industrial-military complex with funds that are recycled back as kickbacks (already happening); and keep the hegemony of the US dollar by all means (tricky: the multipolar world is getting its act together).
A key target being met with astonishing ease is the destruction of the German – and consequently the EU’s – economy, with a great deal of the surviving companies to be eventually sold off to American interests.
Take, for instance, BMW board member Milan Nedeljkovic telling Reuters that “our industry accounts for about 37 percent of natural gas consumption in Germany” which will sink without Russian gas supplies.
Washington’s plan is to keep the new ‘long war’ going at a not-too-incandescent level – think Syria during the 2010s – fueled by rows of mercenaries, and featuring periodic NATO escalations by anyone from Poland and the Baltic midgets to Germany.
Last week, that pitiful Eurocrat posing as High Representative of the EU for Foreign Affairs and Security Policy, Josep Borrell, gave away the game when previewing the upcoming meeting of the EU Foreign Affairs Council.
Borrell admitted that “the conflict will be long” and “the priority of the EU member states” in Ukraine “consists in the supply of heavy weapons.”
Then Polish President Andrzej Duda met with Zelensky in Kiev. 

The slew of agreements the two signed indicate that Warsaw intends to profit handsomely from the war to enhance its politico-military, economic, and cultural influence in western Ukraine. 

Polish nationals will be allowed to be elected to Ukrainian government bodies and even aim to become constitutional judges.
In practice, that means Kiev is all but transferring management of the Ukrainian failed state to Poland. Warsaw won’t even have to send troops. Call it a soft annexation.
The steamroller on the move
As it stands, the situation on the battlefield can be examined in this map. 

Intercepted communications from the Ukrainian command reveal their aim to build a layered defense from Poltava through Dnepropetrovsk, Zaporozhia, Krivoy Rog, and Nikolaev – which happens to be a shield for the already fortified Odessa. 

None of that guarantees success against the incoming Russian onslaught.
It’s always important to remember that Operation Z started on February 24 with around 150,000 or so fighters – and definitely not Russia’s elite forces. 

And yet they liberated Mariupol and destroyed the elite neo-Nazi Azov batallion in a matter of only fifty days, cleaning up a city of 400,000 people with minimal casualties.
While fighting a real war on the ground – not those indiscriminate US bombings from the air – in a huge country against a large army, facing multiple technical, financial and logistical challenges, the Russians also managed to liberate Kherson, Zaporizhia and virtually the whole area of the ‘baby twins,’ the popular republics of Donetsk and Luhansk.
Russia’s ground forces commander, General Aleksandr Dvornikov, has turbo-charged missile, artillery and air strikes to a pace five times faster than during the first phase of Operation Z, while the Ukrainians, overall, are low or very low on fuel, ammo for artillery, trained specialists, drones, and radars.
What American armchair and TV generals simply cannot comprehend is that in Russia’s view of this war – which military expert Andrei Martyanov defines as a “combined arms and police operation” – the two top targets are the destruction of all military assets of the enemy while preserving the life of its own soldiers.
So while losing tanks is not a big deal for Moscow, losing lives is. A

nd that accounts for those massive Russian bombings; each military target must be conclusively destroyed. Precision strikes are crucial.
There is a raging debate among Russian military experts on why the Ministry of Defense does not go for a fast strategic victory. 

They could have reduced Ukraine to rubble – American style – in no time. That’s not going to happen. 

The Russians prefer to advance slowly and surely, in a sort of steamroller pattern. They only advance after sappers have fully surveilled the terrain; after all there are mines everywhere.
The overall pattern is unmistakable, whatever the NATO spin barrage. Ukrainian losses are becoming exponential – as many as 1,500 killed or wounded each day, everyday. 

If there are 50,000 Ukrainians in the several Donbass cauldrons, they will be gone by the end of June.
Ukraine must have lost as many as 20,000 soldiers in and around Mariupol alone. That’s a massive military defeat, largely surpassing Debaltsevo in 2015 and previously Ilovaisk in 2014. 

The losses near Izyum may be even higher than in Mariupol. And now come the losses in the Severodonetsk corner.
We’re talking here about the best Ukrainian forces. It doesn’t even matter that only 70 percent of Western weapons sent by NATO ever make it to the battlefield: the major problem is that the best soldiers are going…going…gone, and won’t be replaced. 

Azov neo-Nazis, the 24th Brigade, the 36th Brigade, various Air Assault brigades – they all suffered losses of 60+ percent or have been completely demolished.
So the key question, as several Russian military experts have stressed, is not when Kiev will ‘lose’ as a point of no return; it is how many soldiers Moscow is prepared to lose to get to this point.
The entire Ukrainian defense is based on artillery. So the key battles ahead involve long-range artillery. 

There will be problems, because the US is about to deliver M270 MLRS systems with precision-guided ammunition, capable of hitting targets at a distance of up to 70 kilometers or more.
Russia, though, has a counterpunch: the Hermes Small Operational-Tactical Complex, using high precision munitions, possibility of laser guidance, and a range of more than 100 kilometers. 

And they can work in conjunction with the already mass-produced Pantsir air defense systems.

The sinking ship
Ukraine, within its current borders, is already a thing of the past. Georgy Muradov, permanent representative of Crimea to the President of Russia and Deputy Prime Minister of the Crimean government, is adamant: 

“Ukraine in the form in which it was, I think, will no longer remain. This is already the former Ukraine.”
The Sea of Azov has now become a “sea of joint use” by Russia and the Donetsk People’s Republic (DPR), as confirmed by Muradov.
Mariupol will be restored. Russia has had plenty of experience in this business in both Grozny and Crimea. 

The Russia-Crimea land corridor is on. Four hospitals among five in Mariupol have already reopened and public transportation is back, as well as three gas stations.
The imminent loss of Severodonetsk and Lysichansk will ring serious alarm bells in Washington and Brussels, because that will represent the beginning of the end of the current regime in Kiev. 

And that, for all practical purposes – and beyond all the lofty rhetoric of “the west stands with you” – means heavy players won’t be exactly encouraged to bet on a sinking ship.
On the sanctions front, Moscow knows exactly what to expect, as detailed by Minister of Economic Development Maxim Reshetnikov: 

“Russia proceeds from the fact that sanctions against it are a rather long-term trend, and from the fact that the pivot to Asia, the acceleration of reorientation to eastern markets, to Asian markets is a strategic direction for Russia. We will make every effort to integrate into value chains precisely together with Asian countries, together with Arab countries, together with South America.”
On efforts to “intimidate Russia,” players would be wise to listen to the hypersonic sound of 50 Sarmat state-of-the-art missiles ready for combat this autumn, as explained by Roscosmos head Dmitry Rogozin.
This week’s meetings in Davos brings to light another alignment forming in the world’s overarching unipolar vs. multipolar battle. 

Russia, the baby twins, Chechnya and allies such as Belarus are now pitted against ‘Davos leaders’ – in other words, the combined western elite, with a few exceptions like Hungary’s Prime Minister Viktor Orban.
Zelensky will be fine. He’s protected by British and American special forces. The family is reportedly living in an $8 million mansion in Israel. 

He owns a $34 million villa in Miami Beach, and another in Tuscany. 

Average Ukrainians were lied to, robbed, and in many cases, murdered, by the Kiev gang he presides over – oligarchs, security service (SBU) fanatics, neo-Nazis.

 And those Ukrainians that remain (10 million have already fled) will continue to be treated as expendable.
Meanwhile, Russian President Vladimir “the new Hitler” Putin is in absolutely no hurry to end this larger than life drama that is ruining and rotting the already decaying west to its core. W

hy should he? He tried everything, since 2007, on the “why can’t we get along” front. Putin was totally rejected. So now it’s time to sit back, relax, and watch the Decline of the West.

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Apocalypse Now
Law & Politics

It looks like Russia will seek to peel off the Donetsk and Luhansk regions and a swathe of access to the Black Sea from Mariupol to Odesa.

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Sunday, April 10, 2022 Apocalypse Now The consequences for global stability are now unfathomable
Law & Politics

Sunday, April 10, 2022 Apocalypse Now

Commodity Prices will continue to surge. Just look at Food Prices last month.

Food prices are soaring at a record pace, rising another 13% in March. @lisaabramowicz1
“But it is a curve each of them feels, unmistakably. It is the parabola They must have guessed, once or twice -guessed and refused to believe -that everything, always, collectively, had been moving toward that purified shape latent in the sky, that shape of no surprise, no second chance, no return.’’
Gravity’s Rainbow is a 1973 novel by Thomas Pynchon
The consequences for global stability are now unfathomable.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.067620 
Dollar Index 102.187 
Japan Yen 127.4035
Swiss Franc 0.962820 
Pound 1.256185 
Aussie 0.706585 
India Rupee 77.6174 
South Korea Won 1268.470 
Brazil Real 4.8241 
Egypt Pound 18.602600
South Africa Rand 15.772580 

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@Glencore to plead guilty to bribery charges and pay $1.5bn penalty @FT

Glencore will plead guilty to multiple counts of bribery and market manipulation and pay penalties of up to $1.5bn following US, UK and Brazilian investigations that uncovered corruption at one of the world’s largest commodity traders.

The UK Serious Fraud Office on Tuesday charged the group’s subsidiary Glencore Energy UK with seven cases of profit-driven bribery and corruption in connection to oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria and South Sudan.
In a statement, the SFO said that its case was that “Glencore agents and employees paid bribes worth over $25mn for preferential access to oil, with approval by the company”.

In the US, Glencore pleaded guilty in two separate criminal cases and agreed to pay approximately $1.1bn in criminal fines and forfeiture. 

One case involved what prosecutors described as a decade-long bribery scheme, and in the second, Glencore’s US commodities trading arm pleaded guilty to engaging in an eight-year scheme to manipulate US fuel oil price benchmarks.
Merrick Garland, US attorney-general, called it the US Department of Justice’s “largest criminal enforcement action to date for commodity price manipulation conspiracy in oil markets”.
Glencore said it would pay about $1.5bn in overall penalties, including the $1.1bn to US authorities, $40mn to Brazilian prosecutors and an amount due to the UK to be finalised at a sentencing hearing. 

The company made a $1.5bn provision for the settlement in February, and said in an update on Tuesday that it does not expect the total fines to “differ materially” from what it has set aside.
The US Department of Justice will also install two independent compliance monitors at Glencore for three years to check its internal controls.
Alexandra Gillies, adviser at the Natural Resource Governance Institute, said “commodity traders including Glencore have a dismal record when it comes to corruption, so it is good to see there are consequences”.
“Glencore’s financial performance won’t suffer much from this fine, especially given the current state of commodity prices. But it is large by anti-bribery standards and that sends an important signal to the industry.”
In 2018, the US Department of Justice launched a wide-ranging investigation and requested the company hand over records related to its compliance with the country’s money-laundering laws and the Foreign Corrupt Practices Act in Nigeria, the Democratic Republic of Congo and Venezuela.
The UK’s SFO followed suit in 2019 and opened an investigation into Glencore over “suspicions of bribery” that it codenamed Operation Azoth.
A barrister for Glencore on Tuesday indicated the company would plead guilty. 

It faces charges including paying bribes of €10.5mn to induce officials of companies Société Nationale des Hydrocarbures and the Société Nationale de Raffinage to advantage Glencore’s operations in Cameroon.
Representing the SFO, barrister Faras Baloch said the company had bribed agents to “assist them in obtaining crude oil cargoes or gain an undue favourable price for those cargos”.
Glencore is also charged with paying €4.7mn in bribes between July 2011 and April 2016 to influence officials to favour the company in oil transactions in Ivory Coast, as well as failing to prevent individuals connected to the company from bribing officials concerned with awarding crude oil cargoes in Equatorial Guinea.
The investigations have cast a long shadow over the company and drawn scrutiny to the culture of one of the world’s largest commodity traders.
Long-serving chief executive Ivan Glasenberg retired last year, becoming the latest in a line of senior figures to depart the company, including the former head of its oil division, Alex Beard, who left in 2019.
Lisa Osofsky, director of the SFO, said: “This significant investigation, which the SFO has brought to court in less than three years, is the result of our expertise, our tenacity and the strength of our partnership with the US and other jurisdictions.”
The company, which shifts millions of tonnes of metals, minerals and oil across the globe, also faces probes by Swiss and Dutch authorities, the timing and result of which remain uncertain.
Last July, a former Glencore oil trader pleaded guilty in New York over his role in a scheme to bribe government officials in Nigeria in return for lucrative oil contracts.
The allegations in the original US DoJ investigation, which date as far back as 2007, occurred during Glasenberg’s 19-year reign at the top of the company.
Glasenberg and his top lieutenants took the company public in 2011 in what was then one of the largest-ever flotations in London. 

It partly used the funds to transform the company from a pure commodity trader into a mining company through a merger with Xstrata in 2013 and a series of acquisitions.
But the company has struggled to shake off a reputation for sometimes questionable activity that many investors saw as embedded in its DNA, stretching back to its time as a privately held trading house.
Analysts said resolution of the charges would be a step forward for new chief executive Gary Nagle, who took the helm of Glencore last year after more than two decades with the company.
Kalidas Madhavpeddi, chair of Glencore, said: “Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred.”
Glencore’s shares have rallied this year close to the highest level since its initial public offering 11 years ago, boosted by a rally in oil and metals prices and strong trading results.

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How hubris and Covid transformed Sri Lanka from ‘donor darling’ to default @FT
Emerging Markets

It is 10am and the queue outside a petrol station in one suburb of Sri Lanka’s commercial capital Colombo is already hundreds of people long. 

At the front is Malar Peter, whose family has taken turns to keep their place for 12 hours already. A few paces behind her is Padmasiri, who arrived at 1am. 

And right at the back of the queue stands Arumugam Annaletchumi, 50, who expects to be there for the rest of this hot, humid day.
They are all waiting for kerosene, carrying empty plastic canisters for a few litres with which to cook and burn lamps during the long blackouts caused by power shortages. 

Yet they are there in hope as much as anything else. There is no kerosene at the station and it’s unclear if it will arrive. 

For Sri Lankans, who until recently enjoyed some of the highest living standards in South Asia, such queues were rare until a few months ago. 

“People just want to live without problems like this,” Annaletchumi says. “This country has been robbed.”

Sri Lanka this month defaulted on its overseas loans after missing interest payments on two $1.25bn sovereign bonds, the first country in the Asia-Pacific to do so in more than two decades, according to Moody’s data

The latest estimates put the country’s total foreign debt at more than $50bn, with a $1bn bond maturing in July. 

President Gotabaya Rajapaksa’s government says it has all but run out of foreign reserves and fuel, relying on ad hoc shipments to top-up supplies in the most visible manifestation of a crisis that, the Eurasia Group consultancy warns, is turning the island into a “failed” state.

After the end of a devastating 26-year civil war in 2009, the island of 22mn had the makings of an Asian economic success story. 

Under governments run by the powerful Rajapaksa family, annual economic growth peaked at 9 per cent.  By 2019, the World Bank had classified the island as an upper-middle income country. 

Sri Lankans enjoyed a per capita income double that of neighbours such as India, along with longer lifespans thanks to strong social services such as healthcare and education. 

The country tapped international debt lenders to rebuild, becoming a key private Asian bond issuer and participant in China’s Belt and Road Initiative.

Much of that progress is now in jeopardy. Some observers argue Sri Lanka’s debt crisis is the product of the hubris, mismanagement and alleged venality of political elites including the Rajapaksa family, as well as irresponsible lending on the part of its creditors.

But, on another level, it is an extreme example of the economic and political churn facing developing countries around the world as rising inflation and Russia’s invasion of Ukraine prompt higher interest rates and surging food and fuel prices globally. 

Within South Asia alone, countries including Nepal have imposed import restrictions in order to protect foreign reserves while Imran Khan was removed as Pakistan’s prime minister in April amid popular anger over inflation.

Sri Lanka’s “economy has been built on unsustainable debt. They were spending more than the money that was coming in,” says Hanaa Singer-Hamdy, the UN’s resident co-ordinator in Colombo. 

“You don’t have fuel and people queue for three or four kilometres waiting in the heat.”

Popular outrage has boiled over in recent weeks after a wave of retaliatory violence following attacks on anti-government protesters and the temporary imposition of a military-enforced curfew. 

Gotabaya Rajapaksa is fighting for his political survival after the resignation on May 9 of his once-powerful brother Mahinda as prime minister. 

Together with new prime minister Ranil Wickremesinghe, a political veteran, the president has struggled to form a new cabinet.

Chinese debt to Sri Lanka, which totals about $3.5bn, according to the Advocata Institute think-tank, has proved particularly controversial. 

While Sri Lanka owes more to private bondholders and countries like Japan, critics argue that China’s BRI loans have been extended at high interest rates for infrastructure projects that have often failed to generate returns.

Sri Lanka has begun talks with the IMF for a bailout of up to $4bn, and is preparing debt restructuring negotiations with creditors. 

Analysts say the talks will be closely watched to see how China — one of the largest and most important lenders to the developing world in recent years — will respond amid growing signs of financial strain in other Belt and Road participants.

“Sri Lanka is a real canary in the coal mine,” says Gabriel Sterne, head of emerging markets at research group Oxford Economics. “It’s the most interesting case in years. There’s going to be lots of low-income debt crises, and the treatment of China in all that is going to be crucial.”

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Time to Big Up the Dosage of Quaaludes
Emerging Markets

Quaaludes ‘’ promote 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’’

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How hubris and Covid transformed Sri Lanka from ‘donor darling’ to default [continued] @FT
Emerging Markets

Postwar economic boom

Sri Lanka has many of the ingredients for economic and political success — from rich natural resources to strong social services and a strategic location near many of the world’s busiest shipping lanes.

But in the 1980s tension between the majority Sinhalese Buddhists and Tamils — groups that make up about 70 and 15 per cent of the population respectively — culminated in civil war when the Liberation Tigers of Tamil Eelam launched a brutal separatist campaign amid Tamil resentment over widespread discrimination.

The conflict would drag on for more than two decades before Mahinda Rajapaksa was elected president in 2005. With Gotabaya Rajapaksa serving as defence secretary, the brothers would lead an unrelenting campaign to crush the Tigers

Government forces were accused of war crimes including indiscriminately bombing civilian areas and executing suspected militants. 

The Tigers were also accused of atrocities and the UN estimates that about 40,000 civilians died in the final years of the conflict, almost half the total. 

Mahinda and Gotabaya have been subject to sustained scrutiny from civil society groups for the alleged abuses committed under their rule, with Human Rights Watch alleging that Gotabaya is implicated in human rights abuses. He has always denied the allegations.

The end of the war in 2009 was followed by a boom in Sri Lanka’s economy. 

The government of Mahinda Rajapaksa tapped international bond markets and longtime ally China for debt to fund the construction of everything from roads and airports to “Port City”, an ambitious project to turn reclaimed land in Colombo into a financial hub. Tourists flocked to the island.

Yet this growth masked deep economic and social imbalances. Critics argue that the Rajapaksas shunned efforts at postwar reconciliation and continued to use ethno-nationalism to drum up their Sinhalese Buddhist base. 

Many debt-backed projects failed to generate a return, most notoriously a Chinese-backed port in the Rajapaksas’ home district that was ultimately handed over to Beijing on a 99-year lease. 

Critics say that easy money for large infrastructure projects fuelled a culture of kickbacks and corruption that became widespread in politics and business.

“The biggest issue is corruption,” says Harini Amarasuriya, an MP from the leftwing Janatha Vimukthi Peramuna party, one of Sri Lanka’s largest. 

“For the past 25-30 years, our economic decisions have not been made on any economic analysis but on kickbacks and commissions.”

Some members of the Rajapaksa family have been accused of wrongdoing on various occasions though they have always denied allegations and have not been convicted. 

Gotabaya Rajapaksa was charged in a corruption case in 2016 though the charges were dropped on grounds of immunity after he was elected president in 2019, according to media reports. He denied the allegations.

Gotabaya Rajapaksa’s 2019 landslide victory came after the Easter Sunday terrorist attacks that killed 269 people. 

He vowed to right an already struggling economy but instead made a series of idiosyncratic decisions that economists say tipped the island into crisis. 

He cut taxes sharply — eroding government revenues — and changed the constitution to concentrate power around him and his family, with several relatives also in government. 

He also imposed a shortlived but destructive ban on chemical fertilisers, designed to promote organic farming and save money on imports, that led to a sharp drop in crop yields.

Anushka Wijesinha, an economist at the Centre for a Smart Future in Colombo, says that Sri Lanka was considered a “donor darling” in the decades after independence, before Mahinda Rajapaksa’s government embarked on its postwar infrastructure boom. 

“The money [was] coming in easily from bilaterals, multilaterals and commercial loans,” he says. “Financing is not a constraint, doing the policy reforms is not a constraint, and — woohoo, bonus — the room for graft is huge.”

A series of ratings downgrades following the 2019 tax cuts locked Sri Lanka, which had never defaulted before, out of international debt markets, leaving it unable to refinance. 

The pandemic cut off remittances and tourism, vital sources of dollars. A poll in January by think-tank Verité Research found that only 10 per cent of Sri Lankans approved of the government. 

Yet Rajapaksa dismissed warnings to begin restructuring or approach the IMF for assistance until March, after protests over the growing economic hardship had spread across the island.

Sri Lanka’s reserves have fallen from $7.5bn in November 2019 to the point where finding $1mn is “a challenge”, Wickremesinghe, the new prime minister, said in an address last week

This has meant shortages of not only fuel but food and medicine, with hospitals forced to postpone surgeries. 

The country has the worst inflation in Asia at about 30 per cent in April and the currency has almost halved in value since it was floated in March.

The UN Development Programme says that nearly half the population is in danger of falling below the poverty line, and warns of a looming humanitarian crisis as the urban poor and former middle class begin to cut back on meals.
WN Thilini lives with her two-year-old daughter in a low-income Colombo neighbourhood. She says she has stopped giving milk to her child and that they now eat mostly rice, dhal and grated coconut. 

The 38-year-old says she has enough food and fuel in the house for a couple more meals, before she too will need to join a queue.

“Most people are down to one meal a day”, says her neighbour, Mohammad Akram, “but are embarrassed to admit it.”

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Just in case anyone forgot: Sri Lanka is now governed by Gotabaya Rajapaksa, a man so sinister he used to keep a tank of sharks in his garden. Death of the Tiger @newyorker H/T @jamescrabtree
Emerging Markets

The mobile-phone video clip shows a pair of soldiers pushing a naked, blindfolded man into the frame. His hands are tied behind his back.

One soldier, dressed in the uniform of the Sri Lankan Army, forces him into a sitting position on the ground, kicks him in the back, and steps out of the way as the other soldier comes forward and shoots him in the back of the head. 

The man’s body jolts and flops down. Off camera, the shooter can be heard laughing giddily and exclaiming,
“It’s like he jumped!” The soldiers kill two other men in similar fashion, and then dispatch a number of wounded prisoners. 

The camera turns to show at least eight other bodies, including those of several half-naked women, lying in pools of blood. All of them appear to have been freshly executed
A master of battlefield innovation, Prabhakaran devised a form of execution for collaborators with the enemy: the victim was tied to a lamppost and blown to pieces with Cordex explosive fuse wire.
He didn’t drink, he said, and didn’t know what he had in the house. He knew only that he had a bottle of “Fonseka.” Would we like a drink of that? 

The keynote speaker was Gotabaya Rajapaksa, an owlish, watchful man with a mustache, wearing spectacles and a gray suit. 

“Sri Lanka’s victory over terrorism is an unprecedented event that the world can learn from,” he said. 

He spoke of how the Tigers’ international support network had enabled it to raise funds from the Tamil diaspora and to ship weapons into Sri Lanka. 

“At one point, the L.T.T.E. controlled one-third of the Sri Lankan coastline,” he said. “In this way, heavy weaponry and enormous quantities of ammunition were brought to Sri Lanka. And this happened in a post-9/11 world.” 

Rajapaksa was congratulating the American observers; it had been the U.S. that helped locate the Tigers’ ships.

He didn’t drink, he said, and didn’t know what he had in the house. He knew only that he had a bottle of “Fonseka.” Would we like a drink of that? He grinned. On the trolley was a bottle of Fonseca Bin No. 27, a brand of port.

When I asked about the suspicions that the government was attempting to change the demographics of the Tamil lands by swamping them with Sinhalese soldiers, he said, with a laugh, “We should do that, but it’s difficult.”

After dinner, Gotabaya led us outside. Across his lawn, by the garden’s high security wall, was a huge, illuminated outdoor aquarium.
Inside, several large, unmistakable shapes moved relentlessly back and forth.
“Are those sharks?” I asked him.
“Yes,” he said. “Do you want to see them?”
We crossed the lawn and stood in front of the tank, which was eight feet tall and twenty feet wide. There were four sharks, each about four feet long, swimming among smaller fish.

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How hubris and Covid transformed Sri Lanka from ‘donor darling’ to default [further] @FT
Emerging Markets

A default test case

On top of Rajapaksa’s mismanagement and Covid, observers say the final trigger for Sri Lanka’s default was the war in Ukraine — a worrying example of the aftershocks of the conflict for low- and middle-income countries. Some, including Belize and Zambia, had already defaulted in the wake of the pandemic.

In addition to depending on imported energy and staples such as wheat, the conflict has hit Sri Lanka in unexpected ways. 

Russia and Ukraine were Sri Lanka’s first- and third-largest tourist markets in early 2022 respectively. Russia was also the second-largest buyer of Ceylon tea, Sri Lanka’s main goods export.

The island’s default could have significant geopolitical ramifications. Its strategic location in the Indian Ocean has long made it an arena for jockeying between countries such as India and China, arch-rivals who have used combinations of easy credit and diplomatic pressure to secure their interests on the island.

Critics of Chinese activity in the island accuse it of using BRI projects to ensnare the country in a “debt trap”, allegations that it denies. 

Yet while China has so far rejected Sri Lanka’s requests to restructure its outstanding debts, India has sought to cement its primacy on the island, offering a series of credit lines, debt swaps and other assistance measures that it [India] says total about $3.5bn.

Sri Lanka’s upcoming debt restructuring negotiations are being viewed as a case study for how China works alongside other creditors such as private bondholders, given the rise of Chinese lending in Africa and Asia.

Analysts say that in countries such as Zambia, as well as Sri Lanka, it remains unclear whether Chinese lenders — which includes the government as well as state banks — will be willing to accept losses on their loans or look to enforce claims for full repayment.

Zambia’s restructuring has shown “there’s somehow this expectation that [Chinese lenders] would be senior creditors,” and therefore prioritised for repayment, argues one London-based fund manager, who holds Sri Lankan bonds.

The fund manager argues that had Rajapaksa started the restructuring process earlier, when Sri Lanka had more foreign reserves left, creditors could have recouped larger amounts.

 “What would have been a fairly mild restructuring process is now a more complicated one.”

The success of any restructuring is likely to be tied to the IMF programme. Any assistance package will take months to negotiate and, while Sri Lanka has already been through 16 IMF programmes in its 74-year history, it has only completed nine. 

International groups also warn that the reforms the fund is likely to demand, such as reversing Rajapaksa’s 2019 tax cuts and reducing energy subsidies, could exacerbate the suffering without adequate protections for vulnerable populations.

Improvement is “not going to come immediately,” warns Nalaka Godahewa, an MP from Rajapaksa’s ruling Podujana Peramuna party. “It’s going to be difficult because nothing much is going to change [in the short term].”

It is unclear whether Rajapaksa and his government can survive even before implementing a series of potentially unpopular economic reforms, prompting analysts to warn that the island could face prolonged political instability.

“To go into an economic restructuring, you need political stability. This is now challenging,” says the UN’s Singer-Hamdy. “The most important is how you discuss with the creditors now, in terms of agreeing to a haircut. This is [what] will help . . . Everybody is waiting to see how the government will negotiate the restructuring with the creditors.”

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The Phenomenon is spreading like wildfire in large part because of the tinder dry conditions underfoot.
Emerging Markets

Prolonged stand-offs eviscerate economies, reducing opportunities and accelerate the negative feed- back loop.

Antonio Gramsci wrote, “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum, a great variety of morbid symptoms appear. now is the time of monsters.”

Ryszard Kapucinski also said: “If the crowd disperses, goes home, does not reassemble, we say the revolution is over.”
It is not over. More and more people are gathering in the Streets.

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Paul Virilio Speed and Politics
Emerging Markets

“The revolutionary contingent attains its ideal form not in the place of production, but in the street, where for a moment it stops being a cog in the technical machine and itself becomes a motor (machine of attack), in other words, a producer of speed.’’

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Zimbabwe’s inflation is back above 100% after currency plunge @Moneyweb

Zimbabwe’s inflation rate jumped back into triple digits in May after the central bank effectively devalued the local currency by introducing a new interbank rate at which most commerce will take place.

Annual inflation quickened to 131.7% from 96.4% in April, ending a 10-month period in which the rate was below 100%. Costs rose 21% in the month, the fastest pace since July 2020. 

Food prices increased more than 150% from a year earlier.

More than four years after the ousting of the southern African nation’s former leader Robert Mugabe, who oversaw plunging economic output and hyperinflation, 

Zimbabwe is still struggling to get back on track.
The Reserve Bank of Zimbabwe introduced the new interbank rate at 276 per dollar on May 9. That was two days after President Emmerson Mnangagwa temporarily barred banks from lending and introduced other measures in a bid to halt the plunge in the Zimbabwe dollar on the black market, where it trades at more than 400 to the greenback. 

The interbank rate is now at 296.

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21-JAN-2019 :: @harari_yuval & money

''Money is accordingly a system of mutual trust, and not just any system of mutual trust: money is the most universal and most efficient system of mutual trust ever devised.”

“Cowry shells and dollars have value only in our common imagination. Their worth is not inherent in the chemical structure of the shells and paper, or their colour, or their shape. In other words, money isn’t a material reality – it is a psychological construct. It works by converting matter into mind.”
The Point I am seeking to make is that There is a correlation between high Inflation and revolutionary conditions, Zimbabwe is a classic example
The Mind Game that ZANU-PF played on its citizens has evaporated in a puff of smoke.

May 2 Currency puzzles

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@KCBGroup rallied +12.38% on new CEO @Saagite
N.S.E Equities - Finance & Investment

Closing Price:  39.95
Market Capitalization: $1.054B
EPS: 10.64
PE:  3.755

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.@SafaricomPLC share data
N.S.E Equities - Commercial & Services

Price: 26.35
Market Cap: $9.02b

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by Aly Khan Satchu (www.rich.co.ke)
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May 2022

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