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Wednesday 03rd of August 2022
 
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Africa

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Oscar Niemeyer's final building opens in French vineyard @dezeen
Misc.

Oscar Niemeyer's final building opens in French vineyard @dezeen

A pavilion designed by the late Brazilian architect Oscar Niemeyer has opened at the Château La Coste vineyard in southern France.

Designed in 2010, two years before Niemeyer's death aged 104.

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Sunday, April 10 Apocalypse Now The moment we find ourselves is in is one of extreme stress and complexity.
Law & Politics


Sunday, April 10 Apocalypse Now The moment we find ourselves is in is one of extreme stress and complexity. 



The Geopolitical fault line is most visible in Ukraine and therefore at the European periphery, however, fault lines are emerging all over the global landscape and exhibiting multiple feedback loops, which feedback loops all have viral and exponential characteristics.



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Yes, America’s hawkish uniparty really is gearing up for a two-front, simultaneous confrontation against two nuclear powers over silly pieces of geography @SohrabAhmari
Law & Politics


Yes, America’s hawkish uniparty really is gearing up for a two-front, simultaneous confrontation against two nuclear powers over silly pieces of geography — after having wasted two decades and trillions of dollars on failed wars involving goat-herders and various Muslim factions.

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Live-fire military exercises announced by Chinese state media reveal that China plans to send its military forces into both Taiwan's sovereign territorial waters and its internal waters @Nrg8000/
Law & Politics


Live-fire military exercises announced by Chinese state media reveal that China plans to send its military forces into both Taiwan's sovereign territorial waters and its internal waters @Nrg8000/

Conclusions

This is a major escalation 

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23-AUG-2021 :: Xi Jinping is on a winning streak ever since he started salami slicing his then adversary President Obama.
Law & Politics


23-AUG-2021 :: Xi Jinping is on a winning streak ever since he started salami slicing his then adversary President Obama.

It is inevitable he will roll the dice on Taiwan 

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BREAKING: Germany 1-year forward baseload electricity surges >€400 per MWh for the first time ever. current price is ~1,000% higher than the €41.1 per MWh 2010-2020 average @JavierBlas
Minerals, Oil & Energy


BREAKING: Germany 1-year forward baseload electricity surges >€400 per MWh for the first time ever. current price is ~1,000% higher than the €41.1 per MWh 2010-2020 average @JavierBlas

We are truly into crunching territory for the country's energy-intensive manufacturing industry.
The current price is ~1,000% higher than the €41.1 per MWh 2010-2020 average.

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May 29 Vanity of Vanities! All is vanity
Law & Politics



May 29 Vanity of Vanities! All is vanity

In the same article Cummings continues
Blofeld: Kronsteen, you are sure this plan is foolproof?
Kronsteen: Yes it is, because I have anticipated every possible variation of counter-move.
Politics therefore suffers from a surfeit of narcissists.
The occupants of No10, like Tolstoy’s characters in War and Peace, are blown around by forces they do not comprehend as they gossip, intrigue, and babble to the media.
The MPs and spin doctors steer their priorities according to the rapidly shifting sands of the pundits who they are all spinning, while the pundits shift (to some extent unconsciously) according to the polls.
The outcome? Everybody rushes around in tailspins assembling circular firing squads while the real dynamics of opinion play out largely untouched by their conscious actions.
In terms of a method to ‘manage’ government, it is not far from tribal elders howling incantations around the camp fire after inspecting the entrails of slaughtered animals. 
Layer on top of this a highly managed media construct which is essentially a Claque where alternative voices are deplatformed and we have an environment which was accurately described thus by @FukuyamaFrancis
The democratization of authority spurred by the digital revolution has flattened cognitive hierarchies along with other hierarchies, and political decision-making is now driven by often weaponized babble.
At a time when what is required is agile multi disciplinary thinking we have ''weaponized babble''


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Our ‘Rhythmically Dancing’ Physical Real Economy Alastair CROOKE
Law & Politics


Our ‘Rhythmically Dancing’ Physical Real Economy Alastair CROOKE

Western modernity is contingent on cheap fossil fuel. If that shrinks, our economies will shrink too – to a sub-optimal level.

The poet, WB Yeats, often used in his writings two old Irish folkloric terms: ‘thrall’ and ‘glamour’. 

Being in thrall to something meant that a person was wholly overpowered by some unaccountable ‘magnetism’ emanating into their world, and into whose grip they had fallen. 

It was, if you like, being caught up by some irresistible, ‘magical’ spell, exerted by some ‘thing’, some ‘being’, or some ‘image-idea’. 

The sense was of being rendered helpless, held immobile in a spider’s web; bewitched.
Glamour was something magical that the fairies threw over a ‘thing’ or ‘being’ that gave them the power to put others in their thrall – to pull people into their spider’s web. 

Glamour was the casting of the spell into which humans fell.
Yates was relating old stories from Ireland about fairies and their magic, sometimes harmless, but as often as not the fairy ‘spells’ were forces that led unerringly to tragedy. 

We may not be dealing here with fairy tales per se, as was Yates. 

Nonetheless, framed differently, we live bewitched by today’s ‘spell’, although most would deny it vehemently.
Naturally, we do not see ourselves today, as naïf. We have a firm hand on the realness of our solidly material world. We absolutely do not believe in fairy tales or magic. Yet …
Today, the West is caught up in the ‘image-ideas’ of mechanistic causality and financialism. 

Wall Street economists pore over the entrails of monetary variables, and have come to see the world through mechanistic-financial spectacles.
This artifice, however, was always illusory, giving its analysis a false sense of empiricism and of data-led certitude: 

The idea that real wealth would emerge out from inflated fiat debt; that such debt expansion had no boundaries; that all debt must be honoured; and its overhang was only to be solved by more debt was never credible. It was a ‘fairy tale’.
Nevertheless, we imagine ourselves to be objective, longing for simple, rational answers from ‘science’. 

And because the economy involves ‘money’, which is somewhat more readily measured, we assume it had a solidity, a realness that leaned to the notion that true (instead of ‘virtual’) prosperity could be conjured out of an ever-increasing mountain of debt.
Nonetheless, this changed attention has – literally – shaped how we ‘see’ the world. 

Some of its consequences might be hailed in terms of great tech advances, but we should be aware too, that it has also led to an increasingly mechanistic, materialist, fragmented, decontextualised world – marked by unwarranted optimism.
Financialism was, after all, just ‘a narrative’; one crafted by technicians, whose credentialled expertise ‘may not be questioned’. 

It was intended to support a particular illusion (in which many, including the money-men, firmly believed); It was the ‘myth’ of debt and credit-led, recession-free growth. 

The true aim though, always was the appropriation of global purchasing power to the oligarchic élites.
The shift in narrative towards financialism nevertheless, has had the effect of removing attention from the ‘other’ facet; the obverse side of a dynamic real economy: that of being a physics-based network system, powered by energy.
Which is to say that Modernity has been powered principally by a rapidly growing supply of highly productive energy for over 200 years.
“The period of Rapid Energy Growth between 1950 and 1980 was a period of unprecedented growth in per capita energy consumption. 

This was a period when many families in the West could afford their own car for the first time. 

There were enough employment opportunities that, quite often, both spouses could hold down paying jobs outside the home.
It was precisely the growing supply of ‘cheap’ fossil fuels [relative to cost of extraction] that had made these jobs available”, Gail Tyverberg writes.
“Conversely, the 1920 to 1940 period was a period of very low growth in energy consumption, relative to population. This was also the period of the Great Depression and the period leading up to World War II … 

If energy of the right kinds is cheaply available, it is possible to build new roads, pipelines, and electricity transmission lines. Trade grows. 

If available energy is inadequate, major wars tend to break out and standards of living are likely to fall. We now seem to be approaching a time of too little energy, relative to population”.
“Both oil and coal are past ‘peak’, on a per capita basis. 

World coal supply has been lagging population growth since at least 2011. 

While natural gas production is rising, the price tends to be high, and the cost of transport is very high. 

Peak production of coal, relative to world population, was in the year 2011.
“Now, in 2022, the least expensive coal to extract has been depleted. World coal consumption has fallen far behind population growth. The big drop-off in coal availability means that countries are increasingly looking to natural gas as a flexible source of electricity generation. 

But natural gas has many other uses, including its use in making fertilizer and as a feedstock for many herbicides, pesticides, and insecticides. The result is that there is more demand for natural gas than can easily be supplied.
“Politicians cannot admit that [our modernity] cannot get along without the right quantities of energy that match the needs of today’s [physical] infrastructure. 

At most, a small amount of substitution is possible, if all the necessary transition steps are taken. 

Thus, most people today are convinced that the economy doesn’t need energy. They believe that the world’s biggest problem is climate change. 

They tend to cheer when they hear that fossil fuel supplies are being shut down. 

Of course, without energy of the right kinds, jobs disappear. The total quantity of goods and services produced tends to fall very steeply”.
Tyverberg states the obvious: Modernity is contingent on fossil fuels, whose energy contribution far exceeds the energy expended on its extraction, transportation, and effective distribution. 

Switching rapidly from high net energy contribution, to marginal or low, during a period of sub-optimal growth, has never before been attempted.
Many do not like to hear this. Political leaders gloss over it. True due diligence is not done. However, it is what it is.
What’s the issue here? The West is in crisis. There is a looming (or present) recession, plus sharply spiking prices. 

The real economy however, as underlined earlier, is a physics-based, dynamic, network system. 

Yet, the Establishment wants to treat these worsening symptoms, as if the physical economy were but an AI-managed mechanistic financial system:
There are two distinct misdiagnoses at play here (arising from the thrall of financialism), both of which on their own are serious, but when combined may prove apocalyptic.
The financial mandarins want to raise interest rates and tighten liquidity, in order to hammer down domestic demand such that inflation dips back to 2%. And then, it all will be fine and dandy, they intimate – except it won’t.
A short, shallow ‘recession’, followed by a return to normal, is one of today’s prevalent market narratives: squeeze the plebs until the pips squeak, and are barely able to put food on the table – then by definition prices, other than food, get crushed (‘discounted’) – and median inflation can fall to 2%. 

Big Sigh of relief! For, then the Central Banks can revert to QE, and the ‘market’ has its subsidy entitlement restored to it.
The problem is plain: this financialised solution is artificial: As soon as easing resumes (and probably it will), global supply-side inflation will still be there, and will spike with greater intensity.
There are two major sources of inflation. There’s the supply side and there’s the demand side. Either one of them can drive inflation, but they’re very, very different in terms of how they work.
Supply side inflation arises when ‘supply’ just isn’t there, or is disrupted by crop failures, component shortages, war, financial war, sanctions, or the many other forms of supply line de-coupling. 

So, as Jim Rickards points out, what can the Fed or the ECB do about that? Nothing. 

Does the Fed drill for oil? Does the Fed run a farm? Does the Fed drive a truck? Does the Fed pilot a cargo vessel across the Pacific, or load freight at the Port of Los Angeles?
“No, they don’t do any of those things, and so they can’t fix that part of the problem. Raising interest rates has no impact on the supply side shortages we’re seeing. And that’s where the inflation’s mainly coming from. Since the Fed has misdiagnosed the disease, they are applying the wrong medicine”.
Here’s the point: Since the Fed or the ECB can’t create supply; it opts for demand-destruction [to fight inflation]”. 

It won’t stop runaway inflation. To be fair, Powell understands this. He has wider objectives in mind: The Big Banks (Powell’s employers) do not fear recession, as much as they fear Europe’s political class destroying their rentier business model by trashing sovereign debt-obligations, and in so doing, shifting toward a single Central Bank-issued, global digital currency. The Fed is ‘at war’ with the ECB (America First!).
And Powell has a point. The inexorable logic to Europe shooting itself in the foot over Russian cheap energy supplies (to save Ukraine), is that Europe inevitably will follow the post WW1 German playbook after France seized the Ruhr – with its abundant cheap coal. 

The Weimar government tried to substitute for the loss of coal – by printing money. It was the era of the Great Depression.
Why then should the current push toward demand destruction through interest rate rises, be such a grave misjudgement? 

Well, because … the real economy is a physics-based network economy. That’s why.
Europe has opted for proxy war with Russia, at America’s bidding. It has subordinated itself to NATO policy. It has imposed sanctions on Russia, hoping to crash its economy. 

In riposte, Russia is squeezing Europe’s cheap energy supplies hard. 

Europe may buy – if it can – much more expensive energy from elsewhere, but only at the cost of sectors of its real economy turning unprofitable and being shut down.
Bottom line: Germany’s Robert Habeck in March was saying that Germany could manage without Russian gas. It would find it from elsewhere. 

His assertion was however a bluff: Habeck at that point, was trying to fill German reservoirs for winter by buying additional Russian gas. Moscow called his bluff and squeezed his supply down to a trickle

The EU too, has blustered about finding alternative supplies, but that was all bluff too. As all the experts warned beforehand: effectively there is no global spare gas capacity.
All this has the quality of a monumental concatenation of mistakes by Brussels – a hasty abandonment of high net energy-contributing fossil fuels (to save the Planet); whilst joining a NATO proxy war on Russia (to save Ukraine). Decisions taken first – with consequences being only apparent afterward.
Western modernity is contingent on cheap (productive) fossil fuel. If that shrinks, our economies will shrink too – to a sub-optimal level. 

If this commonplace is not widely seen, it is because of the thrall of financialisation. 

Going to Net Zero has been perceived as financial boondoggle, just as the war in Ukraine is viewed as the Military Industrial Complex’s financial boondoggle.
Where is Europe headed? Perhaps the best characterisation came from John Maynard Keynes in The General Theory of Employment, Interest and Money. 

Keynes said a depression is “a chronic condition of subnormal activity for a considerable period without any marked tendency either toward recovery or toward complete collapse”.
Keynes did not refer to declining GDP; he talked about “subnormal” activity. In other words, it is entirely possible to have growth in a depression. 

The problem is that the growth is below trend. It is weak growth that does not do the job of providing enough jobs or staying ahead of the national debt. 

That is exactly what the West, and Europe particularly, is experiencing today.
And just to be clear, dealing with supply-side inflation through general demand destruction, means taking a hammer to a fragile dynamic physical system. 

Physics-based systems are inherently unpredictable. They are not mechanistic – a truth to which Werner Heisenberg’s experimental investigation of atoms in the 1920s attests: 

“I remember discussions with [Niels] Bohr which went through many hours till very late at night and ended almost in despair: Can Nature possibly be so absurd, as it seemed to us in those atomic experiments”.
It was Heisenberg’s great achievement to express this ‘absurdity’ in a mathematical form known, perhaps a touch whimsically, as the ‘uncertainty principle’which sought to set limits to old conceptualisations: 

Whenever scientists used classical terms to describe atomic phenomena, they found that there were aspects which were interrelated and cannot be defined simultaneously in a precise way. 

The more the scientists emphasised one aspect, the more the other aspect became uncertain. The closer they tried to come to ‘reality’, the further away it seemed to be – always at a distance.
The resolution of this paradox forced physicists to call into question the very foundation of the mechanistic world view. 

In Fritjov Capra’s words, it showed that as we penetrate into physics-based sphere, nature does not show us any isolated basic building blocks, but rather appears as a complicated web of being in a continuous dancing and vibrating motion, whose rhythmic patterns are determined through a range of configurations.
If sub-atomic scientists in the 1920s understood that the physical world is complex unpredictable and non-mechanistic, why are the western financial Panjandrums of 2022 still in thrall to an outdated mechanistic analysis? 

Even Newton did not go that far. Recall, as often as not, in Yates’ recounting, these ‘spells’ were forces that led unerringly to tragedy.

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Regime Change in Western Capitals long before Moscow.
Law & Politics

Regime Change in Western Capitals long before Moscow.
A ''Fairy Tale'' reality and a geoeconomic boomerang effect which is shredding the standard of living in the West and whose consequence will be Regime Change in Western Capitals long before Moscow.

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April 10, 2022 “You know, we can play chess, too,” Singh said. “It was important for us to show that the fortress could come crumbling down.”
Law & Politics



April 10, 2022  “You know, we can play chess, too,” Singh said. “It was important for us to show that the fortress could come crumbling down.”


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.

if you believe that the West can craft sanctions that maximize pain for Russia while minimizing financial stability risks and price stability risks in the West, you could also believe in unicorns. #Zoltan

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The Man Behind Bin Laden @NewYorker
Law & Politics


The Man Behind Bin Laden @NewYorker  

Last March, a band of horsemen journeyed through the province of Paktika, in Afghanistan, near the Pakistan border. Predator drones were circling the skies and American troops were sweeping through the mountains. 

The war had begun six months earlier, and by now the fighting had narrowed down to the ragged eastern edge of the country. 

Regional warlords had been bought off, the borders supposedly sealed. 

For twelve days, American and coalition forces had been bombing the nearby Shah-e-Kot Valley and systematically destroying the cave complexes in the Al Qaeda stronghold. 

And yet the horsemen were riding unhindered toward Pakistan.

“Bin Laden had followers, but they weren’t organized,” recalls Essam Deraz, an Egyptian filmmaker who made several documentaries about the mujahideen during the Soviet-Afghan war. 

“The people with Zawahiri had extraordinary capabilities—doctors, engineers, soldiers. They had experience in secret work. They knew how to organize themselves and create cells. And they became the leaders.”

 They dreamed of an Egypt that was safe and clean and orderly, and also secular and ethnically diverse—though still married to British notions of class. 

They planted eucalyptus trees to repel flies and mosquitoes, and gardens to perfume the air with the fragrance of roses and jasmine and bougainvillea. 

Many of the early settlers were British military officers and civil servants, whose wives started garden clubs and literary salons; they were followed by Jewish families, who by the end of the Second World War made up nearly a third of Maadi’s population. 

After the war, Maadi evolved into a community of expatriate Europeans, American businessmen and missionaries, and a certain type of Egyptian—one who spoke French at dinner and followed the cricket matches.

Nubian waiters bearing icy glasses of Nescafé glided among the pashas and princesses sunbathing at the pool. In the garden were flamingos and a lily pond.

The Zawahiri name, however, was associated above all with religion. In 1929, Rabie’s uncle Mohammed al-Ahmadi al-Zawahiri became the Grand Imam of Al-Azhar, the thousand-year-old university in the heart of Old Cairo, which is still the center of Islamic learning in the Middle East. 

In July of that year, a military junta, dominated by an Army colonel, Gamal Abdel Nasser, packed King Farouk onto his yacht and seized control of the government, without firing a shot.

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Pozsar Says L-Shaped Recession Is Needed to Conquer Inflation @markets @economics
World Of Finance


Pozsar Says L-Shaped Recession Is Needed to Conquer Inflation @markets @economics 

The US economy may need to undergo a deeper and longer recession than investors currently anticipate before inflation can be brought under control, according to Zoltan Pozsar of Credit Suisse Group AG. 

Markets expect the surge in consumer prices will soon peak and central banks will become less hawkish, but there’s a high risk that global cost pressures will remain elevated, Pozsar, global head of short-term interest-rate strategy at Credit Suisse in New York, wrote in a client note.
The world is being wracked by an economic war that’s undermining the deflationary relationships that have prevailed in recent decades where Russia and China supplied cheap goods and services to more developed nations such as the US and those in Europe, he said.

“War is inflationary,” Pozsar wrote. “Think of the economic war as a fight between the consumer-driven West, where the level of demand has been maximized, and the production-driven East, where the level of supply has been maximized to serve the needs of the West.” That pattern held “until East-West relations soured, and supply snapped back,” he said.
The result is that inflation is now a structural problem, rather than a cyclical one. 

Supply disruptions have arisen from the changes in Russia and China, along with tighter labor markets due to immigration restrictions and a reduction in mobility caused by the coronavirus pandemic, Pozsar said.
There’s now a risk the Federal Reserve under Chair Jerome Powell has to raise interest rates to 5% or 6% and keep them there to create a substantial and sustained reduction of aggregate demand to match the tighter supply profile, he said.
Pozsar’s warning that inflation will stay elevated puts him at odds with the Treasury market, which rallied last month as investors switched their focus to recession risks from inflation concern. 

While an economic slowdown typically weighs on consumer prices, the latest annual US inflation reading of 9.1% for June remains far above the Fed’s 2% goal, although the price surge is forecast to slow for the first time in three months to 8.8% in July according to a Bloomberg poll of economists. 

The bond market is more misguided now than at any other time this year as traders wager the US central bank will start cutting rates in early 2023, Bloomberg Economics’ chief US economist Anna Wong and her colleagues said this week. 

Money markets are wagering on almost one percentage point of hikes by year-end followed by a quarter-point cut by June.
“Interest rates may be kept high for a while to ensure that rate cuts won’t cause an economic rebound (an ‘L’ and not a ‘V’), which might trigger a renewed bout of inflation,” Pozsar wrote in his note

“The risks are such that Powell will try his very best to curb inflation, even at the cost of a ‘depression’ and not getting reappointed.”

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Voodoo Economics
World Of Finance

Voodoo Economics
We have reached the point when the curtain was lifted in the Wizard of Oz and the Wizard revealed to be ‘’an ordinary conman from Omaha who has been using elaborate magic tricks and props to make himself seem “great and powerful”’’ 

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Jul 24 Question is whether if this were a Game of Red Eye and the market has now seen that Powell and Lagarde are holding the 2 of spades
World Of Finance


Jul 24 Question is whether if this were a Game of Red Eye and the market has now seen that Powell and Lagarde are holding the 2 of spades 

After the #ECB hiked rates by 50bps, German 10y declined from >1.3% to almost 1% in a matter of 24h. German 2y down to 0.4%. @COdendahl
When I was a lot younger we used to play a Game called ''Red Eye'' Everyone gets a card and everyone else's card is visible to you except your own. And you bet on that basis. 

The Question is whether if this were a Game of Red Eye and the market has now seen that Powell and Lagarde are holding the 2 of spades and that this hiking cycle is near done. If that is the case, the Yen is a screaming Buy and the Dollar a Big Sell.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.01865 
Dollar Index 106.093
Japan Yen 132.6720 
Swiss Franc 0.954855 
Pound 1.218005 
Aussie 0.692985 
India Rupee 78.7100 
South Korea Won 1310.015 
Brazil Real 5.2796
Egypt Pound 19.040900 
South Africa Rand 16.70157 

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Which African sovereigns are most likely to default? Robert Besseling
Africa


Which African sovereigns are most likely to default? Robert Besseling 

Over the next five years, several already debt distressed African countries are due to make sizable repayments on their foreign currency denominated sovereign bonds, even while rising inflation, slowing economic growth, and depleting foreign exchange reserves put pressure on their own local currencies. 

PANGEA-RISK has identified the most probable default scenarios over this period, including in large African markets such as Ghana, Kenya, and Ethiopia.
Since the start of the pandemic over two years ago, only two African countries have defaulted on their sovereign debt, namely Zambia in late 2020 and Mali in early 2022. 

Remedial action by multilateral financial and development institutions have so far mitigated a wider debt default. 

The International Monetary Fund (IMF) and World Bank are now seeking more ambitious initiatives to offer debt relief and loan restructuring for low income countries.

Sovereigns at highest default risk

With the expiry of the debt service suspension initiative (DSSI) at the end of last year and the low uptake of the Common Framework, there is mounting concern that low-income countries will not be able to meet their $35 billion in debt payment obligations this year. 

The IMF now rates 23 countries out of 50 sub-Saharan African states to be in debt distress or at high risk of debt distress, which is up from just eight countries in 2015

Without bolder debt relief or further special drawing rights (SDR) issuance, several African countries are set to default in coming years, including Ethiopia and Tunisia, as well as perhaps Kenya and Ghana.
In the five-year outlook (May 2022 to May 2027), several sub-Saharan African countries are due to make $21.5 billion in repayments of Eurobonds, excluding the cost of servicing these foreign currency denominated loans. 

These include heavy borrowers such as Ghana. which owes more than $4 billion to bondholders between now [June 2022] and May 2027, and Kenya, with a bond repayment bill of almost $3 billion for the next five years. 

The debt sustainability outlook of the continent’s largest economy, Nigeria which owes almost $2 billion in Eurobond repayments, is also becoming more concerning. 

While Ethiopia has only one Eurobond, a $1 billion bond due in 2024, it is becoming increasingly improbable that the conflict-ravaged country will be able to repay the capital in two years, let alone service the loan in the meantime.
Rising cost of debt
As the cost of debt servicing increases – in fact, tripling between 2010 and 2021 – African sovereigns will struggle to meet regular interest payment deadlines. 

In the first two years of the pandemic, interest rate cuts by big central banks made it relatively cheap for governments to borrow. 

But with global monetary conditions tightening this year, it is becoming more expensive to refinance existing debts. 

African economies seeking to borrow on the international markets could be in difficulty if the US Federal Reserve rates are increased more than anticipated. 

Higher-than-anticipated US rate hikes could prompt significant capital outflows and put pressure on central banks to increase the price of domestic credit, potentially dampening growth.
Zambia defaulted on a Eurobond interest payment in late 2020, while Mali has stopped servicing and repaying its West African central bank (BCEAO) held debt due to regional sanctions. 

Rising US interest rates and tumbling currencies will increase the debt-to-GDP ratios, while raising the cost of borrowing. Countries already in arrears and with large debt burdens, such as Sudan, Eritrea, and Zimbabwe, will see their debt increase even more. 

Higher interest rates also means that countries such as Ghana will no longer be able to affordably tap into international debt markets to refinance existing debts. 

Several large markets such as Angola and Kenya are already scrapping plans to issue more Eurobonds this year, while others like Nigeria are issuing debt at costly interest rates, rendering their debt profile less sustainable.
Meanwhile, the total value of debt repayments is rising. In 2022, the world’s poorest countries face a $10.9 billion surge in debt repayments. 

This increase in debt repayments comes as many African countries shunned the DSSI, which was launched by the G20 group of large economies in April 2020 and aimed to defer about $20 billion owed by 73 countries to bilateral lenders between May and December 2020. 

Despite being extended to the end of 2021, just 42 countries globally received relief totalling $12.7 billion, according to the Paris Club group of creditor nations that helped coordinate the initiative along with the World Bank and the IMF. 

Those countries must now resume repayments this year and start recognising debts that were suspended under the scheme.
Eurobonds at higher non-payment risk
Eurobonds are not the only financial obligations for African countries, which will need to make a total of $185 billion in loan repayments between 2022 and 2024

Most African states have borrowed commercially from banks and export credit agencies, bilaterally from other governments, concessionally from development banks or multilateral financial institutions, or from Chinese state-controlled entities. 

However, a default event is more likely to occur on a Eurobond tranche payment or capital repayment, than on any other form of obligation.
Zambia has continued to make payments to the World Bank, some banks and ECAs, and Chinese entities, even while ceasing to pay interest due on its sole external bond. 

Even though Eurobond structures may not always be more onerous in terms of servicing cost, they are complex to restructure, while the broader socioeconomic and political implications of stopping or delaying payments to China or development banks are often far more serious.

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UN has called it the world’s first climate-change-induced famine For the people of southern Madagascar, it is known simply as kere — the hunger. @FT
Africa


UN has called it the world’s first climate-change-induced famine For the people of southern Madagascar, it is known simply as kere — the hunger. @FT 

“I fed cactus fruit and wild leaves to my children,” she says, holding her two-year-old daughter, Haova, who was at one point diagnosed as being severely malnourished. 

“We boiled the leaves and added salt. It had no taste but it filled our stomachs,” she says. “Kere means hunger. No food every day. That’s kere.”
Rain has barely fallen for three years in southern Madagascar, a semi-barren region in a California-sized island nation off the east coast of Africa that is more often associated with tropical forests, baobab trees and lemurs than with starvation.

Some 1.68mn people, or a third of the population of the Grand Sud, remain in “crisis” or “humanitarian emergency”, according to the Integrated Food Security Phase Classification, a standard five-point scale of escalating hunger. 

Marcelline Voatsasinanjara, who grew up locally and who now works for Save the Children, describes the physical effects of extreme hunger. “You can’t move,” she says. “Only the eyes show you are alive.”

As the people of the Grand Sud struggle to scratch out a living from depleted soil, they offer a warning to other countries, and arguably the planet itself, about what happens when humans push nature too far.
As Jared Diamond, the geographer, wrote in his book Collapse, entire societies, such as that of Easter Island, the once-flourishing Pacific island, can suddenly spiral downwards towards self-destruction.
Emre Seri, a Madagascar-based journalist writing for French magazine Revue XXI, called the claim “one of the most successful media stunts of recent years”. Instead of climate change, he blamed the failure of government policies, cattle-rustling and other local factors in a country that is poorer now than at independence in 1960.
“Madagascar is in a dangerous downward spiral,” she says. “People get poorer every year. And with climate change breathing down their throat, it makes it worse, accelerating everything.”
Human settlement on Madagascar, which according to some estimates broke off from the continental landmass more than 80mn years ago, is relatively recent. 

Ten thousand years ago some Africans found their way across the Mozambique Channel to the island, 400km off the coast, but it was people from Indonesia who colonised the island en masse, probably about 2,500 years ago. 

The closest language to Malagasy, Madagascar’s national language, is spoken in the interior of Borneo, some 10,000km away.

The country’s population has grown sixfold from 5mn at independence to almost 30mn today, adding to land pressure, she says. “Where does this end? It ends in disaster, doesn’t it?”

Satellite imagery, she concedes, shows that some 40 per cent of forest cover has vanished in the past 50 years, swallowed up for farmland, forestry, mining and charcoal. 

“There are many hands on the axe,” she says.
Richard argues that, with more political will, environmental destruction can be reversed and people’s lives improved. 

She advocates the planting of native trees. Farmers could grow valuable cash crops like vanilla, of which Madagascar supplies 80 per cent of the world’s needs, and green peppercorn. 

“It’s not the fact of human presence. It’s what you do,” she says. “That to me is a seed of hope. Otherwise, it’s a kind of: ‘We’re doomed. It’s in our DNA to destroy ourselves.’”

The same could also be true for fearsome dust storms, known as tiomena, or “red winds” that destroy seedlings and make life unbearable. 

“The tiomena comes from the east, bringing red sand,” says Fenosoa, a villager who goes by one name. “All the leaves and everything else in the village turn red. Even the cows turn red.”

Rakotondramanana, the prefect, says: “The sandstorms are a result of deforestation. There are not enough trees to maintain the land.”

23-NOV 2015 I cannot help feeling we are like frogs in boiling water. 


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