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Satchu's Rich Wrap-Up
 
 
Wednesday 07th of September 2022
 







These became known as the “halcyon days,” when storms do not occur. Wikipedia has an article on: halcyon days and it reads thus
Misc.



From Latin Alcyone, daughter of Aeolus and wife of Ceyx. When her husband died in a shipwreck, Alcyone threw herself into the sea whereupon the gods transformed them both into halcyon birds (kingfishers).
When Alcyone made her nest on the beach, waves threatened to destroy it. Aeolus restrained his winds and kept them calm during seven days in each year, so she could lay her eggs.
These became known as the “halcyon days,” when storms do not occur. Today, the term is used to denote a past period that is being remembered for being happy and/or successful



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Taiwan’s military struggles to adapt as China threat grows @FT
Law & Politics


Taiwan’s military struggles to adapt as China threat grows @FT 



Taiwan’s former top military official issued a dire warning last week. 

The armed forces lacked a clear strategy to defend the country against a Chinese attack and the president might not understand the conceptual thinking needed to counter that threat, said Admiral Lee Hsi-ming, former chief of the general staff.
“Think strategically! Don’t limit yourself to thinking about operational details!” Lee urged the military as he launched his new book that argues Taiwan must refocus on the “asymmetric” defence strategy he introduced but has been diluted since he retired three years ago.
Lee praised President Tsai Ing-wen for attaching more importance to the armed forces than her predecessors, but laced his appreciation of her backing for his asymmetric strategy with scepticism.

 “Does she understand it? I am not sure,” he said.
The former military chief’s alarm highlights the inertia that has hindered efforts to strengthen Taiwan’s defences, experts say, and is rooted in its history as the army of the Kuomintang, the Chinese Nationalist party that ruled the country under martial law for decades. 

The struggle to reform has taken on a sudden urgency as China is ratcheting up military pressure on Taiwan.
“We have an authoritarian hangover and it has created a problem with civil-military relations, and it may be the most critical problem we have,” said Kitsch Liao, military and cyber affairs consultant for Doublethink Lab, a Taipei-based civil society group. 

“The reason is that the military used to be the armed wing of the KMT, just like the People’s Liberation Army is the armed wing of the Chinese Communist party.”
When Taiwan democratised in 1992, the Taiwan Garrison Command, the unit that enforced martial law until 1987, was disbanded. But further changes have been slow and incremental.
Dean Karalekas, an expert on civil-military relations in Taiwan at the University of Central Lancashire, said the military had “worked pretty hard to move forward, in their own way”. 

But he added: “The old structures are still in place, [and there is] resistance against structural and cultural change.”
The political officers installed in each military unit to monitor loyalty to the party — a structure mirroring that of China’s military — have not been removed but simply given new job descriptions. Instead of ferreting out communist sympathisers, they now provide counselling to service members.
That cautious approach has come at a cost.
The US, which has a commitment to help Taiwan defend itself, has long pushed Taipei to reallocate its limited defence spending to more effectively deter a potential Chinese invasion and restructure its poorly trained reserve force. 

But implementation of reforms has been painfully gradual.
Tsai’s Democratic Progressive party, which pushed the KMT out of power for the first time in 2000, attributes this to the military’s legacy.
“There are many officers, especially above the rank of colonel, who blame the US for the increasing military tensions around here and agree with the argument that China is just responding to US provocations,” said a senior government official. 

“It contrasts with the younger ones, who fully identify with Taiwan, have high levels of morale and are determined to stand firm against China.”
Analysts said it was a miracle that no military coup had disrupted Taiwan’s transformation into a vibrant democracy.
After Chen Shui-bian, the first DPP president, was elected in 2000, “there was this tense feeling in the air: would the military follow orders from a DPP president? Would there be a coup, even?” Karalekas said. 

Chen placated the military and reassured the KMT by choosing a retired general and KMT member as his first premier. 

Today, there is no doubt that the armed forces are loyal to the constitution rather than their former party masters.
But other changes have taken longer. Until 2000, high-ranking officers were almost all men who were born either in mainland China or whose families had come from there with the KMT in 1949. 

“You had a situation where your ground troops were almost entirely Taiwanese, and they were led by mainlander officers,” Karalekas said.
Chen accelerated officer corps turnover by holding promotions every six months instead of annually. 

He expedited the staffing of flag officer positions with Taiwanese candidates, and by the end of his first term in 2004, three-quarters of the country’s flag officers had changed.
But experts caution that bureaucratic inertia could continue without radical reforms. 

Taiwan has cut its active-service military personnel by more than half since the 1990s to just 170,000, limiting junior officers’ chances for promotion. 

This made patronage networks even more important and discouraged individual initiative.
Moreover, when Taiwan emerged from decades of authoritarian rule, it focused on developing civil society and exploring the separate identity suppressed under the Kuomintang regime. That led attention and public spending away from the military.
“We don’t have enough civilian talent who understand the military,” Liao said. 

“In the US, we have entire think-tanks that study military affairs, and people who go between think-tanks, government and the military. But in Taiwan, we just have a few positions in universities here and there.”
Russia’s assault on Ukraine, which made Taiwanese society much more attuned to the risk of war, may provide an incentive to revitalise civil-military connections. It has boosted civil defence initiatives.
Last week, tycoon Robert Tsao pledged NT$1bn (US$33mn) to help finance two initiatives for training civilian fighters. But such plans will wither unless the military agrees to integrate them into its strategy, experts said.
“Some of the most heroic images coming out of the [Ukraine] war — the very images that have secured massive support from overseas — are of civilians fighting the Russian invaders,” Karalekas said. 

“If Taiwan is to secure this same level of international support in the event of a Chinese attack, then the civilians can’t be seen just waiting to be saved by their military, or worse yet, by someone else’s.”
“The military structures were put in place back when the KMT was essentially an occupying force, and there was the real risk of an uprising,” he added. 

“But today, Taiwan’s young people are proud of the society they’ve inherited and are willing to fight to protect their government and institutions. They must be given every opportunity to do so.”

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Salami slicing tactics
Law & Politics



Salami slicing tactics


Salami slicing tactics, also known as salami slicing, salami tactics, the salami-slice strategy, or salami attacks,[1] is a divide and conquer process of threats and alliances used to overcome opposition. 

With it, an aggressor can influence and eventually dominate a landscape, typically political, in piecemeal fashion. 

Opposition is eliminated "slice by slice" until its members realize, usually too late, that it has been virtually neutralized in its entirety.


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War and Industrial Policy @CreditSuisse Zoltan Pozsar
Law & Politics


War and Industrial Policy @CreditSuisse Zoltan Pozsar


Implicit in this “trinity” were two giant geo-strategic and geo-economic blocks: Niall Ferguson called the first one “Chimerica”. I will call the other one “Eurussia”.

Both unions were a “heavenly match”: the EU paid euros for cheap Russian gas, the U.S. paid U.S. dollars for cheap Chinese imports, and Russia and China dutifully recycled their earnings into G7 claims

Chimerica does not work anymore and Eurussia does not work either. Instead, we have a special relationship between Russia and China, the core economies of the BRICS block and the “king” and the “queen” on the Eurasian chessboard – a new “heavenly match”, forged from the divorce of Chimerica and Eurussia...

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Jul 3 By sanctioning the Russians, we created a reverse '' Petro Dollar'' We created a ''Petro Ruble'' a currency backed by commodities.
Law & Politics

By sanctioning the Russians, we created a reverse '' Petro Dollar'' We created a ''Petro Ruble'' a currency backed by commodities. 

It is a straightforward calculation now between a Money Printer and a currency backed by hard and soft commodities. Its a No Brainer and a seismic macro development. 

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Finally, the U.S. got very rich by doing QE. But the license for QE came from the “lowflation” regime enabled by cheap exports coming from Russia and China. War and Industrial Policy @CreditSuisse Zoltan Pozsar
Law & Politics


Finally, the U.S. got very rich by doing QE. But the license for QE came from the “lowflation” regime enabled by cheap exports coming from Russia and China.  War and Industrial Policy @CreditSuisse Zoltan Pozsar 


Finally, the U.S. got very rich by doing QE. But the license for QE came from the “lowflation” regime enabled by cheap exports coming from Russia and China. 

Naturally, the top of the global economic food chain – the U.S. – doesn’t want the lowflation regime to end, but if Chimerica and Eurussia are over as unions, the lowflation regime will have to end, period. 

As we noted in our prior dispatch, the special relationship between China and Russia (”Chussia”) is a powerful one: a marriage of commodities and industry, uniting the largest commodity producer (Russia) and the factory of the world (China), potentially in control of Eurasia...

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Sunday, April 10, 2022 The moment we find ourselves is in is one of extreme stress and complexity.
Law & Politics



Sunday, April 10, 2022 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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Do you remember the three units of Minsky? War and Industrial Policy @CreditSuisse Zoltan Pozsar
Law & Politics


Do you remember the three units of Minsky?  War and Industrial Policy @CreditSuisse Zoltan Pozsar


Do you remember the three units of Minsky? 

Hedge units can cover their payments from their incomes. 

Speculative units have to borrow to be able to make payments. 

And Ponzi units can make their payments only if they sell some of their assets and are thus the most exposed to rising interest rates. 

As our chip examples demonstrate, Minsky would classify our military supply chains as “speculative” units at best, which are exposed to a further escalation of geopolitical tensions that could easily turn them into Ponzi supply chains

We can also apply Minsky’s framework in Europe, where Germany can’t cover its payments without Russian gas and the government is asking citizens to conserve energy to leave more for industry.
Minsky moments are triggered by excessive financial leverage, and in the context of supply chains, leverage means excessive operating leverage: in Germany, $2 trillion of value added depends on $20 billion of gas from Russia...

...that’s 100-times leverage (see the last chart here) – more than Lehman’s.

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The systemic event is someone challenging the hegemon, and today, Russia and China are challenging the U.S. hegemon. War and Industrial Policy @CreditSuisse Zoltan Pozsar
Law & Politics


The systemic event is someone challenging the hegemon, and today, Russia and China are challenging the U.S. hegemon.  War and Industrial Policy @CreditSuisse Zoltan Pozsar 


But Ukraine and Taiwan aren’t Kuwait, Russia and China aren’t Iraq, and Top Gun 2 isn’t the same movie as Top Gun...
Think about what Tim Geithner said about how to deal with crises like the Asian financial crisis or a herd of short sellers questioning the solvency of the U.S. banking system (see here and below). 

In today’s context, Russia and China are basically the “short sellers” that are challenging the U.S.-led world order, and according to Geithner’s approach, we should be using “overwhelming force, not piecemeal – the Vietnam approach; what we thought was overwhelming force didn’t stop the run; the markets weren’t sure the commitment was credible. 

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Commodity inventories will take off like FX reserves after the 1997 crisis, and will involve not just food and energy but also some industrial commodities. War and Industrial Policy @CreditSuisse Zoltan Pozsar [continued]
Commodities


Regarding re-stocking, news of the EU’s natural gas and electricity shortages need no belaboring: the EU needs to re-stock to keep industry alive and to heat. 

The U.S. will also have to re-stock: the SPR will be “empty” by November. 

India has instructed all its industrial states to build inventories of coal sufficient to cover residential and industrial needs for the next three years (see here). 

Europe and China are suffering historic droughts at the moment, and this year’s wheat harvest in Ukraine is missing. Food and energy shortages are looming...
...and commodity inventories will take off like FX reserves after the 1997 crisis, and will involve not just food and energy but also some industrial commodities.

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Jul 3 The Tail will no longer wag the Dog and the Dog will simply run amok.
World Of Finance


Jul 3 The Tail will no longer wag the Dog and the Dog will simply run amok.



Western markets are turbo finiancialized and for an eternity, Western banks and Central Banks have been able to distort the commodity price complex with little difficulty. 
Take the Gold market for example where derivatives are 100x the underlying. 
One can create inorganic cascade like price moves in the derivatives market and thereby control the physical commodity. 
There are plenty of examples of these inorganic price moves. In essence, the Tail wags the dog. 
The challenge is where the Supply/Demand balance is precarious and a small adjustment [reduce Supply or increase Demand] tips the situation into disequilibrium. 

The Tail will no longer wag the Dog and the Dog will simply run amok.

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Finance is about multi-decade cycles War and Industrial Policy @CreditSuisse Zoltan Pozsar
World Of Finance



Finance is about multi-decade cycles War and Industrial Policy @CreditSuisse Zoltan Pozsar 



Finance is about multi-decade cycles. Private equity rode the “lowflation” cycle and the cycle of globalization that, post-GFC, enabled decades of money printing.

That cycle is over...
...it broke like FX pegs broke in 1997 and like private money broke in 2008.
Finally, uninvestability means that for certain large countries in the global East, it makes absolutely and categorically no logical sense to roll their investments in G7 debt claims. 

Not just because of what happened to Russia’s FX reserves, but also because rolling a $1 trillion portfolio of U.S. Treasury securities means that you will fund the West’s effort to re-arm, re-shore, re-stock, and re-wire......against the East.
And we are back to where we started on the cover page: Dale Copeland’s theory of trade expectations is the right frame to think about world from here, and sadly things make no sense to continue like they used to, be either from a real (trade/production) perspective or a financial (FX reserves) perspective...
...which is why Bretton Woods III is destined to happen. It’s already happening, and we will explore the Bretton Woods III topic in detail in our upcoming dispatch: War and Currency Statecraft.

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Existential Disquiets: Financial War Against the West Begins to Bite Alastair CROOKE
Law & Politics


Existential Disquiets: Financial War Against the West Begins to Bite Alastair CROOKE


The Club of Rome, founded in 1968 as a collective of leading thinkers pondering global issues, took as its leitmotiv the doctrine that to view the problems of humankind individually, in isolation or as “problems capable of being solved in their own terms”, was doomed to failure – “all are interrelated”. 

Now, fifty-years on, this has become an unquestioned ‘revealed truth’ to a key segment of western populations.
The Club of Rome subsequently attracted immediate public attention with its first report, The Limits to Growth. 

Published in 1972, the Club’s computer simulations suggested that economic growth could not continue indefinitely because of resource depletion. 

The 1973 oil crisis increased public concern about this problem. The report went ‘viral’.
We know the story: A group of western thinkers were posed three questions: 

Can the planet sustain a European-style level of consumption spreading everywhere, across the globe? The answer from these thinkers was ‘clearly not’. 

Second question: Can you imagine western states voluntarily relinquishing their standard of living by de-industrialising? Answer: A definite ‘No’. 

Must a lower plane of consumption and use of energy and resources then be coerced upon reluctant populations? Answer: Definitely ‘Yes.
The second ‘big thought’ from the Club came in 1991, with the publication of The First Global Revolution. 

It notes that, historically, social, or political unity has commonly been motivated by imagining enemies in common:
“In searching for a common enemy against whom we can unite, we came up with the idea that pollution, the threat of global warming, water shortages, famine and the like, would fit the bill. 

In their totality and their interactions these phenomena do constitute a common threat … [and] all these dangers are caused by human intervention in natural processes. 

It is only through changed attitudes and behaviour that they can be overcome. The real enemy then is humanity itself”.
It is not the purpose here to argue whether the ‘Climate Emergency’ is well-founded in non-politicised science – or not. 

But rather, to make the point that: ‘It is, what it is’. Its psychic iconography has been caught by the ‘Greta’ schoolgirl cult.
Whatever its merits – or flaws – a significant stratum of society in the West have come to the conviction – one to which they are both convinced intellectually and do believe – that a ‘Climate Emergency’ be so self-evidently correct: that any contradictory evidence and the argument should be disowned emphatically.
This has become the existential western fear: population growth, finite resources and excessive consumption spell the end of our planet. We need to save it. 

Not surprisingly, wrapped around this ‘way of thinking’ are the earlier western themes of identity politics; eugenics; the Darwinian survival of the elect (and the elimination of the ‘lesser’ iterations of life) and European nihilism (the real enemy is ‘we’, ourselves).
Of course, the ‘other’ facet to this western projection of ‘reality’ which is becoming starkly apparent is the hard fact that Europe simply doesn’t have any ready energy or raw material supplies into which it can tap (having turned its back on the obvious source). 

And as Elon Musk has noted, “In order for civilization to continue to function, we do need oil and gas”; adding that “any reasonable person would conclude that”. 

Not only should oil and gas continue to be used to keep civilization running, but Musk said that further exploration “is warranted at this time”.
Thus, western governments must either invite economic misery on a scale that would test the fabric of democratic politics in any country – or face the reality that issues of energy supply effectively place a limit to the extent the ‘Save Ukraine’ project can be pursued (without provoking popular revolt at resulting price hikes).
This unfolding real ‘reality’ of course, also limits by extension the derivative western geo-strategic objective associated with Ukraine – which is the saving of the ‘liberal rules order’ (so central to western cares). 

The obverse ‘face’ to this central fear, then is the worry that the world order already is so broken – because trust is gone – that the emerging world order will not at all be shaped by the Western liberal vision, but by an alliance of economies getting ever closer economically and militarily – whose trust in the U.S. and Europe is gone.
In our formerly interconnected world, where Zoltan Pozsar suggests that what he calls Chimerica (the term for Chinese manufactory, snugly married to a U.S. consumerist society); and Eurussia (where Russian energy and raw materials leveraged value for Europe’s manufacturing base) no longer exist – they have been replaced by ‘Chussia’.
If Chimerica does not work anymore, and Eurussia does not work either, inexorably the global tectonic plates re-position around the special relationship between Russia and China (‘Chussia’) – which, together with the core economies of the BRICS block acting in alliance with the ‘King’ and the ‘Queen’ on the Eurasian chessboard, a new “heavenly match” is forged from the divorce of Chimerica and Eurussia …
In short, the global structure has changed, and with trust gone, “trade as we know it, is not coming back, and it is why soaring inflation isn’t going to be tamed any time soon, either … Global supply chains work only in peacetime, but not when the world is at war, be it a hot war – or an economic war”, notes Pozsar, the leading guru of western financial plumbing.
Today, we are witnessing the implosion of the ‘just in time’ long supply chains of the globalized world order, where corporations assume they can always source what they need, without moving the price:
“The triggers here [to implosion] aren’t a lack of liquidity and capital in the banking and shadow banking systems. But a lack of inventory and protection in the globalized production system, in which we design at home and manage from home, but source, produce, and ship everything from abroad – and, where commodities, factories, and fleets of ships are dominated by states – Russia and China – that are in conflict with the West” (Pozsar).
Yet more significant is the ‘big picture’: That foregone interconnectedness and trust was that which – very simply – underwrote low inflation (Chinese cheap manufactures and Russian cheap energy). 

And from low inflation flowed the companion piece of low interest rates. These together, comprise the very ‘stuff’ of the western global project.
Pozsar explains:
“The U.S. got very rich by doing QE. But the license for QE came from the ‘lowflation’ regime enabled by cheap exports coming from Russia and China. 

Naturally, [situated at] the top of the global economic ‘food chain’ – the U.S. – doesn’t want the ‘lowflation’ regime to end, but if Chimerica and Eurussia are over as unions, the lowflation regime will have to end, period”.
These represent essentially the Orientalist existential disquiets. Russia and China, however, have their own – separate – existential disquiet too. It arises from a different anxiety source. 

It is that America’s endless, forever-wars, undertaken to justify its predatory political and financial expansionism; plus, its obsession to spread a NATO blanket wrapping the entire planet, will – inevitably – one day end in war – war that will go nuclear, and risk the end to our planet.
So, here we have two anxieties – both potentially existential And disconnected; passing each other unheard. 

The West insists that Climate Emergency is primordial, whereas Russia, China and the ‘Mackinder World Island’ States contrive to force the West to abandon its presumption of global Mission, its hegemonic Vision’, and its risky militarism.
The question for Russia-China then, is how (paraphrasing Lord Keynes) to change long-term attitudes, dating back centuries, in the short term, without going to war. 

The latter qualification is particularly pertinent since a weakening hegemon is all the more apt to lash out in anger and frustration.
Lord Keynes’ answer was that an à outrance ‘strike’ on long-held perceptions was required. 

To do this ‘operation’, Russia has seized firstly on the Achilles’ Heel of an over-leveraged western economy that consumes way more than it produces as output, as one means to strike at embedded perceptions through economic pain.
And secondly, through appropriating to itself the Climate Emergency, Russia snatches the former western global sphere away from the West, as means to undermine its perception of itself – enjoying some imaginary global approbation.
The first pathway was opened by Europe imposing sanctions on Russia. Likely, the Kremlin broadly anticipated the western sanctions riposte when deciding to launch the Special Military Operation on 24 February (there was, after all, the 1998 precedent). 

And therefore, the Russian leadership probably calculated too, that the sanctions would boomerang against Europe – imposing an economic misery on a scale that would test the fabric of democratic politics, leaving its leaders to face a reckoning with an angry public.
The second pathway has been contrived through a concerted extension of Russian power through Asian and African partnerships on which it is building political relationships – based on control of global fossil-fuel supplies and much of the world’s food and raw materials.
Whereas the West is hectoring the ‘rest of the world’ to embrace Net Zero targets, Putin is offering to release them from the West’s radical climate change ideology. 

The Russian argument has a certain aesthetic beauty to it, too: the West has turned its back on fossil fuels, planning to phase them out entirely, in a decade or so. 

And it wants you (the non-West) to do the same. Russia’s message to its partners is that we well understand that this is not possible; your populations want electricity, clean water supplies and industrialisation. 

You can have oil and natural gas, they say, and at a discount to what Europe has to pay (making your exports more competitive).
The Russia-China axis is pushing at an open door. The non-West thinks, the West has its high modernity, and now they want to kick away the ladder beneath them, so that others may not join

They feel that these western ‘targets’ such as ESG (Environment, Social and Governance) norms are but another form of economic imperialism. 

Further, the Non-Aligned, proclaimed values of self-determination, autonomy, and external non-interference, today appeal much more than western ‘woke’ values, which have little traction in much of the world.
The ‘beauty’ of this audacious ‘steal’ of the former western sphere lies with Commodity Producers producing less energy yet pocketing higher revenue; and enjoying the benefit of higher commodity prices raising national currency valuations, whilst consumers get energy and pay in national currencies.
And yet … will this Russian-Chinese approach be enough to transform the western zeitgeist? Will a battered West start to listen? 

Possibly, but what seems to have shaken everyone, and may have been unexpected, was the explosion of visceral, Russophobia emanating out of Europe in the wake of the Ukraine conflict, and secondly, the way propaganda has been elevated to a level that precludes any ‘reverse-gear’.
This metamorphose may take much longer – as Europe sinks into being a distant backward province to a falling ‘Imperial Rome’.



This is the Titanic
https://bit.ly/3cuibgD

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




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


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.


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.

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We are getting closer to literally thousands of People freezing to death in their homes. A dystopian finale
Law & Politics


We are getting closer to literally thousands of People freezing to death in their homes. A dystopian finale


What I know is it has gone exponentially wrong. About them knowing I am still trying to work that out because I have to admit I can’t believe leadership is this insane. 
We are getting closer to literally thousands of People freezing to death in their homes. A dystopian finale

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Professor Thomson “a grasp of geopolitical realities is also essential Western governments must either invite economic misery on a scale that would test the fabric of democratic politics in any country or face the fact that energy supply constrains th
Law & Politics


Professor Thomson “a grasp of geopolitical realities is also essential … Western governments must either invite economic misery on a scale that would test the fabric of democratic politics in any country – or face the fact that energy supply constrains the means by which Ukraine can be defended”. 



In other words, it’s either save the European political class’ skin through reverting to cheap Russian gas, or stay aligned with Washington and subject your electorates to misery – and its leaders to a political reckoning that is unfolding already.


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Sheep spend their entire lives being afraid of the wolf, but end up eaten by the shepherd. Fabio Vighi
Law & Politics


Sheep spend their entire lives being afraid of the wolf, but end up eaten by the shepherd. Fabio Vighi


The sacrifice of a sheep (1997) Kourush. Daghestan. RUSSIA Thomas Dworzak @fatalstrategies

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One of the preeminent Thinkers today is @CreditSuisse's Zoltan Pozsar and he said
World Of Finance


One of the preeminent Thinkers today is @CreditSuisse's Zoltan Pozsar and he said 



The policymakers to follow are no longer central bankers, but heads of state at the pinnacle of power who aren’t known for the transparency of their thinking – especially not when at war. @CreditSuisse Zoltan Pozsar
I have no faith in those at  the pinnacle of power. None. So I expect more babble and a doubling down.


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Currency Markets at a Glance WSJ
World Currencies

Currency Markets at a Glance WSJ


Euro 0.989385
Dollar Index 110.529
Japan Yen 144.1645
Swiss Franc 0.98518
Pound 1.147620
Aussie 0.671045
India Rupee 79.93050
South Korea Won 1386.295 
Brazil Real 5.2484000
Egypt Pound 19.258353
South Africa Rand 17.365960

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Commodity Markets at a Glance WSJ
Commodities

Jul 3 The Tail will no longer wag the Dog and the Dog will simply run amok.
https://bit.ly/3J4JVUR

Western markets are turbo finiancialized and for an eternity, Western banks and Central Banks have been able to distort the commodity price complex with little difficulty. 
Take the Gold market for example where derivatives are 100x the underlying. 
One can create inorganic cascade like price moves in the derivatives market and thereby control the physical commodity. 
There are plenty of examples of these inorganic price moves. In essence, the Tail wags the dog. 
The challenge is where the Supply/Demand balance is precarious and a small adjustment [reduce Supply or increase Demand] tips the situation into disequilibrium. 
The Tail will no longer wag the Dog and the Dog will simply run amok.

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Next impacted is cotton. @ndcarson
Commodities


Next impacted is cotton. @ndcarson



Cotton is *the* cash crop for Pakistan. 5% of all the world's cotton comes from Pakistan. Cotton alone is 0.8% of GDP. Textiles employ 17% of Pakistanis and is 8.5% of GDP. 

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The country's borrowings are so complex that estimates of the total range anywhere from $85 billion to well over $100 billion. @joerwallen
Emerging Markets



The country's borrowings are so complex that estimates of the total range anywhere from $85 billion to well over $100 billion. @joerwallen



To get it to a sustainable level Beijing, New Delhi, Tokyo, multilaterals and global asset managers must all swallow losses.

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"In November President Xi Jinping said China would open “green lanes” for African agricultural exports and speed up inspection and quarantine procedures. The target is to increase African imports to US$300 billion in the next 3 years".
Africa


China has removed all tariffs on 98 per cent of the goods imported from 16 of the least developed countries, most of them in Africa.
The policy, which came into force on Thursday, will cover imports from the Central African Republic, Chad, Djibouti, Eritrea, Guinea, Mozambique, Rwanda, Sudan and Togo, as well as a number of countries from Asia and the South Pacific.
The policy will gradually expand to all least-developed countries and increase imports from Africa, the Customs Tariff Commission said in August.
Granting market access is part of China’s plan to grow imports of agricultural products from Africa – a source market dominated by raw materials such as oil, cobalt and copper.

In November, President Xi Jinping said China would open “green lanes” for African agricultural exports and speed up inspection and quarantine procedures. The target is to increase African imports to US$300 billion in the next three years.

According to Chinese customs data, trade with Africa rose by 35 per cent last year to a record high of US$254 billion, with imports reaching US$106 billion.
Some African countries have recently signed deals allowing the export of agricultural products such as chilli peppers, cashew nuts, sesame seeds and spices to China.
But observers said the countries that would benefit from tariff-free treatment might take years to actually establish a foothold in the China market since they had to meet several requirements, including some of the world’s strictest sanitary rules.

Jamie Alexander Macleod, from the Firoz Lalji Institute for Africa at the London School of Economics, said the tariff waivers were unlikely to have a major effect.

“Most of these countries’ exports to China are concentrated in fuels and metals, which face low or zero tariffs anyway,” Macleod said.
“Far fewer firms in these countries are aware of China’s duty-free, quota-free preferences than are aware of the equivalent regimes offered, for instance, by the US and the EU.
“Trade preferences alone usually do little to transform trade without accompanying investments in supply-side constraints.”
However, Macleod said the move was a “promising start that could be more impactful if China buttressed it with targeted awareness campaigns, investments, and support to assist these countries in diversifying their exports”.

Yun Sun, director of the Stimson Centre’s China Programme in Washington, said the zero-tariff served multiple goals: trade facilitation, assistance to least developed countries and meeting Chinese domestic demand.
“Nominally it will help to increase imports. The caveat is the tariff is not the only obstacle. There are also technical barriers such as customs, inspections, and market access criteria,” Sun said.
David Luke, an African trade policy and trade negotiations specialist at the Firoz Lalji Institute, said the US had a generous offer under the African Growth and Opportunity Act that allowed most countries in sub-Saharan Africa to enjoy duty-free, quota-free access but on the condition they promote democracy.
He said the EU worked with a small group of African countries through its Economic Partnership Agreements – a path that Luke says China is taking.
But he argued more could be done, saying: “What China has done is divide and rule. China should have a comprehensive offer for all African countries … developing countries such as Nigeria and Kenya are not included.”

He cited a case in Kenya where it took several years before fresh avocados could be allowed into China – initially only frozen ones were accepted – locking out several traders who could not afford freezing facilities.
“These are issues that African countries can take to the World Trade Organization … but they don’t want to upset China,” he added.
Zhou Yuyuan, a senior research fellow with the Centre for West Asian and African Studies at the Shanghai Institutes for International Studies, said the inspection process for agricultural imports was time-consuming.
He said generally, “it will take longer for the agriproducts exported to China at the first time, but it will become much easier after the trade relation is built”.

Carlos Lopes, a professor at the Mandela School of Public Governance at the University of Cape Town, said the 2 per cent of imports that were excluded from the zero-tariff regime was calculated in terms of schedules, not value.

“It is key to remember that when a country gives free access of X per cent, what they mean are tradeable goods,” Lopes, a former executive secretary of the UN Economic Commission for Africa, said.
He said the services area was a different discussion even though it offered a major opportunity to integrate some global value chains.
“Traditionally the LDC’s free access offered by richer countries such as the US, or the European Union have not provoked export increases or differentiation of trade with these countries,” Lopes said. “It is therefore likely the same will happen in relation to China.”
He said this could be a low-cost economic measure by China that would allow some reputational gains at a time of growing competition for influence.
“It is part of a larger number of announcements by China, including their reduction of the debt burden of African countries,” Lopes said.


18. Kenyan workers prepare boxes of avocados for shipping to China. Photo: Xinhua via @scmpnews
https://bit.ly/3Qm9ra2

#Ethiopia's central bank tightens #foreign_exchange restrictions effective as of today, September 5. People residing in Ethiopia carrying forex shall upon arrival in the country convert all forex into birr. @PatrickHeinisc1


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South Africas Economy Is Smaller Than Before the Pandemic @markets
Africa


South Africa’s Economy Is Smaller Than Before the Pandemic @markets 



GDP contracted 0.7% quarter-on-quarter in period through June

South Africa’s economy is smaller than it was before the coronavirus pandemic struck, after the worst flooding in almost three decades and severe power outages caused it to shrink in the second quarter.
Gross domestic product contracted 0.7% in the three months through June, compared with downwardly revised growth of 1.7% in the previous quarter, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. 

That’s the first decline since the third quarter of last year, when deadly riots and a cyberattack at the state-owned port and freight rail operator weighed on the economy.
The median of 13 economists’ estimates in a Bloomberg survey was for a slump of 0.8%. 

The economy grew 0.2% from a year earlier, compared with a forecast of 0.6% growth in a separate survey.

At an annualized 4.57 trillion rand ($266.2 billion) in the three months through June, GDP is now about 21 billion rand lower than the fourth quarter of 2019, before the pandemic struck.

The quarterly decline comes after heavy rains in the eastern KwaZulu-Natal province, the second-biggest contributor to South Africa’s GDP, triggered floods and landslides that washed away roads, bridges and houses, halted operations at vehicle-manufacturing plants and wrecked infrastructure at sub-Saharan Africa’s biggest container port. 

Rolling blackouts -- which were imposed on more than half of the days in the second quarter, according to Bloomberg calculations -- also contributed to the drop.  
Africa’s most-industrialized economy remains stuck in its longest downward phase since World War II and hasn’t grown by more than 3% annually since 2012. 

Slow policy reforms, weak business sentiment and high levels of crime continue to weigh on fixed investment spending, with private companies wary of committing large sums of money to domestic projects. 

Gross fixed capital formation rose 0.5% from the previous quarter.
Household spending, which accounts for about two-thirds of GDP, grew 0.6% in the second quarter. 

Household consumption expenditure is likely to come under further pressure as consumers reel from high fuel and food prices and an aggressive interest-rate hiking cycle. 

Consumer sentiment about future prospects is at the worst since the mid-1980s, when the country faced a surge in violent opposition to White-minority rule. 
Sluggish economic growth and mounting price pressures pose a threat to social stability in one of the world’s most unequal societies and could complicate efforts to reduce fiscal deficits and debt, and the government is considering widening the welfare net in a country where almost half of the population gets at least one social grant. 

Extreme inequality, poverty and high unemployment are seen as a legacy of the apartheid system that disadvantaged the Black majority. 
Economic growth in the third and fourth quarters of the year won’t reach 1%, according to central bank forecasts. 

Rising interest-rates, an erosion in consumer spending power, supply-chain disruptions stemming from China’s Covid Zero measures and war-induced tensions in the European Union are among the risks to the domestic growth outlook for the second half of 2022. 

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Egypt Favors Flexible Currency Amid Devaluation Calls, @IMFNews Talks @markets @economics
Africa


Egypt Favors Flexible Currency Amid Devaluation Calls, @IMFNews Talks @markets @economics 


Egypt’s government now favors a more flexible currency to support an economy that’s come under pressure from Russia’s invasion of Ukraine, a top official said.
Authorities already allowed the pound, which had been kept stable against the dollar for about two years, to weaken sharply in March, but investors and economists think it has much further to go to reflect its true value. 

Egypt’s currency is down more than 18% so far this year.
Investors are bracing for a second wave of depreciation while the government is in talks for a new loan from the International Monetary Fund, which favors a more flexible exchange rate. 

Asked on Tuesday about calls for a deeper devaluation, Hala Elsaid, Egypt’s planning minister, signaled openness to looser management of the currency.
“We as a government do agree that a flexible exchange rate is definitely good for the economy,” Elsaid, who’s also chairwoman of Egypt’s sovereign wealth fund, told Bloomberg Television in an interview.

The Arab world’s most populous nation is racing to buttress the economy after the war in Ukraine sent Egypt’s food and fuel import bills soaring and helped spur an exodus of foreign portfolio investors from the local debt market. 

It’s a reversal of fortune for the one-time darling of emerging markets. 

Drawn to Egypt’s high interest rates, a stable pound and its track record of market-friendly moves, foreigners had pumped billions of dollars into its debt market.
A leadership shakeup at the central bank last month only served to spur speculation about the currency outlook after the replacement of Tarek Amer, who’d been governor for about seven years and was seen as supportive of a stable pound.
Elsaid said “the government is working very hard to increase our foreign exchange receipts” by means of an effort to boost exports, foreign direct investment and remittances from abroad.
Help has also come in the form of more than $22 billion in deposits and investment pledges from its energy-rich Persian Gulf allies.
Abu Dhabi wealth fund ADQ and a unit of Saudi Arabia’s Public Investment Fund have so far pumped roughly $3 billion into the country, snapping up government-held stakes in prominent companies in deals facilitated by the Egyptian sovereign fund.
More such agreements are expected, possibly including the landmark sale of stakes in some firms held by Egypt’s army. 

The government is also promising new policies on state ownership, limiting its involvement in some areas and exiting others, as it seeks large-scale investment from private enterprise.

Elsaid said Egypt has set up a “pre-IPO” fund, with the aim of holding public stakes and working with strategic investors ahead of public offerings.

Egypt will revisit its forecasts for the economy by next month to account for shocks from abroad, she said. 

The country has recently benefited from improvements in FDI and exports, according to Elsaid.

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Naira Falls to Record Low Against the Dollar as Reserves Fall @markets
Africa


Naira Falls to Record Low Against the Dollar as Reserves Fall @markets 


The Nigerian naira weakened to a record low against the dollar on Tuesday as the central bank continues to face pressure from dwindling foreign exchange inflows amid falling oil production. 
The naira weakened 0.27% to 435.60 to the greenback on the spot market as of 12:52pm local time in Lagos, the lowest the currency has ever traded, according to Bloomberg data. 

In the parallel market, where the currency is freely traded, the naira weakened to 691.13 from 689.23 on Monday, according to @naira_rates, a twitter handle that tracks the rates. 

Foreign exchange inflows into Africa’s biggest crude producer declined 2.4% to $1.5 billion in the three months to June from the previous quarter despite higher oil prices. 

The country’s external reserves fell to $39 billion on Sept. 1 from $40 billion in December

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9 DEC 19 :: Time to Big Up the Dosage of Quaaludes
Africa


9 DEC 19 :: Time to Big Up the Dosage of Quaaludes


we were all popping Quaaludes [Quaaludes ‘’to promote relaxation, sleepiness and sometimes a feeling of euphoria. It causes a drop in blood pressure and slows the pulse rate. These proper- ties 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’’].

Everyone knows how this story ends. When the music stops, everyone will dash for the Exit and the currency will collapse 

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Thousands battle 'catastrophic' floods after Chad's heaviest rains in 30 years @Reuters
Africa


Thousands battle 'catastrophic' floods after Chad's heaviest rains in 30 years @Reuters 


N'DJAMENA, Sept 6 (Reuters) - Chad's heaviest seasonal rainfall in over 30 years has left parts of the capital N'Djamena navigable only by boat and forced thousands to flee their flooded homes over the past month, according to aid groups and the state weather agency.
In N'Djamena's eighth district, families have piled into wooden boats to cross streets that have been awash with fetid flood water since the end of July.

Floods are not uncommon during the central African country's rainy season, which usually runs from May to October in its central and southern regions. 

But this time, the rains came early and were more abundant, quickly overwhelming drainage channels and ponds.

"None of the (eighth) district's neighbourhoods were spared by the floods this year, it's really sad to see so many people suffering," said resident Hassan Hissein Acheik, 38, standing by a vast stretch of riffling floodwater.

Across West and Central Africa from N'djamena to Dakar in Senegal, above-normal rainfall in several countries over the past month has left vast areas submerged under water.
In recent years, intense rainfall, land degradation and poor urban planning have led to more frequent flood disasters in the region, whose countries are among the most vulnerable to climate change, according to the Notre Dame Global Adaptation Initiative index.

"The country has not recorded such a quantity of rainwater since 1990," Idriss Abdallah Hassan, a senior official at the state weather agency told Reuters on Monday, describing the situation as catastrophic.

"Entire towns have found themselves under water," he said.

"We are at the mercy of the mosquitoes. We have no food and some of us have malaria. Nobody is thinking of helping us, the authorities are watching us from afar as if we were migrating birds."

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WilliamsRuto election victory upheld by Kenya’s supreme court @FT
Law & Politics


WilliamsRuto election victory upheld by Kenya’s supreme court @FT 

Kenya’s supreme court has unanimously upheld the election of William Ruto as president, rejecting several petitions lodged by the losing candidate to have the result overturned.
The seven-member court found that losing candidate Raila Odinga’s alliance failed to prove claims that the polls had been rigged.
Chief Justice Martha Koome described some of the evidence presented to the court as variously “hot air”, “sensational”, “a wild-goose chase” and “not credible”.
Allegations of fraud had to be proved beyond reasonable doubt, she said, and evidence by the petitioners had been inconclusive.
The ruling, which cannot be appealed, offered further evidence of the court’s independence. 

Although Ruto, 55, was the incumbent vice-president, the government of outgoing president Uhuru Kenyatta had thrown its weight behind Odinga.
Kenya has a history of disputed and sometimes deadly elections, but this time the streets remained relatively calm. 

In 2017, the supreme court made history in Kenya, and in Africa, by nullifying the result of the election after declaring irregularities.
Last month, the chair of the electoral commission, Wafula Chebukati, said Ruto won 50.5 per cent of the vote, while former prime minister Odinga secured 48.8 per cent. 

But four out of seven electoral commissioners disowned the results, throwing Ruto’s victory into doubt.
In a petition filed last month, Odinga and his running mate, former magistrate Martha Karua, asked the Supreme Court to order a “nullification of the declaration of results”. 

Ruto had been declared the winner, the petition said, because of “irregularities and improprieties” that “were so substantial and significant and that they affected the result”.
Koome said that the court had found few discrepancies between the votes as declared at the polling stations and those collated at national levels, a central claim of Odinga’s petition. 

Nor had there been any evidence of voter suppression, she said, despite the unusually low turnout.
This was the fifth time Odinga, 77, has run for president and the third time he had challenged results in court. 

He had previously appealed to the supreme court after losing a disputed poll in 2013 when his nemesis-turned-ally, Kenyatta, took office. But that was rejected.
Ruto, who will be sworn in next week, on Monday thanked the people of Kenya for “trusting us with the leadership of our nation”.
The electoral commission said in a statement that the supreme court judgment “is a testimony that the commission conducted a free, fair, transparent and credible general election that met the democratic aspirations of the people of Kenya”, adding that the commission “is finally vindicated”.
In his response to the court judgment, Odinga said: “We have always stood for the rule of law and the constitution. In this regard, we respect the opinion of the court although we vehemently disagree with their decision today.”

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