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Wednesday 31st of July 2019
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Macro Thoughts |
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@BorisJohnson Is in a Battle With Currency Traders @markets Africa |
Boris Johnson’s greatest political weapon is his self-confidence. Even
more than his charm or his intellect, it is his boundless belief in
his ability to get things done that has accompanied his rise to Prime
Minister of the U.K.. He never wavers, at least in public, and never
betrays a shred of self-doubt. Opponents not already disarmed by the
famous Johnson charm or sense of humor often find this impossible to
counter. However, knowingly or not, Britain’s new prime minister is
now setting up the hardest fight of his career. It is not with any
politician, who might be awed by the confidence that an Eton and
Balliol education infers, but rather with the foreign-exchange market.
That could be a problem. Currencies are immune to personal charm. And
they have a history of humiliating British prime ministers, even the
greatest of them. For months now, anything that increases the chance
of a “no deal” exit has damaged the pound and anything that reduces
“no deal” risk has raised it.With the rival Brexit Party now
positioned to scoop up all these votes should the U.K. prolong its
membership, meeting that deadline becomes an existential issue for
Johnson and for the Conservatives at large. In this particular
situation, he is working on the assumption that failure to exit on
time would do much worse damage for his party than would the severe
economic problems that would follow a “no deal” exit. He is almost
certainly right. So the two choices are “delay” (the worst outcome for
Johnson) or “exit with no deal” (the worst outcome for currency
markets). It is possible that Johnson is involved in a high-stakes
game of chicken to force the EU to negotiate. Whatever Johnson may
confidently say, it is clear that markets think “no deal” would be
bad, and that the chances of it happening have long been higher than
one in a million. Beyond that, strategists have tried all kinds of
models to answer the question. I will mention two. First, Bloomberg
U.K. economist Dan Hanson estimates that sterling could fall an
additional 13%. This is because for every 1 percentage point increase
in “no deal” risk, trade-weighted sterling falls 0.2%. According to
the bookies, no-deal risk could yet rise 65 percentage points before
it reaches 100 (rather generous odds, I think), and so a 13% drop is
possible. Hanson’s model simply regresses moves in “no deal”
probabilities expressed in betting odds against sterling and the
result is spectacular:London’s Capital Economics conducted the same
exercise for the dollar-sterling exchange rate, and found that for
every 10-percentage-point increase in the chance of “no deal” equates
to the pound losing 3.5 cents on the dollar. So if there is really
still a 65% chance of “no deal,” sterling stands to drop an additional
22 cents or so. Against the dollar, sterling is on the verge of taking
out its post-referendum low, after which the only significant
landmarks left would be the low set in 1985, a few months before
finance ministers agreed in the Plaza Accord to limit the strength of
the dollar and then, only a few cents lower, parity with the dollar.
To go much lower than this will involve something truly historic, in
other words. And declines to these kinds of levels have never lasted
long in the past; “no deal” could very swiftly create an epic buying
opportunity, but only once economic destruction has been wrought.. At
present, it looks alarmingly as if he is over-confident. As Thatcher
could have told him, you can’t buck the market.
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Jack Ma's $290 Billion Loan Machine Is Changing Chinese Banking @business International Trade |
Jack Ma’s online bank is leading a quiet revolution in the way China
lends to small businesses, taking aim at a credit bottleneck that has
held back Asia’s largest economy for decades.
Using real-time payments data and a risk-management system that
analyzes more than 3,000 variables, Ma’s four-year-old MYbank has lent
2 trillion yuan ($290 billion) to nearly 16 million small companies.
Borrowers apply with a few taps on a smartphone and receive cash
almost instantly if they’re approved. The whole process takes three
minutes and involves zero human bankers. The default rate so far:
about 1%.
The financial-technology boom that turned China into the world’s
biggest market for electronic payments is now changing how banks
interact with companies that drive most of the nation’s economic
growth.
As MYbank and its peers crunch reams of new data from payment systems,
social media and other sources, they’re growing more comfortable with
smaller borrowers that they previously shunned in favor of state-owned
giants.
For China’s $13 trillion economy, which expanded at its weakest pace
since at least 1992 last quarter, the implications could be profound.
Non-state firms -- mostly small businesses -- account for about 60% of
growth, employ 80% of workers, and have been disproportionately
squeezed by a more than two-year government crackdown on shadow
lenders.
“Small and medium enterprises are really the boiler room of the
economy,” said Keith Pogson, global assurance leader for banking and
capital markets at Ernst & Young based in Hong Kong. “It used to be a
segment that banks thought was too difficult and too risky. But now
they run their model and work out what the risks are so they feel more
comfortable.”
China is quickly becoming a world leader in the use of big data and
artificial-intelligence technology to make loans, according to Cliff
Sheng, co-head of Greater China financial services at Oliver Wyman, a
consulting firm. Among the country’s biggest advantages: it takes a
more relaxed approach toward privacy than many other jurisdictions.
“Our legal framework and regulatory environment -- which raise fewer
privacy concerns -- make it easier to generate a huge amount of data
and thus provide an unparalleled testing bed,” Sheng said.
One uniquely Chinese source of information for banks is the
controversial social credit system, which is being tested in cities
across the country as a way to reward good deeds and punish
misbehavior.
In one potential scenario cited by MYbank President Jin Xiaolong in a
recent interview, a small-business owner whose social credit score
dropped because he failed to return a borrowed umbrella would find it
harder to get a loan.
But the biggest data trove may come from payments providers like the
one operated by Ma’s Ant Financial, the biggest shareholder of MYbank.
After obtaining authorization from borrowers, MYbank analyzes
real-time transactions to gain insights into creditworthiness. For
example, a drop in customer payments at a retailer’s flagship store
might be an early indicator that the company’s prospects -- and its
ability to repay debt -- are deteriorating.
The upshot of more information is a loan approval rate at MYbank
that’s four times higher than at traditional lenders, which typically
reject 80% of small-business loan requests and take at least 30 days
to process applications, according to Jin, who plans to double
MYbank’s roster of borrowers in three years. He said the
Hangzhou-based firm’s operating cost per loan is about 3 yuan, versus
2,000 yuan at traditional rivals.
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Since U.S. Africa Command began operations in 2008, the number of U.S. military personnel on the African continent has jumped 170 percent, from 2,600 to 7,000 @theintercept @nickturse Africa |
Since U.S. Africa Command began operations in 2008, the number of U.S.
military personnel on the African continent has jumped 170 percent,
from 2,600 to 7,000. The number of military missions, activities,
programs, and exercises there has risen 1,900 percent, from 172 to
3,500. Drone strikes have soared and the number of commandos deployed
has increased exponentially along with the size and scope of AFRICOM’s
constellation of bases.
The U.S. military has recently conducted 36 named operations and
activities in Africa, more than any other region of the world,
including the Greater Middle East. Troops scattered across Africa
regularly advise, train, and partner with local forces; gather
intelligence; conduct surveillance; and carry out airstrikes and
ground raids focused on “countering violent extremists on the African
continent.”
AFRICOM “disrupts and neutralizes transnational threats” in order to
“promote regional security, stability and prosperity,” according to
its mission statement. But since AFRICOM began, key indicators of
security and stability in Africa have plummeted according to the
Defense Department’s Africa Center for Strategic Studies, a Pentagon
research institution. “Overall, militant Islamist group activity in
Africa has doubled since 2012,” according to a recent analysis by the
Africa Center.
There are now roughly 24 “active militant Islamist groups” operating
on the continent, up from just five in 2010, the analysis found.
Today, 13 African countries face attacks from these groups — a 160
percent increase over that same time span. In fact, the number of
“violent events” across the continent has jumped 960 percent, from 288
in 2009 to 3,050 in 2018, according to the Africa Center’s analysis.
While a variety of factors have likely contributed to the rise in
violence, some experts say that the overlap between the command’s
existence and growing unrest is not a coincidence.
“The sharp increase in terrorist incidents in Africa underscores the
fact that the Pentagon’s overly militarized approach to the problem
has been a dismal failure,” said William Hartung, the director of the
arms and security project at the Center for International Policy. “If
anything, attempting to eradicate terrorism by force may be
exacerbating the problem, provoking a terrorist backlash and serving
as a recruiting tool for extremist groups.”
Take Somalia, for example. Over the last decade, AFRICOM has conducted
hundreds of airstrikes and commando missions there and claims an enemy
body count of approximately 800 terrorists, primarily members of the
Shabab, a militant group. The number of U.S. air attacks has
skyrocketed of late, jumping from 14 under President Barack Obama in
2016 to 47 under the Trump administration last year. Yet the
Pentagon’s own analysis found that violent episodes involving the
Shabab represent roughly 50 percent of all militant Islamist group
activity in Africa and that this “rate has remained consistent over
the past decade.”
In October 2017, members of the Islamic State in the Greater Sahara,
or ISGS, ambushed American troops near the border of the Sahelian
states of Mali and Niger, killing four U.S. soldiers and wounding two
others. Just after the attack, AFRICOM claimed the troops were
providing “advice and assistance” to local partners, but it was later
revealed that American commandos operating alongside a Nigerian force
had — until poor weather intervened — hoped to link up with another
contingent of U.S. special operators trying to kill or capture Islamic
State leader Doundoun Cheffou.
Despite these and several other long-running U.S. military efforts in
the region, militant groups in the Sahel have grown more active and
their attacks more frequent, according to the Africa Center. In fact,
“violent episodes” linked to groups associated with Al Qaeda in the
Islamic Maghreb, or AQIM, and ISGS increased from 192 in 2017 to 464
last year. At the same time, fatalities linked to these groups more
than doubled, from 529 to 1,112.
This is especially significant in light of a 2000 report prepared
under the auspices of the U.S. Army War College’s Strategic Studies
Institute, which examined the “African security environment.” While
noting the existence of “internal separatist or rebel movements” in
“weak states,” as well as militias and “warlord armies,” it made no
mention of Islamic extremism or major transnational terror threats.
Now the Africa Center counts 24 “active militant Islamist groups” on
the continent while other official tallies have, in recent years, put
the figure at nearly 50 terrorist organizations and “illicit groups”
of all types.
Neither the Pentagon nor AFRICOM responded to The Intercept’s
questions about the Africa Center’s analysis, the command’s
effectiveness, and any role it may have played in the rising violence
on the continent.
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#Zimbabwe is in crisis. But to expect the ruling #ZANU-PF government to resolve this is improbable at best. It is, more likely, impossible. Read @BitiTendai @africaarguments Africa |
Zimbabwe is in crisis. But to expect the ruling ZANU-PF government to
resolve this is improbable at best. It is, more likely, impossible.
Today nearly four out of every five Zimbabweans just about survives in
absolute poverty.
On average, Zimbabweans are poorer now than they were at independence in 1980.
Informal employment is at 95%, which is why the civil service has more
than doubled over the last ten years to 600,000 employees – this is
the only place government can create jobs.
Whole communities today live on less than 35 cents per person per day.
In practice, this pays for a small dollop of maize, four leaves of
vegetables, and a cap of cooking fat. We have a term for this, Tsaona,
which means living by “accident”.
In today’s Zimbabwe, the elites prosper, in spite of the misery, and
because of mal-governance. They use their preferential access to
dollars to arbitrage against other local, artificial digital
currencies. Furthermore, they have created cartels that are able
entirely control the import and distribution of fuel coming into the
country.
Meanwhile, the military and other favoured clients are offered mining
concessions that are then parcelled out opaquely to friends, local and
foreign. Finally, the government’s agricultural scheme, appropriately
named “command agriculture”, amounts to a $4 billion private piggy
bank used to finance everything from private vehicles to dowries.
ZANU-PF cannot realistically be expected to reform a system that it
not only profits from, but on which its rule depends. Future reform
has to dismantle the corrupt political economy, whilst also expanding
the productive sector.
The only time in the last four decades there has been a serious
attempt at reform was during the Government of National Unity between
2009 and 2013, when I served as the Minister of Finance. During this
period, three critical actions were introduced.
One, it was recognised that the government could not spend what it did
not have. We described this as the “eat what you kill” philosophy.
This immediately provided confidence and clarity to foreign investors
and our international partners. Two, we dollarised the economy,
thereby ridding the country of the opportunities for arbitrage against
the inflating Zimbabwean currency. Three, we opened up the economy
thereby incentivising the private sector.
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21-JAN-2019 :: The Mind Game that ZANU-PF played on its citizens has evaporated in a puff of smoke Africa |
“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 imagina- tion.
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 psychologi-
cal 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 where there are $9.3 billion of Zollars in banks compared to
$200 million in reserves, official data showed.
The Mind Game that ZANU-PF played on its citizens has evaporated in a
puff of smoke
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29-JUL-2019 :: The ''Oudh'' Spring in Khartoum met a ''red in tooth and claw'' Counter-Revolution and Sudan feels like an African Fault-line. Africa |
This single Paragraph does not tell the Story because this year in
2019 so much has gone on. Let start with the Geopolitical and
Political dimension. There has been a significant advance and
intrusion by Middle Powers [KSA, UAE, Egypt was always there] into the
Horn of Africa. The ''Oudh'' Spring in Khartoum met a ''red in tooth
and claw'' Counter-Revolution and Sudan feels like an African
Fault-line. Its somewhat counterintuitive but it is the Al-Sisi Model
which is delivering economic growth of 6% but I for one think its
impossible to replicate because the cry for Political Freedom is
relentless and at fever pitch. Sudan is surely a collision which is
set to repeated elsewhere in what could morph into a Gladwell level
move not unlike Ebola which is exponential at its heart.
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