|Friday 04th of February 2022
Meta’s Tumble as the Hawks Spread Their Wings @bopinion @johnauthers
World Of Finance
The Bank of England and the European Central Bank both met and then held press conferences, and as a result bond yields, both real and nominal, rose sharply
In the case of the BoE, where a 25 basis-points hike was expected but not regarded as certain, the press release instead announced that four of the nine members of the Monetary Policy Committee had dissented in favor of a 50 basis-points hike.
Under the bank’s system, one of the more hawkish governors was even allowed to talk to the press about the dissent.
The BoE had already convinced markets that it was going to be aggressive this year, but was not expected to position itself so clearly for more hawkishness.
Then it was the turn of the ECB, which had no rate hikes to announce. @bopinion @johnauthers
World Of Finance
As with Jerome Powell of the Federal Reserve last week, the bank’s president, Christine Lagarde, used the post-meeting press conference to make her point — and it was if anything even clearer-cut than Powell’s startlingly hawkish display.
Giovanni Zanni of Natwest Capital Markets summarized her five-point message as follows:
1. She stated and repeated during the conference that risks are tilted on the upside on inflation: i.e. not only inflation has already surprised, but could see further significant advances in 2022. She added that governing council members were unanimously concerned about inflation.
2. She said that the situation had objectively changed, although the governing council didn’t want to haste a decision at this meeting...
3. March is well in play for a recalibration of policies, most likely fine tuning of the taper speed (ending in Q3?...), leaving the door open to a rate hike later this year.
4. She didn’t repeat the sentence used in December that 2022 hikes are unlikely. Rate hikes this year are no longer ruled out, and will be conditional on developments on inflation and wages.
5. Finally, she argued that the euro area is getting much closer to the ECB’s inflation target (and so a reaction is required, sooner than expected before).
Put all that together, and it was time for the market to up its expectations for rate rises, which it did in dramatic fashion.
At the beginning of the year, traders were prepared to believe Lagarde when she said that even one 2022 rate hike was unlikely — now they are braced for four:
This is an even greater change in direction than we have already witnessed in the U.S. The Lagarde Pivot is with us at last.
In Europe, the talk is already of a “cost of living crisis,” and the BoE’s announcement in London came lower in the British news cycle than news about a lift in the cap on energy prices.
Consumers aren’t going to like it, but higher fuel bills could easily do exactly what higher rates are supposed to and dampen demand when it’s already not strong.
Meta-mucil for the Nasdaq @bopinion @johnauthers
World Of Finance
Meta Platforms Inc.’s results on Wednesday added to the U.S. stock market’s acute indigestion problems.
Combine horrible numbers for one of the biggest growth companies on the planet with rising yields on the back of hawkish central bankers in Europe, and you had all the ingredients for a seriously harrowing Thursday on Wall Street, which is indeed what happened.
To reiterate a point I made yesterday, when large amounts of money are tied up in projected future earnings of companies, moves in rates make a big difference.
Higher real yields should mean an exit from growth stocks (dependent on future growth) toward value stocks (with valuations that justify buying them in the here and now).
Correlation doesn’t prove causation, and there is more to the value/growth trade than rates, but they’ve become very closely linked in the last few months:
The punishment for Meta’s failure to meet rosy forecasts was one for the history books.
By the close, its market cap had dropped by slightly more than $250 billion.
However, there was some balance for this when Amazon.com announced better results after the close and enjoyed a rally in after-market trading that at one point would have implied an additional $280 billion in market cap.
This may or may not stand up Friday, but the scale of the biggest platform companies in which so many have invested their trust, and their sensitivity to changes in the rates outlook, is a phenomenon of the age.
Meta’s loss in one day was equivalent to Adobe Inc. It is bigger than the entire market caps of Netflix Inc., Cisco Systems Inc. (which was the world’s most valuable company 22 years ago) and Intel Corp., and also much more established companies like Costco Wholesale Corp.
It’s mind-blowing that so much wealth can be created or destroyed on the basis of slight deviations from earnings forecasts.
And what’s most alarming isn’t that the huge swings in Meta and Amazon seem mad; the really concerning thing is that moves like this actually make sense. Too much is riding on them.
Amazon offers the prospect of a swift rebound on Friday. As it is, the main U.S. indexes had a terrible day but remain above their lows from early last week, and the related trends for higher bond yields, lower stock valuations, and a shift from growth to value within the market all remain intact.
Just don’t expect any of them to move in a straight line.
My Struggle: Book 3 Karl Ove Knausgard
Zeitgeist comes from the outside, but works on the inside. It affects everyone, but not everyone is affected in the same way.
The ‘’Zeitgeist’’ of a time is its defining spirit or its mood. Capturing the ‘’zeitgeist’’ of the Now is not an easy thing because we are living in a dizzyingly fluid moment.
US president Joe Biden now finds himself on the front lines of two potential cold wars, one in eastern Europe, the other in the South China Sea. @FT @EdwardGLuce
Law & Politics
So much for America’s shift from the Atlantic to the Indo-Pacific. By demanding concessions that have shocked a divided and rudderless Europe, Russian president Vladimir Putin has united the west behind US leadership.
It has been years since that sentence could be written with a straight face. Russia has brought about what it fears — a west that is displaying something approaching resolve.
As a result, US president Joe Biden now finds himself on the front lines of two potential cold wars, one in eastern Europe, the other in the South China Sea.
This was not the script that Biden had planned on. He came to office promising to reorient US foreign policy to the east.
To be sure, he said all the right things to America’s European partners, who were relieved to be treated as friends again after four years of belittlement by former president Donald Trump.
But they soon learned that Biden meant something different by “America is back” than what they wanted.
Much like Trump, Biden was fixated on China. Unlike Trump, he wanted Europe to help him in this new Indo-Pacific focus.
Europe’s rude awakening began last summer when the US abruptly departed from Afghanistan without the agreement of its Nato allies.
Much like the now-vanished Afghan National Army, America’s Nato partners relied on US air and logistical support to operate in Afghanistan.
They were left thinking their opinion counted for little with Biden in spite of his warm rhetoric. The resulting debacle in Kabul left everyone bruised.
Biden compounded the sin by failing to warn the French about its new Australia, UK, US nuclear submarine deal, Aukus, a few days after the Taliban regained control of Afghanistan.
If ever there was a moment for Russia to exploit western disunity, it was then. But Putin has overplayed his hand.
In contrast to last summer, US officials have been assiduous in consulting and listening to their European counterparts.
Biden now faces two urgent challenges. The first is whether he can offer a way for Putin to climb down without losing face.
The alternative is a conflict in Ukraine that could put the Balkans atrocities of the 1990s in the shade.
With 40m people, a majority of whom want to join Nato, Ukraine is no Bosnia or Croatia. It is twice the size of Germany and has a bigger population than Poland.
A more appropriate comparison would be the Spanish civil war in the 1930s when outside powers, fascist and communist alike, used proxy forces to fight each other. Even Putin would blanch at that.
This is where Biden’s diplomatic creativity will be tested, and may be found wanting.
If, as the consensus in Washington holds, China poses the overwhelming strategic challenge to the US, Biden must eventually find a way to loosen Russia from China’s embrace.
Existential rhetoric about a global battle between autocracy and democracy will only drive Moscow closer to Beijing.
It will also unsettle many of Biden’s newly reassured European allies.
Some of them are uncomfortable with talk of Manichean contests between light and dark.
It is not as if Ukraine is a model democracy. According to the Washington-based Freedom House, Ukraine is only “partly free” and rates well below Hungary’s “illiberal democracy” and other flawed ones such as Serbia, Colombia and Sierra Leone.
Ukraine only ranks slightly below India, which the Biden administration heralds as a democratic bulwark against authoritarian China.
If Biden prioritises this yardstick, his foreign policy is destined for confusion and accusations of hypocrisy.
His language is also alienating relatively dependable friends such as Singapore and the United Arab Emirates — countries America needs on its side.
The crisis in Europe offers Biden a clarifying exit from the rhetorical trap he has set for himself.
The principle at stake is Ukraine’s sovereignty. Its borders should be no less inviolable were it to change its political system.
The world would be a better place, of course, if democracy were flourishing everywhere.
But recent history ought to have taught the US the risks of proclaiming its mission of universal freedom.
Almost everyone, on the other hand, can agree on the sanctity of borders.
By threatening Ukraine’s sovereignty, Putin has done something Biden could not on his own — unite the west. It gives Biden an advantage that should not be squandered.
Russia’s revamped military learns from failures of the past @FT H/T @hervegogo
Law & Politics
Three weeks ago, Russian paratroopers commanded by Colonel General Andrey Serdyukov deployed 4,000km from Moscow to Kazakhstan at the invitation of its government to help quell mass protests. They accomplished their peacekeeping mission in just 10 days and left.
Compared with the limited and lightning-fast operation in Kazakhstan, today the international community is warning that Russia appears to be preparing for a very different operation: a comprehensive invasion of Ukraine.
Moscow has repeatedly denied that it plans to invade, despite open-source intelligence showing that it continues to mass troops on the border between the countries.
But should President Vladimir Putin order an attack, 62-year-old Serdyukov, the head of Russia’s VDV paratroopers — the world’s largest airborne force — is likely to play a leading role.
“The VDV is typically the tip of the spear,” said Michael Kofman, a Russian military expert at the US research organisation CNA and author of a widely cited article on Putin’s military strategy.
“It has already fought extensively in Ukraine in 2014 and 2015. You would see quite a few VDV formations in any new invasion.”
Serdyukov’s career, which has encompassed deployments in Chechnya and Crimea, is illustrative of how Russia’s army has evolved under Putin, with the military, alongside the country’s nuclear arsenal, becoming a central instrument of the president’s foreign policy, say analysts.
Two decades ago, the military was a lumbering and poorly equipped Soviet-era force of badly paid conscripts, padded with officers — almost one for each soldier — that took heavy casualties during the brutal suppression of the Islamist insurgency in Chechnya.
Today, analysts say, it is a streamlined force capable of peacekeeping operations in Kazakhstan, out-of-theatre interventions such as in Syria in 2015, and stealthier missions, such as the annexation of Crimea in 2014.
“The Ukrainian army may be better than it was in 2014, but Russian forces are still far stronger and have also modernised,” said Bettina Renz, author of Russia’s Military Revival and professor of international security at Nottingham university.
“[Russia] has more capabilities, and with that comes more options.”
The turning point came in 2008 when Russian forces bungled a war with Georgia.
The intervention lasted only five days, yet several planes were lost to friendly fire, and field communications were so poor that commanders reportedly had to use their own mobile phones.
Reconnaissance drones could only transmit pictures after landing, instead of in real time.
A massive revamp ensued. Pay was increased, equipment modernised, combat strategies refined and a demoralised officer class increasingly deployed into action.
Poorly trained conscripts began to be replaced with career soldiers.
“Now the [army] is able to choose and recruit . . . maybe not the absolute best, but not the worst either,” said Ruslan Pukhov, director of the Moscow-based Centre for Analysis of Strategies and Technologies.
The Pentagon last week warned that Russia had deployed enough troops and equipment to invade Ukraine at any moment and had a “range of options”, including an attack aimed at occupying the country.
Analysts estimate that 52 Iskander ballistic missile launchers have been placed near the border, plus 76 battle-ready Battalion Tactical Groups, which average 800 troops, more than twice the usual number.
Overall, Russia has an army of about 900,000 personnel, including 280,000 ground troops.
Over the past decade, it has added new aircraft, modernised its tanks and cut the ratio of conscripts to enlisted soldiers from nearly half to 30 per cent.
Ukraine has an active force of 261,000 personnel, of which 145,000 are in the army, plus a further 900,000 reservists.
Although hardened by eight years of conflict in the Donbas, where separatists are fighting to break away from Kyiv, the Ukrainians lack comprehensive air defence systems, most of which remain in Crimea and are in Russian hands.
The fruits of Russia’s reforms became clear during the annexation of Crimea and were confirmed the following year in Syria, say analysts.
“To many people’s surprise here, including mine, Russian actions [in Syria] were successful, efficient and cost effective,” Fyodor Lukyanov, editor-in-chief of Russia in Global Affairs magazine, said in a recent interview at Pittsburgh university’s centre for international studies.
Syria also served as a test bed for precision missile strikes and unmanned vehicles and as a training ground for more than 60,000 personnel, including officers.
“Serdyukov’s experience is the rule rather than the exception,” said Henry Boyd, a military expert at the International Institute for Strategic Studies in London. “Russia has a deep front bench of senior commanders.”
The reforms have not always matched the ambitions, say analysts. Shortages of skilled personnel and high-tech components, especially advanced chips, have delayed deliveries of next-generation equipment.
“Have you heard of many cases where our people went to study at, say, MIT and then returned to Russia? I haven’t,” Pukhov said.
Even so, military experts say, Russia’s modernised forces are capable of delivering a massive dose of blunt force.
“Russian missiles may not be precise enough to target the top right-hand window of a building, as the US and it allies can. But they are still accurate enough to blow up the whole building,” said Samuel Cranny-Evans, a military sciences analyst at the Royal United Services Institute.
With Ukraine, Russia has also retained an element of surprise. By parking equipment against the border, which can then be manned by troops brought quickly forward, Kofman said, the scope and timing of any final operation would not be revealed until late into preparations.
“If the VDV starts surging forces to take position near Ukraine’s borders, that’s a good indicator that they’re planning for an offensive,” Kofman added.
Grozny, Chechnya, August, 1995. Chechens celebrating the peace. Photograph by Thomas Dworzak.
Law & Politics
Within 24 hours of delivering that speech, Russia instructed that the US should vacate Syrian Air Space. This message was not delivered to Ashton Carter by his Russian counterpart Shoigu.
It was delivered to the US Embassy in Baghdad. And pretty soon after that message was delivered, Russia began its intervention on the side of President Bashar Assad of Syria.
Putin fancies himself the fly-catcher and syria the fly-trap.
The speed of execution confirms that Russia is once again a geopolitical actor that will have to be considered. It is a breath-taking rebound.
29-NOV-2021 :: Regime Change
Regime Change came to Saddam’s Iraq and for a while regime change was de rigeur.
Muammar Gaddafi was decapitated and the domino effect only stopped when Vladimir Putin decided he was going to put a stop to it and intervened on behalf of Bashar Al-Assad in Syria.
Today, the US has exited Afghanistan and the days of a Unipolar World are self evidently behind us. We exist in a Tripolar World [US China and Russia] with rapidly emerging Middle Powers.
I am not discounting Fortress Europe but one senses the Fortress is keener on a more defensive posture unlike the US [notwithstanding its withdrawal from Afghanistan], China and Russia.
Taiwan and Ukraine are the immediate geopolitical flashpoints.
Narrative and Metaverse, Pt. 2: Gain of Function @EpsilonTheory
Why is it so difficult to see that there is an actual, physical world of thought where narratives live, and that these narratives can be diminished or enhanced by the metaverse-aware, just as viruses can be diminished or enhanced by the microverse-aware?
As regular readers of Epsilon Theory know, I’m a dilettante farmer, meaning that my primary farming goal is really just to avoid injury (well, severe injury) as I act out the timeworn middle-aged white guy fantasy of driving a tractor and “working the land”.
So, yes, we have horses and sheep and goats, but they’re pets, not livestock. Their meaning to me is aesthetic, not utilitarian, and I think of our flock of sheep, for example, as a living, mobile art installation.
My grandfather and namesake, who was a non-dilettante dairy farmer in North Alabama, would find my attitude towards these animals entirely alien and more than a little comical.
Every animal on my grandfather’s farm had a utilitarian purpose and meaning.
Every animal’s survival, literally whether or not they would be killed or allowed to live another day, was the result of a constant, unceasing, utilitarian cost-benefit analysis.
That Ben Hunt, unlike this Ben Hunt, was in the business of farming, which requires thinking about animals in a very different way than dilettante farming.
Farmers or not, I believe it’s fair to say that most people in the 1930s shared my grandfather’s utilitarian thinking about animals, and I believe it’s fair to say that most people today share mine.
It’s interesting to me that our society-wide thinking about animals has changed so dramatically in less than 100 years, and I believe it’s because on a society-wide basis we have hidden away all of the billions of poultry and livestock animals that used to live among us.
Did you know that there are 75 million pigs and hogs kept as livestock in the United States? 75 million! I’ve never seen one of them.
I see the shrink-wrapped chops and bacon and roasts every time I go to the grocery store, but I have never seen ONE of the 75 million alive-only-until-a-utilitarian-calculus-determines-they-will-be-slaughtered pigs and hogs.
About 9 billion chickens will be killed for food in the United States this year. Another 400 million or so will lay eggs for us.
There are about 100 million cows alive today in the United States, and less than 10% of that total are dairy cows. More than 100,000 cows are killed to be eaten in the United States every day.
Out of sight, out of mind.
An ocean of shrink-wrapped animal flesh becomes the water in which we swim, invisible to conscious thought, much less consternation.
And what a vast and well-priced ocean of shrink-wrapped animal flesh it is! … oh-so democratically available as befits this, the best of all possible worlds.
So vast that I cannot remember a single day of my life where I did not eat the flesh of another animal.
So invisible that I cannot remember a single day of my life where I thought of it as eating the flesh of another animal.
We no longer think of animal-as-food because we no longer have the story of animal-as-food.
We no longer have any personal experience or knowledge of the animals we eat, because those billions of animals (billions!) have been intentionally sequestered and hidden away from us.
More importantly we have no mediated or socially-shared linguistic experience (none at all!) with how the food we eat comes to us. This is intentional, as well.
The story of animal-as-food has been erased from the metaverse.
It starts, as it always does, with the words.
We have many words, thousands of words, for the (literally) disembodied animal part and its preparation into a meal.
We have entire television networks devoted exclusively to words of food preparation. I have personally watched hundreds of hours of Top Chef and Chopped and Hells Kitchen and Masterchef and … my god, but it just hit me that I have spent a measurable portion of my life consuming this mediated, socially-shared food preparation content.
I know so many words about cooking techniques for (literally) disembodied animal parts. More than the words, I know the grammar.
I know how a meal can be constructed to make sense and have power as a social communication. And it does! There is nothing like a good meal with family and friends to communicate and instantiate our shared humanity.
My point is not that our modern words and grammar of food are ‘bad’. My point is not that we should stop eating animals-as-food.
My point is that ALL of our modern words and grammar of food refer to the (literally) disembodied animal part as the singular object of attention, as a thing-in-itself.
There are no recipes, no cooking competitions, no TV shows that start with the living animal as the thing-in-itself, as the object that must be killed and dismembered to provide for the amazing meal to come.
Well of course we don’t have butchering competitions on TV, Ben, that would be horrible. Everyone would be put off to see the Top Chef contestants pluck a chicken before they cook it.
To which I say … yes, exactly. The story of transforming a sentient creature into food – the act of plucking a chicken or gutting a fish or butchering a cow – is not a ‘fun’ story.
Every consumption of animal-as-food is a story of sacrifice. It’s why we used to give thanks and “say grace” before a big meal with a big cooked animal.
We used to have the words for this. I know my grandfather did.
Today … have you noticed that chefs on these TV shows no longer even call animal-as-food by its animal name? No, they call it “protein”, as in “choose your protein carefully for this cooking challenge!” or “this would be a difficult protein for a less skilled chef!”.
There’s no longer even a pretense of connecting the food with the animal life from which it came.
Occasionally you’ll hear one of the chefs talk about “honoring the protein”, but only when it is an expensive piece of animal-as-food.
The ‘honor’ – by which they mean an especially tasty preparation technique – is not due to the sentient life that was sacrificed to provide the animal-as-food, but to the American Eater, who would no doubt be aghast at, say, improperly rendered fat in a seared duck breast, or an overcooked filet mignon served with a pedestrian condiment.
Can you imagine that? Knowing where all your food came from? Knowing the story of your food?
I honestly can’t. I simply do not have the words for it.
With one exception. My eggs. And it is in this exception that I learned the process by which some stories are erased from the metaverse and others are implanted.
There is one animal on our dilettante farm where my thinking is as utilitarian as my grandfather’s, and that’s our chickens.
I understand that some people like chickens for their aesthetics, but that’s not me. I’m so over that with chickens.
Chickens are, by nature, stupid and cruel in a pack environment, as their dinosaur brains hardwire them to bully the weak or the different just because they can.
To keep the eggs coming, it’s important to provide minerals in your chickens’ diet, particularly calcium for sturdy egg shells.
That’s what egg shells are made of – calcium carbonate – and as any backyard chicken keeper knows, the cheapest and most effective way to accomplish this dietary supplement is to feed the chickens their own egg shells.
But there’s a catch. Before you put the broken egg shells into the coop along with the other kitchen scraps, you have to grind them up. Why? Because the dinosaur brain of every chicken has clusters of neurons evolved to recognize a curved macro surface … like an egg.
In fact, the dinosaur brain of every chicken has lots of these neural clusters devoted to recognizing curved macro surfaces, because the informational processing of curved macro surfaces – it’s an egg! – is so crucial to the evolved life processes of the species.
If those neural clusters evolved to recognize curved macro surfaces somehow become associated with the neural clusters that drive food acquisition and pecking, your chickens will “learn” to peck at curved surfaces wherever they see them … like in the fresh, unbroken eggs that their sisters lay.
The macro curve-recognizing neural clusters are always there. Nothing you can do about it. The trick is to avoid triggering the stimulation of the macro curve-recognizing neural clusters in association with feeding-related behaviors.
So we have a big old-fashioned mortar and pestle in our kitchen which for the past 12 years has been used for nothing other than grinding down egg shells until they’re not easily recognizable as a curved macro surface. It’s wonderfully therapeutic, honestly, to grind the shells.
And now for a thought experiment. Imagine if I didn’t want to prevent my chickens from destroying their own eggs. Imagine if I wanted to make them do it. How simple it would be! I’d just feed them the uncrushed shells.
But that’s crazy, Ben. Why would you want to trigger specific neural clusters in your chickens’ brains in a way that would cause them to start pecking at their own eggs?
This is the point where we stop talking about chickens.
World Food Prices Are Climbing Closer Toward a Record High @markets
Food, Climate & Agriculture
Global food prices jumped toward a record last month, further adding to the surging cost of living for consumers.
The United Nations’ index of prices rose 1.1% in January, pushed up by more expensive vegetable oils and dairy.
The gauge is edging closer to 2011’s all-time high, and unfavorable weather for crops and the fallout from an energy crisis threaten to keep prices high going forward.
Inflation has been running rampant across the globe, and the latest leg higher in the UN’s food index could further stretch household budgets.
The commodities tracked by the gauge are used in most grocery store products or fed to animals from which those items are produced.
That’s particularly bad news for the poorest consumers and nations with the least disposable income.
The poorest “segments in the population will feel the pinch the most,” Josef Schmidhuber, deputy director for markets and trade at the UN’s Food and Agriculture Organization, said by phone.
“High energy costs and high food costs and high necessities -- they account for a large part of their overall expenditures.”
Sugar marked the only commodity that eased during the month, while costs for meat, grain, dairy and vegetable oils rose.
Countries spanning Turkey to Paraguay are facing food inflation.
Surging energy prices have bolstered the appeal of crop-based biofuels and raised the cost of fertilizers and fuel for farmers.
That could force cutbacks on farm inputs, particularly in developing nations, which may increase reliance on crop imports if harvests falter, Schmidhuber said.
Crop supplies also face risks from bad weather and geopolitical tensions.
A dry spell has hit South American soy fields, while palm oil prices have reached a record due to labor shortages and export restrictions.
The possibility of conflict at the Ukraine border also has the market watching for any impact to Black Sea grain shipments.
For now, output is struggling to keep up with demand as economies rebound from the pandemic, farm adviser Agritel said in a note this week.
“Galloping inflation has started on energies and raw materials and is moving now toward consumer prices,” it said.
“It is hurting emerging countries, which are lagging behind with deeper and lasting consequences of the crisis.”
Global food markets are but the perturbation of a butterflys's wing away from a serious tipping point. @csmonitor By Aly-Khan Satchu, September 6, 2010
Food, Climate & Agriculture
In chaos theory, the butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state.
"At one point I decided to repeat some of the computations in order to examine what was happening in greater detail. I stopped the computer, typed in a line of numbers that it had printed out a while earlier, and set it running again. I went down the hall for a cup of coffee and returned after about an hour, during which time the computer had simulated about two months of weather. The numbers being printed were nothing like the old ones. I immediately suspected a weak vacuum tube or some other computer trouble, which was not uncommon, but before calling for service I decided to see just where the mistake had occurred, knowing that this could speed up the servicing process. Instead of a sudden break, I found that the new values at first repeated the old ones, but soon afterward differed by one and then several units in the last decimal place, and then began to differ in the next to the last place and then in the place before that. In fact, the differences more or less steadily doubled in size every four days or so, until all resemblance with the original output disappeared somewhere in the second month. This was enough to tell me what had happened: the numbers that I had typed in were not the exact original numbers, but were the rounded-off values that had appeared in the original printout. The initial round-off errors were the culprits; they were steadily amplifying until they dominated the solution." (E. N. Lorenz, The Essence of Chaos, U. Washington Press, Seattle (1993), page 134)
Elsewhere he stated:
One meteorologist remarked that if the theory were correct, one flap of a sea gull's wings would be enough to alter the course of the weather forever. The controversy has not yet been settled, but the most recent evidence seems to favor the sea gulls.
23-NOV 2015 I cannot help feeling we are like frogs in boiling water. We have created massive interference in the "cosmic tuning" phenomenonhttp://bit.ly/2Nuxi76
Bread, freedom and social justice were the three main goals of the 2011 uprising that toppled Hosni Mubarakhttps://bit.ly/3zOMqWr
Poor Nations Face $35 Billion Bill as Debt Restructuring Slips @markets @Habesh_ @EMPosts @mattstephenhill @katarinah
Slow progress on a plan by the biggest economies to help debt-ridden developing nations restructure what they owe is spurring concern from the International Monetary Fund and World Bank about vulnerabilities as a $35 billion bill comes due and U.S. interest-rate increases loom.
More than a year since the Group of 20 set up the so-called Common Framework to reorganize the debt of countries in danger of default, a lack of coordination and transparency has hampered the process.
Chad, Zambia and Ethiopia -- the only nations among about 70 eligible ones that have applied -- remain mired in talks.
And Ethiopia had its credit rating cut just for applying, prompting nations like Mauritania to avoid the process.
“The framework has yet to deliver on something that may act as a catalyst for others,” World Bank Chief Economist Carmen Reinhart said.
Creditors have been too slow to accept that they’re going to earn less from their investments, she said.
The urgency to avert what IMF chief Kristalina Georgieva terms “economic collapse” for some countries is growing after the G-20’s reprieve on debt-service payments for about 70 struggling nations -- in place since May 2020 -- ended in December.
The World Bank estimates that the world’s poorest countries, which comprised most of the nations eligible for the debt-service suspension, owe $35 billion in payments in 2022.
The framework requires private creditors to participate on comparable terms to government lenders.
It connects the six-decade-old Paris Club of creditors in mostly western nations with China, now the biggest lender to low-income countries.
The IMF and World Bank -- which pledged to help with debt-sustainability analyses, policies and new lending -- championed the initiative as a faster process that would reduce costs.
The institutions have suggested adjustments to the framework, including giving nations a debt standstill during their negotiation with creditors.
World Bank President David Malpass last month called on China to participate more in the restructuring processes.
A meeting of G-20 finance chiefs in Indonesia this month presents an opportunity to make it more effective, said Susan Lund, the chief economist of the International Finance Corp., the World Bank’s private-sector lender.
Too many creditors are holding out and waiting for others to accept losses, she said.
“It’s a classic free-rider problem,” Lund said. Creditors “need to step up to take a haircut. You don’t want this to worsen even more.”
Meanwhile, the list of nations in trouble grows. About 60% of low-income countries are at high risk or already in debt distress, double 2015 levels, the IMF says.
Eight developing economies have dollar-denominated government bonds that pay at least 1,000 basis points more than U.S. Treasuries, which is above the threshold for debt to be considered distressed, according to data compiled by Bloomberg.
Framework timelines need to be improved, and the formation of creditor committees and early engagement with the debtor country should go more quickly, said Guillaume Chabert, deputy director at the IMF’s strategy, policy and review department.
Private creditors aren’t having their perspective sufficiently taken into account in the IMF’s analysis of needed debt reductions, said Kevin Daly, investment director at Aberdeen Standard Investments, which holds Zambian bonds.
That creates the risk of “a big gulf between what the IMF requires and what these creditors feel is necessary,” Daly said.
The IMF engages regularly with private creditors, including through the Institute of International Finance, which represents global financial companies, the fund’s Chabert said.
Debt-restructuring negotiations are done directly between the debtor nation and its creditors, he said.
The Zambian finance ministry said that the nation is committed to transparency and treating creditors comparably.
Ethiopia’s State Minister for Finance Eyob Tekalign said the nation has been cooperative with the process and is disappointed that it hasn’t been completed, calling on all parties to intensify efforts.
A Chad finance ministry spokesperson declined to comment.
The process needs more urgency, said Masood Ahmed, president of the Center for Global Development, a Washington-based think tank.
Until now in the pandemic, the need to restructure debt has been “mostly a low-income country problem,” Ahmed said.
“But if interest rates really move up and cause unexpected market surprises, you could also see some of the emerging markets that have high levels of debt feeling vulnerable.”
Don’t Write Off Democracy in Africa Just Yet @WPReview @hofrench
The 1980s are usually recalled as a decade of one-party rule in Africa, and beyond that, of the receding tide of civilian-led government in the face of military takeovers in one country after another.
Having covered the phenomenon while working as a freelance journalist based in West Africa for a little more than the first half of that decade, I recall my excitement when I returned as a reporter for The New York Times at the start of the 1990s, which are often remembered for quite the opposite: the rebirth of democratic politics on the continent.
This time around, I covered the arrival of elected governments in several places, but most strikingly to me in Mali and Benin, whose dictatorships in earlier eras I had seen close-up myself.
Among my strongest recollections from this bold new era of participatory politics and competitive elections is of a warning I received from an editor back in New York, telling me not to get carried away in my enthusiasm for what seemed to me to be an unmistakably positive wave of change.
Privately, I chafed and bridled over this. The Western press had long caricatured Africa as a place of “big men” and their goons, as well as of corruption, pestilence, violence and famine—that is, when it bothered to cover the continent at all.
Now, with Africa moving toward democracy—moreover, of its own volition—I was being urged not to accord so much weight to what seemed so clearly to me to be a historic wave of change.
I stuck to my guns as best I could, writing the news stories and analyses that I felt needed to be written, not worrying when they got buried deep inside the newspaper or limited to shorter articles.
Looking back now, amid today’s prolonged season of military coups across West Africa, however, it is hard not to feel differently.
The editor was right about democracy on the continent, in fact, even if it was for the wrong reasons.
This style of government, in its most familiar form of political parties and regular trips to the polls, where citizens get to vote according to their own whims, was always bound to be fragile in Africa in our era, experiencing as many setbacks as advances.
After at least six recent military coup d’etats on the continent since August—one in Burkina Faso, one in Guinea, two in Mali, one in Sudan and one in Chad—as well as an unsuccessful attempt at one in Guinea-Bissau just yesterday,
the conventional wisdom that comes to many today as easily as did my enthusiasm over the wave of elections I covered nearly three decades ago is that Africans have fallen out of love with democracy, or that it simply doesn’t work on the continent.
But if I were an editor fielding the stories of correspondents today, I would caution any reporter coming to that conclusion just as strongly as I was cautioned for the opposite slant back then.
The changes of regime that the world has recently seen out of Africa in favor of soldiers in khaki huddling around tables in hastily arranged appearances before the cameras to announce the overthrow of civilian governments are neither surprising, nor are they likely to be permanent.
I remember watching the coup of Maj. Gen. Muhammadu Buhari in Nigeria in 1984, when he declared, “We have dutifully intervened to save the nation from imminent collapse,” and looking back, it is remarkable how little this template for self-justification has changed.
Civilian rule is taking the blame today in places like Mali and Burkina Faso, but it is hard to imagine how military rule can set things right.
This means that military leaders are likely to take the blame tomorrow.
Sooner or later, though, civilian governments will replace most of these newly installed military regimes, once it becomes clear just how hard it is to wield power to any great effect in the most vulnerable African states.
In fact, that is what happened in Nigeria, ultimately bringing Buhari back to power as an elected civilian president. In the meantime, other elected governments are bound to fall.
The crisis of African politics in this recent moment, although not limited to it, has been centered in the broad belt of semi-arid states situated to the immediate south of the Sahara Desert, known as the Sahel.
In reality, it is not so much a crisis of systems of government as it is a far more complex and hard-to-resolve crisis of economics, demography and the environment.
As I wrote in a recent column, this is true for most of the African continent, which has had little success finding a viable station for itself in an unforgiving and brutally competitive global economy.
And that’s not for lack of trying. Many African states invested heavily in education, health care and other public services in the exuberant early years of independence, following long decades of paltry efforts in these areas under stingy and exploitative colonial rule.
Newly independent countries sampled pretty much every ideological flavor out there, and even created new ones of their own.
Some hewed close to their former colonial powers, keeping on European advisers and favoring private investment from abroad.
Others tried much more nationalist approaches and experimented with import substitution and heavy investment aimed at industrialization or other paths toward higher growth rates, which they hoped would enable them to break out of the low stations colonial rule had left them in. Almost nothing seems to have worked.
Prospects for the Sahel have always promised to be among the most difficult anywhere in Africa.
The region combines ecological fragility and limited arable land on one hand, with some of the world’s highest population growth rates on the other.
Add to that the fact that almost every state in the region has been beset by violence from insurgent Islamist fundamentalist groups over the past decade or more.
As a result, countries with scant room to maneuver and no obvious good answers about the best way forward in order to provide greater security and prosperity for their people are being pushed over the edge.
In fact, looking back over the past 75 years of independence in Africa, there are no strong examples of grand state-building by army leaders who seize power.
In fact, as the political scientist Paul Nugent once wrote, “nothing is more corrosive of military unity than military rule.”
Citizens of African states in crisis, and they are by no means limited to the Sahel, have cheered on the military before only to regret it.
Their disenchantment with their governments is understandable, and yet no regime on the continent has figured out a path forward that can deliver improved living standards with a recipe or lessons that can be easily applied to others.
The Sahel poses what are perhaps the most daunting challenges of any region. Its countries are landlocked, with unsustainably high birth rates, widespread poverty, gender inequality, failing educational systems and few, if any comparative advantages, to compensate for these things.
If solutions are to be found for problems as many and varied as these, they are unlikely to come via men in khaki or by diktat.
Democracy is clearly no magic bullet, but bringing people together in a national project based on choice and participation is likely to be part of the answer.
Congo & Kabila: A dive into the road that exports the country's copper & cobalt. Audits allege that the toll collectors, inc. one founded by the ex-president's family, can't account for $238 million -- w/@markets @mjkcongo @WTBClowes
For 250 hot and dusty miles, the two-lane highway cuts through central Africa, its path lined with the carcasses of trucks, buses, and minivans.
But this modest road holds outsize value for global markets, connecting some of the continent’s richest mines to the rest of the world—most notably, China.
Along this route, thousands of flatbed trucks haul sheets of copper and sacks of cobalt hydroxide, essential for electric cars and other 21st century technologies.
Their drivers must pay steep tolls, as much as $900 for a round trip.
And for almost a decade, records indicate, a cut of those tolls flowed to the family of one politician: Joseph Kabila, the former president of the Democratic Republic of Congo.
The toll payments illustrate how Kabila blurred the lines between state and private business, documents reviewed by Bloomberg News suggest.
By striking such deals with his regime, Chinese companies over the past 15 years came to dominate Congo’s mining industry, down to the roads the country’s minerals travel for export.
The relationship with Kabila has been of strategic benefit to China in its economic rivalry with the U.S. And it has helped Congo, a nation of 105 million, become Africa’s largest producer of copper and the world’s biggest source of cobalt.
Yet, as on much of the continent, a foreign power and a country’s elite, not the general population, have reaped the benefits of natural resources.
Like seams of cobalt, business arrangements around the toll road have long been buried.
The trail begins with the company Kabila’s government contracted to rebuild and maintain the highway: state-controlled China Railway Group Ltd., one of the largest construction companies in the world.
Someone needed to collect the tolls that would pay for the roadwork, and there the former president’s family saw an opportunity to cash in.
Two management companies, one of which was co-founded by a Kabila family investment firm, have misappropriated $238 million since 2015, allege a pair of audits by Congo’s top anticorruption official seen by Bloomberg.
China Railway didn’t respond to emails and phone calls seeking comment. Nor did Kabila or his family.
In an email, the Chinese embassy in Kinshasa, Congo’s capital, said its government always asks Chinese companies to respect local laws and regulations and to “never interfere in Congolese political affairs.”
The Kabilas’ involvement in the toll road came to light through the biggest leak ever of financial documents from Africa.
A consortium of five nongovernmental organizations and 19 media outlets, including Bloomberg, gained access to bank records obtained by the Paris-based Platform to Protect Whistleblowers in Africa and the French news organization Mediapart.
The resulting articles and reports—published under the name “Congo Hold-Up”—demonstrate the extent to which the country’s most powerful family used the Congo unit of Gabon-based Groupe BGFIBank SA to serve its private interests during a period in which at least $138 million in state funds passed through the lender to Kabila’s family and associates.
They also show how Chinese companies transferred tens of millions of dollars to the same network.
In December, Kabila’s lawyers denied wrongdoing and called the reporting “a campaign of defamation, slanderous denunciations, denigrations, and untruths.”
Outside powers have a long history of coveting Congo’s natural resources. It began under Belgian colonial rule and continued during the country’s tumultuous post-independence period, when Congo was caught between sides in the Cold War.
Increased scrutiny of Congo’s mining industry comes after a pivotal moment. Kabila, a former military commander who’d trained in China, assumed power from his father, who was assassinated in 2001.
In 2019, Felix Tshisekedi succeeded him as president after the two men made a deal to resolve a disputed election in which another candidate almost certainly won the vote.
Tshisekedi, the son of a well-known opposition politician, initially governed Congo in coalition with Kabila, but he’s since sidelined or co-opted those loyal to his predecessor.
Now his administration is revisiting contracts with Chinese and other foreign companies negotiated under Kabila that it views as skewed against the Congolese people.
In the early 2000s, as Congo emerged from years of civil war, China seized an opportunity to buy mines, a process that’s accelerated in recent years.
In 2008 the countries agreed that Chinese companies would finance $3 billion worth of infrastructure and build a $3.2 billion copper and cobalt project known as Sicomines, whose tax-free profits would repay the investments.
China Railway teamed up with state-owned Power Construction Corp. of China Ltd., also known as PowerChina.
Both companies are major players in President Xi Jinping’s “Belt and Road” initiative, which makes investments in infrastructure around the world, partly as a way to project the country’s growing economic power. PowerChina didn’t respond to requests for comment.
That same year, Congo separately awarded a subsidiary of China Railway the first of three no-bid contracts to rebuild its main export and import routes—including the key mining highway, which runs from Kolwezi to the Zambian border. Tolls would pay for the roadwork.
The highways were in desperate need of an upgrade, and China Railway was on the ground and ready. The roads led to riches.
Copper and cobalt exports increased more than 50-fold under Kabila, with about 1.3 million tons of metal trucked out of Congo in 2018, his final year in power.
Much of the highway goes by the grand name of National Road 1. In a country with one of the world’s worst road networks, it stands out for a simple reason: It’s paved.
Still, there are few streetlights, and accidents are common. Pedestrians and cyclists share the route, transporting food and other goods to Kolwezi, Likasi, and Lubumbashi—cities along the way founded by Belgian colonists near Congo’s biggest mines.
The road runs past dozens of communities that have mostly missed out on the rewards of Congo’s multibillion-dollar mining industry.
Makeshift shacks with orange tarpaulin roofs—the same plastic sheets used to keep hand-dug tunnels from collapsing in the rain—signal the homes of Congolese leading migratory lives on the economic fringes of one of the world’s poorest countries, where three-quarters of the population subsists on less than $1.90 a day, the international poverty line.
Judith Kasongo works as a cook and cleaner in Kanyaka, a village along the toll road. She has no clean water to wash her food.
“It’s beyond understanding, and as a Congolese it hurts to see all this wealth go outside the country, as we remain in poverty,” says Kasongo, 31.
“We see our minerals developing other countries, while in Congo we don’t have enough roads and face so many difficulties.”
In pictures posted on his Twitter feed, Jules Alingete Key looks more like a general than an auditor.
He’s often scowling, and he sometimes wears a uniform the sky-blue color of Congo’s flag, accented with epaulets and gold buttons.
Alingete is President Tshisekedi’s inspector general of finance, or, as one Congolese magazine described him, “the sheriff of finance and the public good.”
He has become an anticorruption crusader, launching investigations into politicians and businessmen who were untouchable under Kabila. He says he faces constant threats from his targets.
As part of his investigations, Alingete has dug into who really profited from Congo’s most important roads.
They were supposed to benefit the country as a whole. There would be at least $1.1 billion worth of new and refurbished toll roads: two connected segments in the Katanga region and another from Kinshasa to the country’s main port of Matadi.
Instead, a large portion of the $757 million in tolls collected on the mining route from 2010 through 2020 vanished, according to the inspector general’s office.
On one leg of the highway, in a five-and-a-half-year period starting in 2015, maintenance spending amounted to only $50 million, less than one-fifth of what was generated in tolls during that time, his auditors found.
The inspector general’s conclusion: Hundreds of millions of dollars have been lost to overbilling and embezzlement. “On the ground, these funds were not used for roads,” the agency told the consortium, describing a “mechanism of overcharging.”
Alingete identified the culprits: the two toll operators, which were entitled to keep only 10% of the fees collected.
One, a company called Société de Gestion Routière du Congo, or SGR, misappropriated $121 million from April 2015 through 2020, according to an audit report seen by the consortium and verified by Alingete.
The Kabilas have a long association with SGR. So does Cong, the Chinese businessman. China Railway initially owned SGR in a joint venture with the Kabila family investment firm, which took full control in April 2015, records show.
Yet, 10 days before that ownership change, Cong had represented the company in renewing its toll concession with the Congolese government.
He says that SGR’s absent legal representative, who was a senior China Railway manager, had authorized him to sign the contract.
Cong says he acquired SGR in November 2016, though Congo’s corporate registry didn’t reflect the transfer until this year, after the consortium sent him questions.
He said he paid the Kabilas no money and instead assumed an undisclosed amount of debt that the presidential family’s company owed China Railway. Cong didn’t provide any documentation for the transaction or the debt.
In that same five-and-a-half-year period, $117 million disappeared from the road’s other toll operator, Société de Gestion de Péage au Congo, or Sopeco, Alingete’s auditors found in a separate report. Cong owns that company, too.
The audits don’t cover what happened before 2015, though most of the funds intended for roadwork also “went up in smoke” in the preceding years, the inspector general’s office found.
Like SGR, Sopeco has ties to the Kabilas. From 2013 through January 2016, the two toll operators made 44 payments worth a total of $10.4 million to a company called Congo Construction Co., which delivered more than $30 million to people and entities directly linked to the Kabilas,
Bloomberg reported in November. Almost all the money from the toll-road businesses was withdrawn from BGFI in cash, documents show.
“These payments created clear conflicts of interest and serious risks of fraud and bribery,” according to a report by the Sentry, a Washington-based anticorruption group that was part of the “Congo Hold-Up” consortium.
BGFI’s Congo unit was itself a Kabila family business: The former president’s brother was its chief executive officer, and his sister owned 40% of the bank until 2018, when both were forced out amid accumulating scandals resulting from an earlier data leak by a whistleblower.
Before her shares were reclaimed by BGFI’s Gabonese headquarters, Kabila’s sister drew up an abortive plan to sell her stake to three new shareholders, including Cong, who would have paid $2.9 million for a 7.5% interest, bank records show.
Cong said he wasn’t aware of such a proposal. In a statement after publication of the first “Congo Hold-Up” stories, the bank acknowledged past governance problems at its Congo branch but questioned the authenticity of the leaked documents.
The consortium found no indications that the Kabila-linked company, Congo Construction, or CCC, did any construction work.
Cong said two Sopeco transfers to CCC’s account at BGFI were for a loan agreement and a gravel supply deal, but he didn’t know why SGR sent almost $8 million to the company, because the payments occurred before he took over the business.
Cong has other connections to CCC, which was owned by another Chinese businessman. His hotel and the company share the same address. In an email, a bank official described CCC and the Fleuve Congo Hotel “as sister companies housed in the same building.”
Bloomberg couldn’t verify all the figures from the government reports, and Alingete didn’t respond to multiple requests for the complete audit documents.
In emails to the consortium, Cong denied the inspector general’s allegations, saying he’d provided documentation showing all the money was spent appropriately, and he considers the matter closed.
L’Agence Congolaise des Grands Travaux, the government agency that oversees most of Congo’s biggest infrastructure projects, including toll roads, told the consortium it isn’t aware that either toll-road company engaged “in any cases of corruption or other improprieties.”
But, according to the audit reports, Alingete has urged the government to cancel the contracts held by Sopeco and SGR and replace them with “a much more responsible partner.”
In the waning days of the Kabila administration, Cong won extensions on his concessions to collect tolls on the mineral highway. The bounty would continue into 2025 for one stretch of road and to 2043 on the other, the audits reveal.
The companies also signed contracts for tolls and roadwork on two other mineral supply routes that could amount to half a billion dollars.
Alingete’s investigation could threaten Cong’s franchise. But for now, his contracts survive, and business has never been better.
Congo’s mining ministry reported last year that copper exports were on track to break all records. —
Today, Congo is once again key to the global economy in the 21st century. Once it was about rubber. Today its all about cobalt [Copper and Lithium].
Erik Prince who is raising a $500M fund to invest in the supply of these metals said to the Financial Times
“For all the talk of our virtual world, the innovation, you can’t build those vehicles without minerals that come from generally weird, hard-to-access places.”
4 FEB 19 Whilst oil and the petro-dollar economy underpinned US power projection, the DR Congo with an estimated 66% of cobalt [possibly the new oil] supplies might well represent the Future.
since the days of King Leopold through Mobutu through the Kabilas, it has been a country where ‘’L’etat c’est moi’’ applies
since the days of King Leopold through Mobutu through the Kabilas, it has been a country where ‘’L’etat c’est moi’’ applies and citizens have had to exist in a world that Joseph Conrad pronounced as “The horror! The horror!” in his book The Heart of Darkness.
V.S. Naipaul, in A Bend in the River wrote “It isn’t that there’s no right and wrong here. There’s no right.”
Uganda's night life roars back after nearly two years of COVID restrictions @Reuters
Throngs of revellers filled The Levels bar in Uganda's capital Kampala, dancing to live music and ordering bottle service to their tables, on Monday night.
Nearly two years after the government shut down bars and nightclubs and banned outdoor musical performances and other entertainment activities to combat COVID-19, the country's nightlife is roaring back.
"Of course Uganda is the life of a party, if you do not party you are not a Ugandan," said Vera Muryengye, a consultant, as she sipped a drink.
"It's the end of the month, you get your money, get your salary, put the money into circulation. That's it, that's Uganda."
Raymond Karemera, head of marketing at Nomad Bar and Grill in a neighbourhood of Kampala that is often likened to Las Vegas, said many bars struggled to avoid bankruptcy as they continued to pay security and electricity expenses while closed.
"It was a very horrible time for us," he said.
On a recent night at Nomad, as people raised glasses of wine and whiskey for toasts, one patron shouted "Kampala is back! We love you, wee!"