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Satchu's Rich Wrap-Up
 
 
Wednesday 13th of April 2022
 
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The Big $hort @CreditSuisse Zoltan Pozsar
World Of Finance


The rise of Bretton Woods III – the new monetary world order that we’ve been busy imagining since the outbreak of the war – and the corresponding rise of (1) the renminbi, (2) commodities, and (3) monetary gold as reserve assets to upend the dominance of the U.S. dollar and the “exorbitant privilege” mean a relative decline of the ancien régime monétaire and its instrument: the Eurodollar.
Not a demise of the Eurodollar. A relative decline of it...
...which should naturally give rise to a set of “big shorts”.
The big shorts will include the U.S. price level (shorting inflation expectations), shorting policy rates, shorting the curve inversion (the yield curve has gone mad), and shorting some U.S. dollar FX pegs and the U.S. dollar versus the renminbi...
...i.e., three of the four prices of the U.S. dollar (everything but par; see here).
Wars and shifts in the global balance of power bring about shifting alliances, shifting trade relations, shifting priorities, and shifts in the monetary pillars that have been anchoring everything around us. 

It is times like these when revaluations and the abandonment of FX pegs happen – never telegraphed; always by stealth.
As we move away from Bretton Woods II to Bretton Woods III...
...it’s rational to ponder whether China will revalue the renminbi versus the dollar, and whether Saudi Arabia and Hong Kong will abandon their peg to the dollar or shift weights to other currencies in the context of a basket. 

After all, if Larry Summers is right and the Fed will be forced to hike to close to 5%, and if we are right about the relative decline of the FX value of the U.S. dollar, why would anyone shadow the U.S. hiking cycle and crush domestic housing and suffer a spike in living costs due to a peg that no longer makes any sense.
It’s our currency, but why should anyone internalize our (the U.S.’s) problems?
If the bull market in rates is over, why should Bernanke’s savings glut countries anchor themselves to a reserve asset that is now falling in value (rising rates), and hoard a currency (the dollar) that’s set to fall in terms of purchasing power?
Some things money just can’t buy: the most valuable commodity is time – and that’s something money definitely cannot buy. 

Money also can’t buy commodities in times of shortages. But, countries can choose to revalue their currencies if they’ve been suppressing their value, or re-think their FX pegs with an eye to maximize the commodities they can buy in a world of shortages...

The current circumstances are somewhat reminiscent of the U.K.’s struggles with the ERM back in 1992 – when George Soros broke the Bank of England.
The preamble to the BoE’s problems in 1992 was the birth of globalization: the fall of the Berlin Wall is widely understood to be the point in time that marks the start of the modern era of globalization that began in the 1990s. 

The German unification that followed the fall of the Berlin Wall was paired with massive fiscal stimulus and monetary restraint, which the U.K. and the BoE were meant to shadow as the pound sterling was linked to the Deutschmark under the ERM

But the BoE could not follow the Bundesbank’s policies for domestic reasons, and was ultimately forced to abandon the ERM. 

The pound sterling collapsed on Wednesday, September 16, 1992, and the rest became financial history...
If Larry Fink is right, and we are indeed witnessing the end of globalization – I think he is right – then the war in Ukraine marks the end of globalization, and the weaponization of the dollar and the inflation that sanctions against Russia will cause mean that some FX pegs could come under pressure again.
If the birth of globalization can mess with pegs, the end of globalization can mess with pegs too, but this time in the other direction: in 1992, the issue was the BoE’s inability to shadow the BuBa, and so it “de-valued” relative to the ERM

today, the issue is peggers’ (potential) unwillingness to shadow the Fed’s hiking cycle and to shoulder the risks of being pegged to a reserve asset that’s now falling in value and a currency that will have less purchasing power.
The risk today is revaluation, not devaluation, and a re-think of the core that peggers decide to peg themselves to. 

Peggers need to be careful, for under Bretton Woods III “beggar thy pegger” is the risk, not “beggar thy neighbor”...
Revaluations and the abandonment of pegs that results in revaluations happen not from a position of weakness, but a position of strength and are matters of......statecraft.
Statecraft is conducted at the very top, not by central banks, and comments about Saudi Arabia potentially reversing the flow regarding U.S. investments (“in the same way we have the possibility of boosting our interests, we have the possibility of reducing them” as per the SPA citing the Saudi crown prince) suggest some potential disturbance to the status quo. 

Similarly, in city states aiming for zero-Covid, the last thing one needs is accelerating inflation and falling house prices due to imported problems that come from the wrong peg.
“Our currency, your problem” is about the rest of the world’s struggle to procure funding and commodities in a currency that at times got very strong.
“Our commodity, your problem” is about the rest of the world’s decision to re-think what the right value of their own currency is and what they’re pegged to.
“Our commodity, your problem” is not about the rest of the world’s struggle, but rather the U.S.’s struggle with price stability and with other prices of money.
When FX reserves come in two tranches (liquidity and investment tranches), and when U.S. dollars are available “on tap” through the U.S. dollar swap lines and the FIMA repo facility, it’s not very important to run with excessive hoards of FX reserves to begin with. 

When a wave of inflation and interest rate hikes are about to erode the market value of those FX reserves and the U.S. dollar’s purchasing power, it makes sense to trim at least the investment tranches, which mean selling longer-dated Treasury notes. In a de-globalizing world,

where re-stocking (resource nationalism), re-arming, re-shoring, and re-wiring are the goals, what you accumulate as reserves (U.S. dollars or commodities) and who you partner with geo-strategically and also monetarily matter a lot...
Revaluations are a risk, and some FX pegs are at risk too. To forecast the future, we need to review the past. 

For that, we’ll use the four crises of shadow banking to frame our discussion. The pattern is bleak. The future does not look bright.

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Its a Wizard of Oz moment
World Of Finance

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



The Curtain has been lifted and Mr. Powell has now arrived at his Volcker moment 

Deutsche Bank's Jim Reid notes that yesterday's surge in the 2-year US Treasury yield was, by one measure, "the biggest "shock" since October 1979 when Volcker announced his intentions on the world @ReutersJamie
The last time inflation was here, February 1982 - the Fed Funds Rate was 15%. @Convertbond
Dartmouth economist and former Fed adviser Andrew Levin says the Fed needs to get rates to a neutral setting within a year or so, and that the means getting the Fed Funds rates up to 4% or 5%




A REGIME CHANGE IS UNDERWAY [in the markets]





There is no training – classroom or otherwise.. that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market. 
There's typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. Paul Tudor-Jones



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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.
World Of Finance

Russia essentially gave the $ and the Euro the very same exorbitant privilege that King Abdul Aziz Ibn Saud of Saudi Arabia gave President Franklin D Roosevelt aboard the USS Quincy in Great Bitter Lake in February 14, 1945 when the petro dollar economy was symbolically born.

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The Big $hort @CreditSuisse Zoltan Pozsar continued
World Of Finance


Allow me to explain...
The term “shadow banking” became a part of our lexicon when the legendary Paul McCulley – the former chief economist at PIMCO – coined the term. 

Yours truly then turned the term into cartographic graffiti (see here). But it was the framework that Perry Mehrling built around the concept of shadow banking that gave direction to my thinking about it and helped all of us to understand shadow banking simply as “money market funding of capital market lending”.
Shadow banking is not a new phenomenon. Carry trading and money changing is something Jesus himself had to deal with when he drove the merchants and money changers from the Temple. 

Shadow banking had three crises during the post-Nixon, post-Volcker fiat money era, which are best demonstrated using Perry Mehrling’s “four prices of money” framework (see here).

As a reminder, the four prices of money are par, interest (and bases), foreign exchange, and the price level (or the price of commodities in terms of money). 

Since 1997, the shadow banking system has been steadily barraged by a series of crises...
In 1997, shadow banking was money market funding of capital market lending in Southeast Asia under the aegis of fixed exchange rates. 

Southeast Asia funded everything with U.S. dollars borrowed in money markets, which funded capital market projects underwritten by banks and finance companies until the money flows came to a sudden stop. 

Then came a crisis – a funding crisis – and the crisis of the notion of “par”, that is, a crisis of FX pegs to the U.S. dollar.

 There were no dollar swap lines to deal with dollar funding issues back then, and emergency liquidity assistance came in exchange for a pound of flesh – emergency loans from the IMF for implementing the Washington Consensus. 

The legacy of 1997 was the global rise of FX reserves – Secretary Geithner’s “money in the window” concept to keep the speculators at bay – which also seeded the Bretton Woods II system. 

When China joined the WTO in 2000, the global rise of FX reserves went into overdrive – Greenspan’s conundrum got a new label as Bernanke’s savings glut and got us a new set of problems.
According to an ancient Chinese proverb, “to have enough is good luck; to have more than enough is harmful”. 

As Paul McCulley reminded all of us about Minsky’s teachings back in 2007, stability begets instability, and excessive stability of long-term interest rates thanks to China’s FX reserve accumulation has led to a house price boom and excessive accumulation of leverage in the system.
In 2008, shadow banking was money market funding of capital market lending again, but this time the peripheral borrower was within the borders of the U.S. – the emerging market in play was the “emerging class” of subprime borrowers. 

The system that funded subprime mortgages was built not around the notion of FX pegs but the notion that “private AAA is the same as public AAA”. 

As a journalist remarked back then, the supply of private AAA paper was growing like kudzu, and at the peak of the subprime boom, the outstanding amount of private AAA paper far exceeded the amount of public AAA paper. 

That should have made people think, but it didn’t, and money markets gorged on the private AAA stuff, minting trillions of short-term AAA paper to buy them. 

Until it didn’t – when the steep decline in house prices brought a sudden stop of principal and interest payments on NINJA and other types of subprime loans, private AAA became junk and trust in funding markets evaporated. 

No income to pay mortgages was the same as no FX reserves to make good on FX pegs, and the notion of par between bank deposits, between bank deposits and repo, and between bank deposits and money fund shares came crashing down.

The cleanup to that episode gave rise to QE, and the lessons from that episode were enshrined in Basel III. 

QE was done to inflate asset prices to fight the threat of deflation, but it left a bad taste in the mouth of FX reserve accumulators – China stopped adding to their FX reserves.

 Demand for the reserves the Fed created via QE was underwritten by the Liquidity Coverage Ratio of Basel III.
In a humbling reversal of fortune, it was banks that had to load up on reserves (reserves, not FX reserves), and they had to implement a consensus too (Basel III, not the Washington Consensus). 

The Great Financial Crisis was then followed by the European debt crisis, which was the genesis of the European version of QE. Then nothing for a while, until September 2019...
In 2019, shadow banking was money market funding of capital market lending yet again, but this time in the most unimaginable way: the “emerging market” was the U.S., which could only fund itself on the margin through the goodwill of relative value (RV) hedge funds harvesting the bond basis. 

RV hedge funds bought Treasuries, shorted the future, and funded the pair in the repo market – the o/n repo market because that was the only place where balance sheet was unlimited due to the rise of sponsored repo (as an arbitrage around the SLR chapter of Basel III). 

The Fed was trying hard to get out of QE and as it conducted QT, it drained all excess reserves from the U.S. banking system, which was the marginal lender to the repo market and hence to RV funds, and through the RV funds to the U.S. government itself. 

When the money ran out, “par” broke again – the Fed lost control of the o/n interest rate complex, and for a moment, the U.S. government had a little bit of a funding problem...
We say the following for it may be lost on market participants and policymakers...
...since 1997, we‘ve been dealing with a series of money market crises that had either the Eurodollar or the U.S. dollar at their epicenter, and where a different price of money broke at each time. 

Importantly, in each of these crises, the problems got worse and worse, and the crisis was coming closer to home:
1997 was “our currency, your problem”; 2008 was “our currency, our problem” (bank deposits, money fund shares, mortgages, and the American dream); 

while 2019 was about “our currency, our federal government’s funding problem”, which was the very first time we saw some cracks to the notion of the “exorbitant privilege”. 

A crisis of U.S. dollar pegs, a crisis of domestic dollars, and a crisis of the bedrock of government finance – the o/n Treasury repo market...
...a series of worsening crises burning up the hierarchy of the dollar system.
The Fed’s liquidity injection into the repo market in September 2019 saved the RV hedge fund community and the Treasury’s ability to fund itself, but the onset of the Covid-19 pandemic stressed the system again a few months later, and RV funds had to be bailed out through a gigantic QE program. To be clear:

other central banks ended up doing QE too, but to fund new fiscal programs; no other central bank had to step in to backstop a fragile funding structure to its own government – the leveraged bond basis trades that funded the Treasury.

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The Big $hort @CreditSuisse Zoltan Pozsar further
World Of Finance


The pattern of the three big crises since 1997 are similar: first a liquidity event, then a backstop at a steep price, and then a lasting impact in financial markets:
in 1997, a sudden stop, the sale of national assets, and FX reserve accumulation; in 2008, a sudden stop, a fire sale of mortgages, and reserve printing (QE); in 2020, a sudden stop, a fire sale of Treasuries, and reserve printing again.
Today...
...we have a dollar shortage in the commodity trading world, driven by shortages in physical commodities. 

In Lombard Street and Commodities, we explained the nonsense of not giving liquidity assistance to commodity traders (see here).
Today, shadow banking is “money market funding of commodity trading”. Commodity traders guarantee price stability, not central banks

and without the risk transfer provided by futures markets and without a liquidity backstop to that risk transfer process, spot prices are at an extreme risk of spiking, not to mention the risk of price spikes due to a sudden stop of physical commodity flows or the risk of price spikes due to logistical (“balance sheet”) bottlenecks in the world of shipping. 

In an upcoming dispatch we will take readers through the plumbing of the commodity derivatives complex, so for now, it suffices to say that, unless central banks provide a liquidity backstop to commodity traders, they will soon have to underwrite fiscally funded price control measures via QE.
That wouldn’t be good for the U.S. dollar, nor would it be a durable or credible way to “underwrite” the notion of price stability – the fourth price of money and the most important pillar of the post-gold, fiat money world order. 

If you lose price stability, then two of the other three prices of money become a mess – the level of interest rates and the FX value of the U.S. dollar will suffer, and yes, we are seeing a lot of that already: look at the OIS curve re-pricing and EM currencies (positive commodity terms of trade) rallying versus the dollar.
In the context of the four prices of money (see here), which, to remind, include: 

(1) Par
(2) Interest
(3) Foreign exchange 

(4) Price level

...it’s important to emphasize that since the 1990s, we’ve been dealing with crises that had to do with par, interest, and FX pegs, which are all nominal variables that central banks can fix easily. 

You just pour money at the problem (QE), and the problem goes away quickly. The price level is a different ballgame – you cannot print oil to heat or wheat to eat, or print VLCCs and other things that will soon give central banks a headache and test the notion of credibility...
...the credibility of central banks as “all-powerful protectors” of price stability.
Credibility about a central bank’s ability to police the price level supports a central bank’s ability to adjust interest rates and the FX value of its currency to serve the cyclical needs of the economy. 

In other words, structural stability in terms of the price level enables tactical flexibility to deal with business cycles.

Credibility in the context of Bretton Woods III is an even broader topic, for Bretton Woods III will emerge not only in search of a new price stability anchor but also in search of a new reserve currency to shun a weaponized U.S. dollar.
The credibility of the U.S. dollar has been damaged before...
...so once again we are dealing with a pattern: President Nixon deciding to take the U.S. dollar off gold in 1971 was one episode of “credibility lost” (that episode too was driven by statecraft [see the Saudi crown prince’s comments above], 

where President Nixon and Secretary Connally, not the Fed Chair, drove the decisions). 

The fiat-money Bretton Woods II framework that emerged from there was anchored not by gold, but by the very promise of price stability, i.e., the Fed’s credibility to be able to always deliver price stability – from “In God We Trust” to “In the Fed We Trust”. That trust is now at risk...
Credibility is measured not only in terms of a central bank’s ability to deliver on its promise of price stability but also in terms of how a dominant state upholds the rule of law and the notion of open capital accounts. 

In this context, weaponizing the dollar and the Eurodollar has further undermined credibility.
We referred to setting the right value of a nation’s currency and the right peg as a strategic choice of the state (hence “statecraft”). 

President Nixon’s decision to take the dollar off gold was a strategic choice of the state too, as was the weaponization of the U.S. dollar. It was not a decision of the Fed...
The weaponization of the dollar = the subversion of the state’s monetary interests to the state’s foreign policy interests. Money is hierarchical, in an absolute sense.
We usually think of money and its hierarchy in terms of instruments, prices, and intermediaries (gold, reserves, and deposits; secured, unsecured, and FX swaps; central banks, banks, and dealers, respectively), not in terms of money and state.
But it’s now time to bring the state in as an extra layer in the hierarchy of money...
...and to re-discover another essential book from Charles Kindleberger, Power and Money. 

Do you remember when we all re-discovered Kindleberger’s Manias, Panics and Crashes during the 2008 crisis? 

I remember it as being required reading from Tim Geithner down to the last trader/analyst at FRBNY.
Now it’s time to rediscover Power and Money, for what we now see is the state exercising power that will ultimately harm money – the Eurodollar – as we know it: OFAC is far-far more powerful than either the FOMC or FSOC at the moment.
The state does what the state does, and the FOMC will have to clean up the inflation that comes next. 

The state (power) is de-stabilizing the pillar of the Bretton Woods II system (the U.S. dollar) by creating risks to the price level. 

Once again, the White House and the deputy national security adviser wield far more power over interest rates and foreign exchange rates than the FOMC.
What would Charles Kindleberger say to all this?
I do not know, but I am eagerly awaiting Perry Mehrling’s forthcoming book,
Money and Empire: Charlie Kindleberger and the Birth of the Dollar System. They say you should short companies when they build stadiums and put their own name on it. 

Should we short the U.S. dollar now that this book is coming? Books are real assets – do buy the book. But perhaps short the concept...
The legacy of the unfolding commodity crisis will be long-lasting. This crisis is another crisis of shadow banking – the fourth crisis of shadow banking and a crisis of the fourth price of money. 

Recall that it is easy to deal with crises of the first three prices, but central banks cannot do anything about the fourth, and without price stability, there is no exorbitant privilege or dollar supremacy.
If Francis Fukuyama was wrong about the end of history, so will be anyone who thinks the U.S. dollar will come out unscathed from all this: if control over the price level is lost, interest rates and the value of the U.S. dollar will suffer too.
It’s inevitable...
The pattern of crises since the 1990s is obvious. So is the list of prices that these crises have tested so far. There remains one last price, the fourth price of money – the price level – to test, which will be the main test of the dollar’s post-WWII supremacy: 

the current crisis will test the Fed’s credibility to deliver price stability, and as the theme of “our commodity, your problem” suggests, there is a risk that the Fed won’t be able to deliver on its price stability mandate successfully.
Paraphrasing Herodotus...
...”circumstances rule central banks; central banks do not rule circumstances”.
Inflation is a complex phenomenon, and it has nothing to do with DSGE models. 

Free-flowing commodities and commodity traders guarantee price stability, not central banks, and deflationary impulses coming from globalization shouldn’t be mistaken for central banks’ communication skills as anchors of price stability.
Luck is luck. Luck isn’t structural...
Luck is running out; central banks were lucky to have price stability as a tailwind when they had to fight crises of FX pegs, par, repo, and the cash-futures basis. Those were the easy crises. The ones you can print your way out of with QE.
But not this time around...

Inflation borne of shortages (commodities [due to Russian sanctions], goods [due to zero-Covid policies], and labor [due to excessive positive wealth effects]) is a whole different ballgame. You can’t QT or hike your way out of it easily...
...and if you can’t, credibility gets damaged, a decline of the U.S. dollar is inevitable, and shorting U.S. rates, the U.S. dollar, and some FX pegs make logical sense.

        

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Apocalypse Now
World Of Finance


The Violence of the Sanction warfare imposed on Russia has been noteworthy and I reference the below captioned @NewYorker article
The @POTUS Official Who Pierced Putin’s “Sanction-Proof” Economy
https://bit.ly/3JJo7Ob
Singh said, “We’ve made him stare into an economic abyss. But he could choose to pull back.”
The markets are where these two systems touch—the supply of buckwheat, the joint energy ventures, the price of the ruble—and within this arena the sanctions were a demonstration that Washington still had levers to pull. “You know, we can play chess, too,” Singh said. “It was important for us to show that the fortress could come crumbling down.”
The Sanction warfare program is a reiteration of the @BarackObama 2014 version but then Oil was dropped to $20.00 and today its trading at $97.56 a barrel. This is the first flaw in the sanction warfare effort.
‘’You can print money, but not oil to heat or wheat to eat’’ wrote @CreditSuisse’s Zoltan Pozsar.
Russia essentially gave the $ and the Euro the very same exorbitant privilege that King Abdul Aziz Ibn Saud of Saudi Arabia gave President Franklin D Roosevelt aboard the USS Quincy in Great Bitter Lake in February 14, 1945 when the petro dollar economy was symbolically born.
By insisting payments are made in Russian Rubles for Russian commodities Vladimir Putin has withdrawn that exorbitant privilege.
The Russian Ruble rally is real and has much further to go.
if you believe that the West can craft sanctions that maximize pain for Russia while minimizing financial stability risks and price stability risks in the West, you could also believe in unicorns. #Zoltan
The democratization of authority spurred by the digital revolution has flattened cognitive hierarchies along with other hierarchies, and political decision-making is now driven by often weaponized babble. @FukuyamaFrancis
It’s a seismic geoeconomic development whose consequences will hurt the value of $ and the Euro and burst the G7 Bond Bubble.
G7 bonds which have been on the slide are poised at the very precipice and I expect a further and exponential downside move.

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Fitch: Core inflation slowed on a month-on-month basis to 0.3% in March...But Core goods prices ex-autos continued to rise quickly...Rental inflation jumped to 5% y/y, the highest since April 1991:
World Of Finance

Fitch: "Core inflation slowed on a month-on-month basis to 0.3% in March...But nearly all of this slowdown was explained by the fall in auto prices. Core goods prices ex-autos continued to rise quickly...Rental inflation jumped to 5% y/y, the highest since April 1991:"

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Average weekly earnings on an inflation-adjusted pace are declining by the most in data going back to 2006, highlighting how far wages are lagging behind consumer price increases @lisaabramowicz1
World Of Finance


14-FEB-2022 :: the greatest macro trading opportunity to reset shorts in the US 10 and Ultra Bond. We can look across all G7 Bonds because this is a Super Bubble that is going to burst big.



Friday's action and next immediate sessions might afford us the greatest macro trading opportunity to reset shorts in the US 10 and Ultra Bond. We can look across all G7 Bonds because this is a Super Bubble that is going to burst big. There is no way out now.


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The Music has been playing for Eternity and its about to stop
World Of Finance

Love Fellini. So brave, with that whiff of insanity. @DiAmatoStyle Federico Fellini's 8 1/2 @tcm
https://twitter.com/tcm/status/1232079264385773570?s=20

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Nulla è più onesto di un sogno Federico Fellini Napoli 1956, Thomas Hoepker @EnzaAltieri
Misc.


Nothing is more honest than a dream Federico Fellini Naples 1956, Thomas Hoepker



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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
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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Looks to me Russian attacks in Ukraine will reconfigure with focus not only on Donbas but consolidation of grip on entire Black Sea coast @Halsrethink
Law & Politics


Looks to me Russian attacks in Ukraine will reconfigure with focus not only on Donbas but consolidation of grip on entire Black Sea coast to enable Russian land access to Transniestria and Moldova.

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Apocalypse Now April 10, 2022 Aly Khan Satchu
Law & Politics


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.
Lets start with Ukraine where Володимир Зеленський @ZelenskyyUa is presented as a brave Freedom Fighter facing down a revanchist Vladimir Putin. 

Any argument that seeks to understand Putin’s and Russia’s concerns is shouted down in a barrage of ‘’You are with us or against us’’ 

There is a strong argument that the US actually set a Trap for Russia in Ukraine just as Jimmy Carter’s former national security adviser Zbigniew Brzezinski admitted that the C.I.A. set a trap four decades ago for Moscow by arming mujahiddin to fight the Soviet-backed government in Afghanistan and bring down the Soviet government.
He said:
“According to the official version of history, CIA aid to the mujahideen began during 1980, that is to say, after the Soviet army invaded Afghanistan on December 24, 1979. But the reality is completely otherwise: Indeed, it was July 3, 1979 that President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. And that very day, I wrote a note to the president in which I explained to him that in my opinion this aid was going to induce a Soviet military intervention.
He then explained that the reason for the trap was to bring down the Soviet Union. Brzezinski said:
“That secret operation was an excellent idea. It had the effect of drawing the Russians into the Afghan trap and you want me to regret it? 

The day that the Soviets officially crossed the border, I wrote to President Carter, essentially: ‘We now have the opportunity of giving to the USSR its Vietnam war.’ 

Indeed, for almost 10 years, Moscow had to carry on a war that was unsustainable for the regime, a conflict that bought about the demoralization and finally the breakup of the Soviet empire.”
Secretary Blinken has refused to meet Lavrov, Biden calls for ‘’Regime Change’’ on a daily basis and ‘’defensive’’ weapons are being shoveled into Ukraine at an unprecedented speed. 

There is clearly zero intention to resolve this matter anywhere other than on the battlefield and through an insurgency which will bleed Russia to death and the Ukrainians as well.
Xi Jinping rather pithily pronounced
He who tied the bell to the tiger must take it off
It is also clear that Russia took a military ‘’lite’’ approach. This is evidenced by a comparison between the casualty rate over the period so far compared with for example the Iraq war. 

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

The Violence of the Sanction warfare imposed on Russia has been noteworthy and I reference the below captioned @NewYorker article
The @POTUS Official Who Pierced Putin’s “Sanction-Proof” Economy
https://bit.ly/3JJo7Ob
Singh said, “We’ve made him stare into an economic abyss. But he could choose to pull back.”
The markets are where these two systems touch—the supply of buckwheat, the joint energy ventures, the price of the ruble—and within this arena the sanctions were a demonstration that Washington still had levers to pull.

 “You know, we can play chess, too,” Singh said. “It was important for us to show that the fortress could come crumbling down.”
The Sanction warfare program is a reiteration of the @BarackObama 2014 version but then Oil was dropped to $20.00 and today its trading at $97.56 a barrel. This is the first flaw in the sanction warfare effort.
‘’You can print money, but not oil to heat or wheat to eat’’ wrote @CreditSuisse’s Zoltan Pozsar.
Russia essentially gave the $ and the Euro the very same exorbitant privilege that King Abdul Aziz Ibn Saud of Saudi Arabia gave President Franklin D Roosevelt aboard the USS Quincy in Great Bitter Lake in February 14, 1945 when the petro dollar economy was symbolically born.

By insisting payments are made in Russian Rubles for Russian commodities Vladimir Putin has withdrawn that exorbitant privilege.
The Russian Ruble rally is real and has much further to go.

if you believe that the West can craft sanctions that maximize pain for Russia while minimizing financial stability risks and price stability risks in the West, you could also believe in unicorns. #Zoltan
The democratization of authority spurred by the digital revolution has flattened cognitive hierarchies along with other hierarchies, and political decision-making is now driven by often weaponized babble. @FukuyamaFrancis
It’s a seismic geoeconomic development whose consequences will hurt the value of $ and the Euro and burst the G7 Bond Bubble.
G7 bonds which have been on the slide are poised at the very precipice and I expect a further and exponential downside move.
a new market narrative. @TaviCosta
I think the optimal short is the French OAT because here we will have an imminent Marine Le Pen victory at the Polls.

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

Food prices are soaring at a record pace, rising another 13% in March. @lisaabramowicz1
“But it is a curve each of them feels, unmistakably. It is the parabola They must have guessed, once or twice -guessed and refused to believe -that everything, always, collectively, had been moving toward that purified shape latent in the sky, that shape of no surprise, no second chance, no return.’’
Gravity’s Rainbow is a 1973 novel by Thomas Pynchon
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
http://bit.ly/2Lqv1uk
The consequences for global stability are now unfathomable.

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Stunned by a longtime French friend on the phone today when he said LePen likely to win. @Halsrethink
Law & Politics



Stunned by a longtime French friend on the phone today when he said LePen likely to win. Macron will keep most of those who voted for him in 1st round, but many others will sit out 2nd round or go for "anyone but Macron". A yellow vest shock?

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5 DEC 16 :: One common theme is a parabolic Putin rebound. At this moment, President Putin has Fortress Europe surrounded
Law & Politics


At this moment, President Putin has Fortress Europe surrounded. The intellectual father of the new Zeitgeist that propelled Brexit, Le Pen, the Five Star movement in Italy, Gert Wilders in the Netherlands, is Vladimir Putin.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.08355 
Dollar Index 100.356
Japan Yen 126.0670 
Swiss Franc 0.93210 
Pound 1.300415 
Aussie 0.743545
India Rupee 76.1635 
South Korea Won 1226.750 
Brazil Real 4.6750189 
Egypt Pound 18.51960 
South Africa Rand 14.457670 

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Apocalypse Now April 10, 2022 Aly Khan Satchu
Commodities


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

Food prices are soaring at a record pace, rising another 13% in March. @lisaabramowicz1
“But it is a curve each of them feels, unmistakably. It is the parabola They must have guessed, once or twice -guessed and refused to believe -that everything, always, collectively, had been moving toward that purified shape latent in the sky, that shape of no surprise, no second chance, no return.’’
Gravity’s Rainbow is a 1973 novel by Thomas Pynchon
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
http://bit.ly/2Lqv1uk
The consequences for global stability are now unfathomable.

read more






Sri Lanka announces default on all external debt, reports AFP. @bloombergquint
Emerging Markets


Conclusions

Its a Precursor and a Harbinger for all the other Quaalude Poppers 

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Sri Lanka Will Default on Foreign Debt to Save Cash for Food @bpolitics @YahooFinance
Emerging Markets


(Bloomberg) -- Sri Lanka warned of an unprecedented default and halted payments on foreign debt, an extraordinary step taken to preserve its dwindling dollar stockpile for essential food and fuel imports.
All outstanding payments to bond holders, bilateral creditors and institutional lenders will be suspended until a debt restructure, the finance ministry said in a statement Tuesday. 

The newly appointed central bank governor, Nandalal Weerasinghe, said in a briefing that authorities are seeking to negotiate with creditors and warning of a possible default.
The measures are “a last resort in order to prevent a further deterioration of the Republic’s financial position,” the finance ministry said. 

“It is now apparent that any further delay risks inflicting permanent damage on Sri Lanka’s economy and causing potentially irreversible prejudice to the holders of the country’s external public debts.”
The announcement follows mounting calls for President Gotabaya Rajapaksa and his brother, Prime Minister Mahinda Rajapaksa, to resign. 

They have so far been defiant despite citizen protests against inflation that’s running at 20% and daily electricity cuts of as long as 13 hours. 

Rajapaksa’s party has lost its majority in parliament and bailout talks with the International Monetary Fund are set to be further delayed.
The government will expedite talks with the IMF, the finance ministry said Tuesday, adding that it wants to avoid a hard default. Rajapaksa’s administration is also seeking aid from nations including India and China, which is one of its biggest creditors.
“China has been doing its utmost to provide assistance to the socioeconomic development of Sri Lanka, and will continue to do so going forward,” a Foreign Ministry representative said at a briefing Tuesday.
Sri Lanka’s dollar bonds due July 2022 fell 1.8 cents on the dollar on Tuesday to a fresh record low 46.07 cents

The rupee lost 0.5%. The nation’s stock market is shut this week for public holidays after trading for shortened hours due to the daily power cuts.
“The market was expecting this default to come,” said Carl Wong, head of fixed income at Avenue Asset Management, which no longer holds Sri Lankan bonds. 

“Now we have to see how the new government handles the onshore chaos while talking to IMF.”
Sri Lanka’s foreign-exchange reserves slumped 16% to $1.94 billion last month. 

The government was due to make a $36 million interest payment on a 2023 dollar bond April 18, as well as $42.2 million on a 2028 note, Bloomberg-compiled data show. 

A $1 billion sovereign bond was maturing July 25.
The economic crisis has evolved into a political stalemate, potentially complicating efforts to negotiate aid. 

Mahinda Rajapaksa in a speech Monday night called on citizens to be patient as price surges and shortages worsen, while touting his family’s role in ending a decades-long civil war back in 2009. His brother, the president, has said he won’t resign under any circumstances.

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


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

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

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

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

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

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

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

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

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


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

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

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

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Paul Virilio Speed and Politics
Emerging Markets


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

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Peru’s foreign debt has slumped to record lows as a wave of social unrest amid quickening inflation upends a market once famed for its resilience to near-perpetual political crisis.
Emerging Markets


Government bonds due in 2031 tumbled 6 cents in the past week to trade at an all-time low of 88.5 cents on the dollar, pushing yields up across Peru’s debt curve. 

nation’s 100-year bond has fallen to a record 68 cents while the sol is down about 2% in the past five days. 

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South Africa raised $3 billion in a Eurobond sale, the third African nation to tap the market since the start of Russia’s war with Ukraine. @markets
Africa


In its first foray into the market since the start of the coronavirus pandemic, the country sold $1.4 billion of 10-year debt at 5.875% and $1.6 billion of 30-year securities at 7.3%. 

Both tightened from initial guidance of 6% and 7.5% respectively, though investors demanded a premium over existing debt.

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We're pushing for a better life for each and every Kenyan right across the nation. Better days are coming. #Inawezekana @RailaOdinga
Africa


Our people must lead more comfortable lives and not ever have to go to bed hungry, we'll get this done! 

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