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Satchu's Rich Wrap-Up
Tuesday 07th of June 2022

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Its a Wizard of Oz moment This is ‘’Voodoo Economics’’
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%

The worry is if Powell blinks 

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i had not watched Harold Pinter for quite a while

always claustrophobic, violently intense, cryptic and outstanding 

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The Caretaker (1963)

The Master of “The Theatre of Menace,” Harold Pinter

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“Only one thing remained reachable, close and secure amid all losses: language,” Celan once said @NewYorker


I heard him,
he was washing the world,
unseen, nightlong,

One and infinite,
they I’d.

Light was. Salvation.

“Deathfugue,” with its unsettling, incantatory depiction of a concentration camp, was first published in 1947

The camp in the poem, left nameless, stands for all the camps, the prisoners’ suffering depicted through the unforgettable image of “black milk”:

Black milk of morning we drink you evenings
we drink you at noon and mornings we drink you at night
we drink and we drink
we dig a grave in the air there one lies at ease

In phrases that circle back around in fugue-like patterns, the poem tells of a commandant who orders the prisoners to work as the camp orchestra plays: 

“He calls out play death more sweetly death is a master from Deutschland / he calls scrape those fiddles more darkly then as smoke you’ll rise in the air.” 

The only people named are Margarete—the commandant’s beloved, but also the heroine of Goethe’s “Faust”—and Shulamit, a figure in the poem whose name stems from the Song of Songs and whose “ashen hair” contrasts with Margarete’s golden tresses. 

The only other proper noun is “Deutschland,” which many translators, Joris included, have chosen to leave in the original. 

“Only in the mother tongue can one speak one’s own truth,” he told a friend who asked how he could still write in German after the war. “In a foreign tongue the poet lies.”

Many of the love poems contain images of violence, death, or betrayal. 

“In the springs of your eyes / a hanged man strangles the rope,” he writes in “Praise of Distance.” 

The metaphor in “Nightbeam” is equally macabre: “The hair of my evening beloved burned most brightly: / to her I sent the coffin made of the lightest wood.” 

In another, he addresses her as “reaperess.” Bachmann answered some of the lines with echoes in a number of her most important poems; after Celan’s suicide, she incorporated others into her novel “Malina,” perhaps to memorialize their love.

“We / just don’t know, you know, / we / just don’t know, / what / counts.”

 The poem’s image of humanity as a flower echoes the blood of “Tenebrae”: “the corona red / from the scarlet-word, that we sang / above, O above / the thorn.”

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

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

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Dust Off That Dirty Word Detente and Engage With China @opinion @nfergus
Law & Politics

Is detente still a dirty word? I hope not. We may soon need it.

Back in the 1970s, that little French duosyllable was almost synonymous with “Kissinger.” 

Despite turning 99 last month, the former secretary of state has not lost his ability to infuriate people on both the right and the left — 

witness the reaction to his suggestion at the World Economic Forum that “the dividing line [between Russia and Ukraine] should return to the status quo ante” because “pursuing the war beyond that point could turn it into a war not about the freedom of Ukraine … but into a war against Russia itself.”

There is a lesson here.

In purely foreign-policy terms, the grand strategy of Joe Biden’s administration is open to criticism. 

“What began as an effort to make sure Russia did not have an easy victory over Ukraine,” wrote David Sanger and his New York Times colleagues on May 26, “shifted as soon as the Russian military began to make error after error, failing to take Kyiv. The administration now sees a chance to punish Russian aggression, weaken Mr. Putin, shore up NATO and the trans-Atlantic alliance and send a message to China, too.” 

That is a well-grounded assessment, in line with numerous statements by President Biden, Defense Secretary Lloyd Austin, the US ambassador to NATO, Julianne Smith, and numerous other American officials.

But what exactly does Russian “strategic failure” look like? 

And how much assistance will the United States have to give Ukraine to achieve it? 

On May 25, Newsweek alluded to “a report that stated the U.S. was preparing to target the Russian fleet to free up paths for Ukraine to export grain.” 

That was almost certainly an incorrect inference from a tweet by a Ukrainian government adviser.

Still, some influential figures in and around Washington seem eager to ramp up American support for Ukraine in remarkable ways. 

Last month, my old friend James Stavridis wrote that “an escort system for Ukrainian (and other national) merchant ships that want to go in and out of Odesa” was “worth considering” by the US and its NATO allies. 

The Black Sea should become “the next major front in the Ukraine war.”

Another commentator I respect, Eliot Cohen, wrote on May 11 that Ukraine was “winning the war” and that Kyiv now had the option of not merely restoring the pre-Feb. 24 line of contact, but “recovering portions of Donbas lost in the 2010s, or recovering everything, including Crimea, that was part of Ukraine in 2013.” 

The soon-to-be-victorious Ukrainians, he added, would also have to decide “whether to seek reparations and reconstruction aid, and whether freedom to join the European Union and the possibility of joining NATO have to be part of the eventual peace settlement.”

To his credit, Biden dialed back his administration’s goals in a measured op-ed for the New York Times on May 31. “We do not seek a war between NATO and Russia. … [T]he United States will not try to bring about [Putin’s] ouster in Moscow. So long as the United States or our allies are not attacked, we will not be directly engaged in this conflict. We are not encouraging or enabling Ukraine to strike beyond its borders. We do not want to prolong the war just to inflict pain on Russia.” But the reality is that the administration has become the arsenal of Ukraine’s democracy, not the broker of a peace that it is leaving to Ukraine to define.

Three of Europe’s most important leaders — French President Emmanuel Macron, German Chancellor Olaf Scholz and Italian Prime Minister Mario Draghi — are distinctly uneasy about this. 

They would much prefer to see an imminent ceasefire and the start of peace negotiations. 

But to speak of compromise in the current febrile atmosphere of Ukrainophilia is to invite charges of appeasement. 

Ukrainian President Volodymyr Zelenskiy reacted angrily to Kissinger’s argument for a peace based on the status quo ante. “I get the sense that instead of the year 2022,” Zelenskiy snapped, “Mr. Kissinger has 1938 on his calendar.”

Yet Zelenskiy himself has said repeatedly — most recently in an interview on May 21 — that he would regard as “victory” a return to the territorial position on Feb. 23, which was what Kissinger plainly meant by the status quo ante. 

That would mean Ukraine taking back Kherson and the ravaged city of Mariupol. It would mean pushing Russia out of its “land bridge” from Crimea to Russia. And it would mean completely reversing all the gains the Russians have made in the eastern Donbas region.

Zelenskiy knows, and so should we, what a daunting task that represents. In a speech last week, he acknowledged that Russia has seized around a fifth of Ukraine’s territory. 

In an interview with Newsmax, he admitted that Ukraine was losing “60 to 100 soldiers per day as killed in action and something around 500 people as wounded in action.”

Even with an open-ended commitment from the US to supply them with weapons, do the Ukrainians have the trained manpower to drive Russia out of all the territory it has occupied since Feb. 24? 

And if this brutal war continues through the summer, and is still being fought as the year wanes and the temperatures begin to fall in Europe, what then? 

Vladimir Putin is surely counting on the usual divisions within the Western alliance and within American politics to resurface sooner or later.

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The Charge of the Light Brigade
Law & Politics

Theirs not to reason why, 

Theirs but to do and die

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Dust Off That Dirty Word Detente and Engage With China @opinion @nfergus [continued]
Law & Politics

The most remarkable thing about the foreign policy of the Biden administration is that helping Ukraine defeat Russia is not even its top priority. 

“Even as President Putin’s war continues,” declared Secretary of State Antony Blinken in a speech at George Washington University on May 26, “we will remain focused on the most serious long-term challenge to the international order — and that’s posed by the People’s Republic of China.”

Blinken’s speech repays close study. About one-tenth of it was conciliatory. “We are not looking for conflict or a new Cold War,” he declared. “We do not seek to transform China’s political system. … We will engage constructively with China wherever we can.”

But the rest was as hawkish a speech on China as the one delivered by then Vice President Mike Pence in October 2018, which for me was the moment Cold War II got going in earnest. In Blinken’s words:

Under President Xi, the ruling Chinese Communist Party has become more repressive at home and more aggressive abroad. We see that in how Beijing has perfected mass surveillance within China and exported that technology to more than 80 countries; how its advancing unlawful maritime claims in the South China Sea, undermining peace and security, freedom of navigation, and commerce; how it’s circumventing or breaking trade rules … and how it purports to champion sovereignty and territorial integrity while standing with governments that brazenly violate them.

Blinken spelled out how the US intends to “shape the strategic environment around Beijing,” citing the new Indo-Pacific Economic Framework for Prosperity, announced by Biden on his recent Asia tour, and the Quad of the US, Australia, India and Japan, with its new Indo-Pacific Partnership for Maritime Domain Awareness, not forgetting AUKUS, the US deal on nuclear submarines with Australia and the UK.

But the most startling lines in Blinken’s speech were the ones on “the genocide and crimes against humanity happening in the Xinjiang region”; on US support for “Tibet, where the authorities continue to wage a brutal campaign against Tibetans and their culture, language, and religious traditions”; on Hong Kong, “where the Chinese Communist Party has imposed harsh anti-democratic measures under the guise of national security”; on “Beijing’s aggressive and unlawful activities in the South and East China Seas”; and — the coup de grace from a Chinese vantage point — on “Beijing’s growing coercion” and “increasingly provocative rhetoric and activity” toward Taiwan.

The response of the Chinese Foreign Ministry to this confrontational speech was, I thought, surprisingly restrained.

Taiwan is, of course, the key issue. As if to confirm Xi Jinping’s darkest suspicions, Biden went off script again at a press conference in Tokyo with Japanese Prime Minister Fumio Kishida on May 23. A reporter asked if the United States would defend Taiwan in the event of a Chinese attack. “Yes,” the president answered. “That’s the commitment we made. We agree with a one-China policy. We've signed on to it and all the intended agreements made from there. But the idea that, that it (Taiwan) can be taken by force, just taken by force, is just not, is just not appropriate.”

Almost immediately, US officials, led by Defense Secretary Lloyd Austin, walked this latest gaffe back. But when is a gaffe not a gaffe? When the president of the United States says it three times. By my count, that is the number of occasions Biden has pledged to come to Taiwan’s defense since August last year.

What are the practical implications of ditching the half-century-old policy of “strategic ambiguity” on Taiwan, which dates to Kissinger’s compromise with Zhou Enlai in 1972? 

In his book “The Strategy of Denial: American Defense in an Age of Great Power Conflict,” Elbridge Colby argues that the US can and must prioritize the defense of Taiwan. 

Colby was deputy assistant secretary of defense for strategy and force development under Donald Trump. 

His book has been a hit with China hawks precisely because it gets specific about how the US could cope with a Chinese attempt to seize Taiwan.

“Defending forces operating from a distributed, resilient force posture and across all the war-fighting domains,” Colby writes, “might use a variety of methods to blunt the Chinese invasion in the air and seas surrounding Taiwan.” 

The US and its allies might “seek to disable or destroy Chinese transport ships and aircraft before they left Chinese ports or airstrips. The defenders might also try to obstruct key ports; neutralize key elements of Chinese command and control … And once Chinese forces entered the Strait, US and defending forces could use a variety of methods to disable or destroy Chinese transport ships and aircraft.”

“There’s a very real chance of a major war with China in the coming years,” Colby tweeted last month. “Everyone with influence should be asking themselves: Did I do *everything* I could to deter it? And make it less costly for Americans if it does happen? … China has the will, the way, and increasingly a sense of urgency to take us on over stakes that are genuinely decisive for us (and the world, for that matter).”

Yet it is far from clear, as retired Taiwanese Admiral Lee Hsi-Min has argued, that Taiwan would be capable of putting up as tenacious a fight as Ukraine has against Russia in the event of an invasion by the People’s Liberation Army. 

Moreover, in all recent Pentagon war games on Taiwan, the US team consistently loses to the Chinese team. 

To quote Graham Allison and Jonah Glick-Unterman, my colleagues at Harvard’s Belfer Center, “If in the near future there is a ‘limited war’ over Taiwan or along China’s periphery, the US would likely lose — or have to choose between losing and stepping up the escalation ladder to a wider war.”

Meanwhile, according to the head of the US Strategic Command, Admiral Charles Richard, “We are facing a crisis deterrence dynamic right now that we have only seen a few times in our nation’s history. The war in Ukraine and China’s nuclear trajectory — their strategic breakout —demonstrates that we have a deterrence and assurance gap based on the threat of limited nuclear employment.”

A month ago, Richard told the Senate’s strategic forces panel that China is “watching the war in Ukraine closely and will likely use nuclear coercion to their advantage in the future. Their intent is to achieve the military capability to reunify Taiwan by 2027 if not sooner.” 

China has doubled its nuclear stockpile within two years, increasing the number if its solid-fueled intercontinental ballistic missile silos from zero to at least 360.

For its part, the Biden administration is proposing to cancel the sea-launched cruise missile nuclear development program, as part of a package of military cuts that are projected by the Congressional Budget Office to reduce the defense budget as a share of gross domestic product from 3.3% in 2021 to 2.7% in 2032.

If all this adds up to a coherent grand strategy, then I’m Sun Tzu.

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Law & Politics

1-4-2-1. The first 1 refers to defending what has since come to be called the homeland. 
The 4 refers to deterring hostilities in four key regions of the world. 
The 2 means the U.S. armed forces must have the strength to win swiftly in two near-simultaneous conflicts in those regions. 
The final 1 means that we must win one of those conflicts “decisively,” toppling the enemy’s regime.

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Political decision-making is now driven by often weaponized babble.
Law & Politics

At a time when what is required is agile multi disciplinary thinking we have ''weaponized babble''

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Dust Off That Dirty Word Detente and Engage With China further
Law & Politics

The truly amazing thing is that Biden’s foreign policy not only fails the basic tests of strategic coherence and credibility. It also seems exceptionally poorly designed to serve the Democrats’ domestic interests.

The Biden administration’s number one problem is inflation. The polling is clear on that, and we are five months away from midterms that are set to hand both chambers of Congress back to the Republicans. 

(The public is interested in only one thing more than inflation, and that is Depp v. Heard.) 

The Fed has the job of bringing inflation back down, but most monetary economists know that it will be very hard to do this through raising interest rates and shrinking the balance sheet without causing a recession at some point.

Currently, however, the administration's foreign policy isn’t helping fight inflation — quite the reverse. 

Large-scale support for Ukraine is not only expensive (the total thus far is $53 billion, according to economist Larry Lindsey). It also restricts supply via sanctions on Russia, and further restricts supply by prolonging the war, cutting off Ukrainian exports of wheat and other goods

Continuing Trump’s trade war and ramping up the support for Taiwan add a further inflationary pressure by keeping Chinese imports more expensive than they otherwise would be, and also encourage the process of “decoupling” China’s economy from ours.

Remember the old days, when foreign policy was supposed to serve a domestic political purpose? That was the era that produced the 1997 movie “Wag the Dog,” in which Dustin Hoffman and Robert De Niro fake a war in Albania to salvage a presidential re-election campaign. 

Well, Joe Biden is a very, very long way from wagging the dog. We seem to confront here a classic case of what the old German historians called the “primacy of foreign policy.” Despite the likely political cost to the president’s party, the dog is wagging the tail. 

If a competent Democratic strategist were to rethink Biden's foreign policy, what might she come up with? Well, how about detente 2.0 (or deuxieme, if you prefer)? If — as I’ve argued for the past four years — we’re already in Cold War II, then Ukraine is Korea. 

It’s the early-innings phase of the superpower struggle, the time when the US still has military superiority but can’t help getting dragged into peripheral conflicts. 

We now clearly have the option to proceed from the 1950s to the 1960s, with the Taiwan Semiconductor Crisis substituting for the Cuban Missile Crisis.

Alternatively — and a lot less terrifyingly — we could take a historical shortcut and proceed straight to the 1970s.

Detente has a lousy reputation, as we have seen. Neoconservatives continue to argue that it was a misconceived strategy that mainly benefited the Soviet Union and that Reagan was right to ditch it in favor of a more confrontational strategy.

But this is misleading. First, Reagan ended up doing his own version of detente with Mikhail Gorbachev — involving more radical disarmament than Kissinger himself thought prudent! 

Second, detente in the 1970s made a good deal of sense at a time when the US was struggling with inflation, deep domestic division, and a war that grew steadily less popular the longer it lasted.

If that sounds familiar, then consider how detente might be helping Joe Biden today if, instead of talking tough on Taiwan in Tokyo, he had taken a trip to Beijing — fittingly, on the 50th anniversary of Nixon's trip there in 1972. He could have:

1. Ended the trade war with China.
2. Begun the process of ending the war in Ukraine with a little Chinese pressure on Putin.
3. Applied joint US-China pressure on the Arab oil producers to step up production in a serious way (last week’s announcement was unserious), instead of letting them play Washington and Beijing off against one another.

Would Xi Jinping take detente if Biden offered it? Like Mao in 1972, the Chinese leader is in enough of a mess himself that he might well. 

Zero Covid has become Xi’s version of the Cultural Revolution, a policy that is ultimately destabilizing China, whatever the original intent was. As for China’s international position, the decision to back Putin has surely weakened it.

Last week, for example, China’s Foreign Minister Wang Yi signally failed to persuade 10 countries in the Pacific to sign a regional agreement on trade and security. 

Mao’s problem in 1972 was that he had quarreled bitterly with Moscow. Half a century later, as Kissinger pointed out at Davos, Xi Jinping’s problem is that he is too close to Moscow for comfort.

Do I think detente stands a chance of being revived? No, I don’t, because I think the Biden administration is deeply committed to the containment of China as the keystone of its foreign policy. 

But it is worth remembering that their hawkishness had its origins in domestic politics. This time two years ago, Biden’s handlers decided he had to be tougher on China than Trump in order to win the presidency.

 Well, maybe they were right about that as a matter of electoral tactics. But does the same logic apply today, with a midterm shellacking fast approaching? I think not.

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The @POTUS Official Who Pierced Putin’s “Sanction-Proof” Economy @NewYorker
Law & Politics

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.”

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Its a Wizard of Oz moment This is ‘’Voodoo Economics’’
Law & Politics

Its a Wizard of Oz moment  This is ‘’Voodoo Economics’’ 

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

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%

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The Fed has already lost credibility for its misread and late pivot on inflation. @BillAckman
World Of Finance

The Fed has already lost credibility for its misread and late pivot on inflation. There is no economic precedent for

[There is no economic precedent for] 200 to 300 bps of fed funds addressing 8% inflation with employment at 3.6%. @BillAckman

200 to 300 bps of fed funds addressing 8% inflation with employment at 3.6%. Current Fed policy and guidance are setting us up for double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates. That is why I believe there are no

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US army war college quarterly 1997. The US officer charged with defining the future of warfare, wrote One of the defining bifurcations of the future will be the conflict between information masters and information victims
Law & Politics

This information warfare will not be couched in the rationale of geopolitics, the author suggests, but will be “spawned” - like any Hollywood drama - out of raw emotions.

“Hatred, jealousy, and greed - emotions, rather than strategy - will set the terms of [information warfare] struggles”.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.067570 
Dollar Index 102.714
Japan Yen 132.8655
Swiss Franc 0.97237
Pound 1.246905 
Aussie 0.718110
India Rupee 77.7001 
South Korea Won 1259.325 
Brazil Real 4.7956000 
Egypt Pound 18.634460 
South Africa Rand 15.517800 

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April 10, 2022 “But it is a curve each of them feels, unmistakably. It is the parabola’’
Food, Climate & Agriculture

“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.’’

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May 29 2022 It is also clear that Putin is seeking a quid pro quo between easing the Food situation with a removal of sanctions.
Food, Climate & Agriculture

The Question is whether there is an appetite for a quid pro quo because if there is not, then we are going to see another serious spike.

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Between Jan 1 2020 and Dec 31 2021 our model estimates the number of SARS-CoV-2 infections in the African region to be 505·6 million (95% CI 476·0–536·2) inferring that only 1·4% (one in 71) of SARS-CoV-2 infections in the region were reported.

Deaths are estimated at 439 500 (95% CI 344 374–574 785), with 35·3% (one in three) of these reported as COVID-19-related deaths. 

Seroprevalence studies suggest that the reported COVID-19 infections and deaths represent a small fraction of the actual burden of COVID-19 in the WHO African region.

As of Dec 31, 2021, there were 3179 seroprevalence studies across 134 countries and territories tracked

Among the 47 countries of the WHO African region, 31 had seroprevalence studies, of which 11 were nationally representative and five—in Ethiopia, Kenya, Senegal, Sierra Leone, and South Africa—were at low risk of bias, as categorised in the SeroTracker.

Looking at these countries, their reported infections at the time of the seroprevalence studies represented a small proportion (one in 50 to one in 200) of their actual burden of COVID-19.

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IHS sketches out development plans for Africa’s Atlantic discoveries

“There is a unique opportunity to invest in new projects, given the high prices, which we expect to remain high for a few years,” IHS technical researcher for Africa Ismini Katsimpardi said. “Projects that were not viable one or two years ago can now go ahead.”

Katsimpardi talked through discoveries in Cote d’Ivoire, Namibia and South Africa.
Eni announced its Baleine discovery, which holds an expected 2 billion barrels of oil in place, in Cote d’Ivoire in September 2021. 

The Italian company is drilling an appraisal well in a nearby block, which will provide more insight into Baleine’s outlook.
“Eni is fast tracking development,” Katsimpardi said.
The company will likely process gas onshore for power generation and domestic use. 

This will require the construction of a pipeline, leading the analyst to predict that for the first two or three years Eni will reinject the gas.
She put the total capital expenditure for the Baleine project at $5 billion, with a “healthy breakeven” at $40 per barrel.
It will also be significant for the local government. With a state take of 60%, IHS expects Cote d’Ivoire to earn $1.5bn per year once in full production.
In February this year, TotalEnergies and Shell announced the Venus and Graff discoveries offshore Namibia.
There remains a “fair amount of uncertainty” over the Venus discovery, Katsimpardi said. 

Initial reports put the discovery size at 1.5bn barrels, but some reports have put this substantially higher, even as high as 10bn barrels. 

Appraisal this year should shed more light on the find.
IHS expects Total to develop the project with two FPSOs, saying the capital expenditure required would be “significant”. However, the internal rate of return (IRR) would be 30-35%, the analyst said.
Shell would likely develop its Graff find also with an FPSO. Katsimpardi put this project’s potential IRR at 37-40%.
Given the companies’ net zero plans, routine flaring would be impossible. Furthermore, “flared gas is throwing away value,” said Katsimpardi.
Similar to the Baleine discovery, initially the operators might reinject gas but ultimately it would be produced, potentially via a shared floating LNG (FLNG) unit or to onshore.
Success would be transformative for Namibia. “These two developments would have an expected peak production of more than 500,000 barrels per day,” she said.

 “Namibia could be in the top six or seven producers in Africa.” IHS shows the possibility for Namibia to overtake Angola after 2030.
The total capex on the two projects would be more than $30bn. By 2030, Namibia could be receiving $6bn from the two projects.
South Africa
Total’s Brulpadda and Luiperd discoveries should not be overlooked. IHS predicted that Luiperd would be developed in three phases. 

The first would involve just two or three wells and be tied back to the FA platform, carrying gas onshore to the Mossel Bay gas-to-liquid (GTL) plant.
Such an approach would “minimise risk and capex spend”, Katsimpardi said. The project would have a breakeven of less than $2 per 1,000 cubic feet.
By the mid-2030s, South Africa would be earning $700 million from this project, she said. “Development of the Brulpadda discovery would take this higher, although it would need more capex on additional gas infrastructure in the area.”
The opportunities of the finds are significant. For the companies involved, the producer countries and regions such as Europe hoping to secure new supplies.
However, there is always the risk of changing contract terms. “South Africa and Namibia are offering generous terms,” IHS research and analysis associate director Roderick Bruce said.
As countries start to see production, they are likely to change terms. “Some tighten too far, like Senegal and Tanzania, and as a result do not see much success in attracting new investments.”

Bruce called for countries to find a balance, to maximise revenues for governments and investors. While the countries of South Africa and Namibia may be appealing now, there is no certainty this will continue forever.
“Aboveground risks are never static,” Bruce said.

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Kenya Economic Update (KEU) June 22 Edition No. 25 #KenyaEconomicUpdate @WorldBankKenya @Hansen_WB
Kenyan Economy

Kenya’s economy has staged a remarkable recovery from the worst economic effects of the pandemic. 

Real GDP increased by 7.5 percent in 2021, higher than the estimated growth in Sub-Saharan Africa of 4 percent. 

This growth was driven by the recovery of the services sector and expansion in industrial output. 

By contrast, the agriculture sector’s output contracted by 0.2 percent in 2021, affected by drought conditions in the arid and semi-arid lands (ASAL).
Kenya’s economic performance remained strong in the early months of 2022 but external challenges have mounted. 

Kenya’s exposure to the war in Ukraine through direct trade linkages is moderate, with Russia and Ukraine accounting for only 2.1 percent of total goods trade between 2015 and 2020. 

Similarly, tourists from Ukraine and Russia do not account for a significant share of Kenya’s tourism market. 

However, the economy is vulnerable to the commodity price shocks resulting from the war, particularly through fuel, fertilizer, wheat and other food imports. 

Global financial conditions have also tightened sharply, increasing external financing costs.

A strong recovery in revenues has supported fiscal performance but this is now being countered by the cost of subsidizing fuel

Revenue in the current fiscal year through Q3 remained on target and performed above the previous year’s outturn (12.3 percent of GDP in Q3 2021/22 against a target of 11.2 percent of GDP in Q3 2020/21). 

As a result, the fiscal deficit in Q3 FY2021/22 shrank to 3.9 percent of full-year GDP from 4.4 percent a year earlier. 

However, the limited passthrough of higher international oil prices to consumers is generating fiscal costs, with the total monthly cost of subsidizing fuel estimated to be approximately US$66 million.

Looking ahead, economic growth is expected to moderate in 2022 with real GDP projected to grow by 5.5 percent in 2022 and 5.2 percent on average in 2023–24.

using the Integrated Food Security Phase Classification (IPC), it is estimated that 3.1 million Kenyans (out of 13.6 million) living in ASAL counties are food insecure. 

Sub-Saharan Africa (SSA) The pace of economic growth in the region is expected to moderate in 2022, expanding by 3.6 percent, down from 4 percent in 2021.

Kenya is a net oil importer; imports of refined fuel products amounted to $3.2 billion in 2021 (15% of total imports). Increased global prices are putting upward pressure on headline CPI, increasing the fiscal costs of fuel subsidies, and leading to a deterioration of the current account balance.

Increased world prices for wheat products (2.3 percent of total imports) and spillovers to other food products could have adverse effects on inflation and food security. Higher prices for fertilizer (1.2 percent of total imports) could weigh on agricultural output.

a strong recovery in services and industry increased household consumption by 6.2 percent in 2021 against a contraction of 2.5 percent a year earlier. 

With the increase in imports significantly outpacing exports growth, net exports subtracted 2.4 percentage points from GDP growth in 2021.

Services sector value-added increased by 9.8 percent in 2021 compared to a contraction of 1.8 percent in 2020. 

A major factor in this strong rebound is the impact on the national accounts of measured education sector output normalizing.

Beneath the overall buoyancy of the services sector lies a mixed picture across sub-sectors, ranging from a strong rebound to well above pre-crisis output in the education subsector, to only a partial recovery in tourism

average bed occupancy rising to 57 percent from its low of 10 percent in May 2020 

Agriculture output contracted by 0.2 percent in 2021, leading the sector to slightly pull back GDP growth (compared to a 0.9 percentage point contribution to GDP growth in 2020). 

The 2021 production estimates indicate that poor rains reduced maize output by 3 percent, wheat by 28 percent and beans by 13 percent below 2020 levels.

products experiencing significant price increases in May 2022 included fortified maize flour (23.8 percent y/y), cooking fat (44.6 percent y/y), cooking oil- salad (47.1 percent y/y), wheat flour-white (28.4 percent y/y), kerosene (21.3 percent y/y), petrol (18.7 percent y/y), and diesel (21.5 percent y/y). 

Core inflation, which excludes often volatile food and energy prices, remained little- changed at 2.6 percent y/y in May 2022

Sustained accumulation of pending bills remains a substantial challenge to businesses’ cash flow and liquidity. 

Pending bills have accumulated both at the national and county level, despite the government’s policy of prioritizing payments of pending bills at the beginning of every financial year. 

Pending bills rose from KES 64.7 billion (0.7 percent of GDP) in June 2019 to KES 359.5 billion (3.2 percent of GDP) in June 2021 and further to KES 434.5.7 billion (3.4 percent of GDP) in March 2022.

Kenya’s public debt to 67.8 percent of GDP as of March 2022, up from 50 percent of GDP in June 2016.

a rating of a high risk of debt distress as assessed by the joint IMF/World Bank DSA.12 

The government’s renewed prioritization of concessional borrowing (Figure 12) has begun to reduce external debt service costs, and debt management reforms are ongoing.

The government is also working to lengthen the maturity profile of domestic debt and reduce refinancing risk by relying more on T-bonds instead of short-term T-bills, increasing the bonds to 28.0 percent of GDP in April 2022 from 25.2 percent of GDP in April 2021, while bills declined by 1.4 percentage points to 5.1 percent of GDP in April 2022 from 6.7 percent of GDP in April 2021.

The war in Ukraine and consequent sanctions are expected to subtract about 0.5 percentage points of GDP growth in 2022 and 0.3 percentage points in 2023 compared to the baseline prior to the war, largely through indirect terms of trade losses

Key domestic risks include a more virulent pandemic, election-related disruptions to fiscal consolidation and investment (general elections will take place in August 2022), and adverse environmental and weather developments (including if the severe drought currently affecting north-eastern Kenya were to spread, or armyworm infestations were to worsen).
As the agricultural sector is a cornerstone of the Kenyan economy and crops are primarily rain-fed, adverse weather conditions constitute the major domestic risk to the economic outlook. 

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Pwani Oil has been asking its customers to pay using dollars at a rate of Sh121 per dollar. @moneyacademyKE
Kenyan Economy

It needs the dollars so that it can pay for the palm oil imports it needs to make cooking oil. — Business Daily

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

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