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Tuesday 16th of August 2022

Sunday, April 10, 2022 Apocalypse Now
World Of Finance

Sunday, April 10, 2022 Apocalypse Now

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

By insisting payments are made in Russian Rubles for Russian commodities Vladimir Putin has withdrawn that exorbitant privilege.

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

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

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

The policymakers to follow are no longer central bankers, but heads of state at the pinnacle of power who aren’t known for the transparency of their thinking – especially not when at war. @CreditSuisse Zoltan Pozsar


By extension, Russia and China have been the main “guarantors of macro peace”, providing all the cheap stuff that was the source of deflation fears in the West, which, in turn, gave central banks the license for years of money printing (QE).

 Maybe to understand the path of inflation from here, we should read less Friedman and Schwartz and much-much more Brzezinski and Mackinder

Wars are hard to forecast...
...as are all the “tits” for “tats” in an unrestricted, geostrategic game of Go (or chess, depending on your perspective

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Vanity of Vanities! All is vanity
Law & Politics

Vanity of Vanities! All is vanity

Blofeld: Kronsteen, you are sure this plan is foolproof?
Kronsteen: Yes it is, because I have anticipated every possible variation of counter-move.
Politics therefore suffers from a surfeit of narcissists.

In terms of a method to ‘manage’ government, it is not far from tribal elders howling incantations around the camp fire after inspecting the entrails of slaughtered animals. 

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

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War and Interest Rates @CreditSuisse Zoltan Pozsar H/T @RonStoeferle end
World Of Finance

War and Interest Rates @CreditSuisse Zoltan Pozsar 

Getting right where inflation goes from here is basically a matter of perspective: 

do you see inflation as cyclical (a messy re-opening after Covid, exacerbated by excessive stimulus) or structural (a messy transition to a multipolar world order, where two great powers are challenging the might and hegemony of the U.S.). 

If the former, inflation has peaked. If the latter, inflation has barely started, and could actually be understood as an outright instrument of war, for as Lenin said, “the best way to destabilize the capitalist system [is] to debauch the currency”

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The point that what we are living through now is structural, and so we are not dealing with a business cycle, but rather with something straight from the Book of Genesis....a “seven fat years, followed by seven lean years”-type of thin Zoltan Pozsar
World Of Finance

Instead of playing “catch-up” with the pre-GFC trend of aggregate incomes, we’re now playing “catch-down” to the post-nativist, post-Covid, and post-Ukraine trend of aggregate supply. 

The level of economic activity needs to adjust down in an “L”-shaped manner. If it doesn’t, we will have more inflation problems...
In this context, the market’s recession/no-recession soul-searching is ridiculous

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War and Interest Rates @CreditSuisse Zoltan Pozsar H/T @RonStoeferle .....
World Of Finance

War and Interest Rates @CreditSuisse Zoltan Pozsar H/T @RonStoeferle 

The market can talk all it wants about a “soft landing,” but as explained above, we need an “L”-shaped adjustment in activity, and an “L”-shape has two parts: first an “I” which you can think of as a vertical drop (perhaps a deep recession); second, an “_” which you can think of as a flatline (stagnation, as in stagflation).

Regarding the first bit, there is nothing “soft” about a vertical drop.
Regarding the second bit, there is nothing that guarantees an interest rate cut after the vertical drop: stagnation, especially when paired with inflation (stagflation), means that interest rates may be kept high for a while to ensure that rate cuts won’t cause an economic rebound (an “L” and not a “V”), which might trigger a renewed bout of inflation. 

But make no mistake about it: the risk of the Fed hiking to 5% or 6% is very real, and ditto the risk of rates cresting there despite economic and asset price pain.

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The Masque of Pandora Alastair Crooke
World Of Finance

The Masque of Pandora Alastair Crooke

This, however, is but the initial step. When the western financial authorities say they ‘welcome’ a recession to destroy demand – and so to reduce inflation – implicit in this statement is an élite conviction that protest can and will be successfully squashed.
All the signs are that a ruthless, violent, and administrative suppression of popular disquiet is being contemplated.

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These words were written in 1899 by Sir Halford Mackinder at the start of his epic journey to conquer Mount Kenya (17,057 feet)

These words were written in 1899 by Sir Halford Mackinder at the start of his epic journey to conquer Mount Kenya (17,057 feet)

“I went out into the freshness of sunrise, & beyond great herds of game grazing peacefully within a few hundred yards, saw to the south on the horizon 100 miles away the snowy dome of Kilimanjaro, and 100 miles to the north the twin peaks of Mount Kenya, streaked with glaciers.”

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The Pandemic Is a Portal

The Pandemic Is a Portal

This strange dream like sequence of non linear time has been the overwhelming experience for what feels like an eternity now.

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Jul 3 The choice for Western Policy Makers is extraordinarily bleak.
Law & Politics

Jul 3 The choice for Western Policy Makers is extraordinarily bleak. 

a ''Fairy Tale'' reality and a geoeconomic boomerang effect which is shredding the standard of living in the West and whose consequence will be Regime Change in Western Capitals long before Moscow.

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@Nouriel Sees Either US Hard Landing or Uncontrolled Inflation @markets
World Of Finance


@Nouriel  Sees Either US Hard Landing or Uncontrolled Inflation @markets 

Economist Nouriel Roubini said there are two options for the US economy, given the Federal Reserve’s most-aggressive tightening campaign in decades: an economic hard landing or inflation at a persistently elevated level.
“The fed funds rate should be going well above 4% -- 4.5%-5% in my view -- to really push inflation towards 2%,” the chairman and chief executive officer of Roubini Macro Associates said 
“If that doesn’t happen, inflation expectations are going to get unhinged,” said Roubini, whose prescience on the housing bubble that led to the US financial crisis of more than a decade ago earned him the nickname Dr. Doom. 

“Or if that happens, then we are going to have a hard landing. Either way, either you get a hard landing or you get inflation getting out of control.”
The central bank’s latest dot plot of interest-rate projections published after the June policy meeting suggests that the federal funds rate will reach around 3.375% by the end of this year and almost 3.8% by the end of 2023. That’s not hawkish enough, said Roubini.
“Even if you have 3.8%, we have inflation still well above target around 8%, falling only gradually,” he said. “Markets expecting a pivot and the Fed cutting rates next year to me sounds delusional.”
Roubini joins a chorus of prominent economists, including Goldman Sachs & Co. Chief Economist Jan Hatzius, who think it will be difficult for the central bank to avoid a deep and painful recession, also known as a hard landing.

“In the US, whenever you had inflation above 5% and unemployment below 5%, the Fed tightening has led to a hard landing,” Roubini said. “So my baseline is a hard landing.”

US inflation decelerated in July by more than expected, which investors speculated took some pressure off the Fed to continue hiking interest rates aggressively. 

The consumer price index increased 8.5% from a year earlier, cooling from the 9.1% June advance that was the largest in four decades.
The producer price index, meanwhile, decreased 0.5% from a month earlier, according to US report last week. 

While some market watchers celebrated the consecutive data as evidence that inflation may have peaked, Roubini had other concerns. 
“It might have peaked but the question is how fast is it going to fall? With the Fed still having real rates on the policy side highly negative, I don’t think the monetary policy is tight enough to push inflation toward 2% fast enough,” Roubini said. 

“We are still in a severely inflationary environment, not just in the United States but around the world.”
He added that geopolitical events may contribute to further spikes in inflation, including China’s stringent Covid Zero policy, which require authorities to shut down businesses and lock down the population in the event of major outbreaks. 
Roubini also said the ongoing war in Ukraine may put pressure anew on commodity prices, particularly energy, and expressed concern on the possibility of a wage-price spiral.

The market reaction is Pavlovian. Sure it's been an annus Horribilis in the First Half but betting on a return to QE, lower rates and easy money seems to me a seriously sub optimal Bet. 


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Currency Markets at a Glance WSJ
World Currencies

Currency Markets at a Glance WSJ

Euro 1.01619
Dollar Index 105.624
Japan Yen 133.3165 
Swiss Franc 0.94614 
Pound 1.204800
Aussie 0.702095
India Rupee 79.5255 
South Korea Won 1310.265 
Brazil Real 5.0973000
Egypt Pound 19.150716 
South Africa Rand 16.431700 

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Jul 3 One can create inorganic cascade like price moves in the derivatives market and thereby control the physical commodity.
World Of Finance

Jul 3 One can create inorganic cascade like price moves in the derivatives market and thereby control the physical commodity.

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

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Nigeria's inflation rate quickens to 19.6%, the highest level since September 2005 and more than double the 9% ceiling of the central bank’s target band

Nigeria's inflation rate quickens to 19.6%, the highest level since September 2005 and more than double the 9% ceiling of the central bank’s target band

Annual food-price growth soared to 22% from 20.6% in June and core inflation, which strips out food costs, quickened to 16.26% in July, compared with 15.75% the previous month. Prices rose 1.8% against the previous month.

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Overall, just before closure, three (3) ISIN tickers were up & the other three (3) were down. @aristarichusK
N.S.E General

When the market re-opens tomorrow, we will have a better picture of the election (debt venerability) risk reaction by the international market.

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

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