As the modern world system unwinds, chaos is visibly in the ascendance. To those aware of the lopsided (inequity) nature of the world system, (@1500 AD-onward) recent anti-systemic developments cannot be altogether unexpected. Expectedly, those who have been immensely benefitting from the global regime are increasingly concocting schemes to retain their (mostly) undeserved privileges. Continuous wars are amongst the overall contemplated schema. Unlike before however, many of the wars the psychopaths/sociopaths’ want to wage, will not be easily winnable. Observe the situation in MENA (Middle East & North Africa) and Afghanistan. At the same time and characteristically, the gullible sheeple (human mass) is, by and large, at a loss as to the real reasons for the various wars!
The polarizing economic regime of the world system is undergoing acute distress, not only in the core countries of the West, but also in the peripheries and semi-peripheries. For instance, in South Africa, a member of the BRICS (Brazil, Russia, India, China and SA) major rumbling is in the offing. The South African sheeple is demanding an equitable share of the country’s wealth, as in the distribution of land. Despite provisions agreed upon at the time of liberation, (from apartheid) the sheeple is forcing the compromised political leadership of ANC to raise the issue of land afresh. This certainly doesn’t spell peace in ‘Rainbow La La Land’, at least in the coming few years! The Namibian sheeple is also eager to review the issue of land. One should recall the political arrangement on the eve of independence in that neighborhood! Mozambique has now succumbed to another round of debt slavery, so to speak, a mere two decades after it was relieved of its massive debts, odious as they were. The situation is more or less the same in many of the so-called ‘emerging countries’ of Africa. Beware; debt is mostly a weapon of control and not always a tool of economic progress! Here is how one analyst put it: ‘Globalization is all about world control. It is about getting the nations addicted and dependent on fiat currency and then managing them for the benefit of the looters.’
South Americans’ suffering is leaving them without much energy to instigate debates on the fundamental reorganization of theirs’ structurally ‘dependent economies.’ Brazil is witnessing its most severe depression in its modern history! The attempt (by the current politicos in power) to bring back the traditional regime of social polarization and economic stagnation a la old-style compradorial servitude might not work this time around. The whole ‘Africa Rising’ meme also belongs to this stupid charade. Luckily, it is being challenged by the growing militancy of the sheeple, eager to redress parasitic economic and social orders. Anticorruption movements in Nigeria are becoming more virile. In the wider East African region, anti-establishment activities are gaining ground, despite the numbing rhetoric of the status quo at the service of dominant/oppressive capital. Even in the relatively progressive developmentalist state of Ethiopia, its unripe ethnic federalism notwithstanding, the sheeple is flexing its muscle, intent on throwing out degenerate political goons and affiliated oligarchs (foreign & domestic, big & small) who have been taking unfair advantages of its decency for far too long!
Last week the Chinese state/leadership made the decision to look at its complex economy more soberly and realistically. Accumulating debt with the objective of growing the economy non-stop, as if there is no tomorrow, will bring stagflation and more, the day after tomorrow (even if most of the debt is domestic, like Japan.) Prudence and resilience, both in economic development and social progress need an atmosphere of predictability, transparency and most importantly, integrity, in other words-the rule of law! The decision to slow down the current rate of growth in China should be commended, as resources are/were being wasted royally, for the sake of maintaining unrealistic growth rate that might not bring much to human happiness, at leas at this level of economic development. It should also be noted that in the long run, newly minted parasites/cronies exclusively benefitting from state largess would only undermine collective harmonious existence, even in places like China!
Admitted or not, the Western world is also in secular decline, mostly as a result of unsustainable debt, parasitism (cronyism), militarism (overreach), overconsumption, complacency, etc, etc. The dominant global system has no clue about the core essentials that can potentially foster general peace & wellbeing amongst diverse humanity, outside of the absurd, narrow and untenable idea of infinite growth, on a finite planet! Consequently (and amongst other things), the system cannot bring its stupid self to accept the benefits of depopulation. The system is finding it difficult dealing with the welcomed trend in global demography, because it negatively impacts the economies of the core countries as well as the semi-peripheries (China, etc.) So far, the system’s panacea for all and sundry has been the massive creation of debts (to increase unnecessary consumption to compensate for declining income and population), but debts (only pull future consumption forward) take away, not only opportunities, but also rights of the unborn future generations. The humongous debts being created all over the global system will hardly be payable and therein lies the source of major conflicts in the years to come! Two centuries later, the following pertinent observation still applies to each and every country of our planet!
“If the American People ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the bankers and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.” (On the dominion of banks – letter to James Monroe, January 1, 1815) Thomas Jefferson. Good Day!
CHAOTIC TIMES
Turkish Airlines and Turkish Cargo Rise to the Top Amid Pandemic
Turkish Airlines successfully ended the fiscal year 2020 with 6.7 billion USD revenue, which accounts for 50% of the preceding year’s level, with a net loss of only 836 million USD. During these uncertain times, the airline was also able to maintain its robust route network. According to Eurocontrol, in April 2021 Turkish Airlines operated an average of 685 flights per day almost double the number of the closest competitor in Europe, Lufthansa. In 2020, Turkish Airlines flew 28 million passengers, with an impressive load factor of 71%. Currently, the airline serves 179 international destinations with 16 intercountry and 58 intercontinental flights. The new Istanbul Airport also stayed on top: even with a 68% loss of traffic, it was still Europe’s most successful airport as of March 2021, with 616 departing and arriving flights.
This success is based on cost cutting activities, capex reduction and active capacity management. In fact, Turkish Airlines achieved such performance without relying on any governmental cash injections. Furthermore, agreements with Boeing and Airbus on fleet growth will further decrease the aircraft financing needs of Turkish Airlines by around 7 billion USD in the coming years.
Re-Globalization
Despite the COVID-19 pandemic, the world is witnessing a re-globalization of sorts, with cross-border flows of goods and capital on the up. The COVID-19 pandemic certainly led to some setbacks. In fact, as it was widely reported, cross-border trade declined more during March and April 2020 than it did during the Great Depression of 1929. However, the recovery has been faster than expected. This is particularly the case with trade and capital movements between developed economies. China is included in this latter category.
As far as human travel is concerned – whether for business or pleasure – the recovery is slower. According to the DHL’s Global Connectedness Index 2020, travel has suffered an unprecedented drop resulting from the restrictions of the pandemic. And the reopening of borders is taking considerable time. Thus, the re-globalization we are seeing is fragile and the cracks in it are not easy to repair.
Moreover, it may involve profound changes in the workings of some supply chains. In the era of globalization 101, the dominant model was the one of “just-in-time” manufacturing. But in the new, post-pandemic phase, the winning formula is closer to a “just-in-case” model. This will therefore be a different type of globalization. And whoever fails to engage with it will be condemned to watching from the sidelines.
Andres Ortega, senior research fellow at the Elcano Royal Institute, Spain stated that we are witnessing a process that involves the abrupt and intermittent expulsion of air. This is the definition of a “hiccup.” The ongoing re-globalization we are witnessing is accompanied by hiccups.
To begin with, there is an ongoing scarcity of containers even as their cost is increasing. The problems this is causing to global trade recovery were highlighted by the Suez Canal incident. For several days in March, the canal was blocked by a ship, halting billions of dollars in maritime commerce.
Moreover, some key raw materials are running short and are therefore becoming more expensive, if available. There is a shortage of wood as well as of some petroleum-based products like plastics, PVC resins and colorings. At the same time, there has been a rise in oil prices and other raw materials such as copper. The bottlenecks slowing down re-globalization are being laid bare.
According to Andres Ortega, in the first phase of the pandemic, the main shortages faced by countries had to do with medical equipment like masks, gloves, respirators and so on. These were ironed out relatively quickly, although there is still a high degree of dependence on Asia, especially China and India, for supply.
But now, other shortages have arisen involving, for example, the lipids used in the COVID-19 vaccines based on messenger RNA. Plastic tubes and bags are also in short supply. According to the International Federation of Pharmaceutical Manufacturers, the United States Defense Production Act, designed to protect United States supplies, has aggravated the situation.
Branko Milanovic, Professor at the City University of New York stressed that shortages are also plaguing the digital realm. A lack of semiconductors has slowed down the assembly lines of various vehicle manufacturers worldwide. This matters greatly, not least because cars today are computers on wheels. The pandemic has further highlighted the excessive dependence – one that China shares – on Taiwanese chip manufacturers. Taiwan Semiconductor Manufacturing Company (TSMC) is particularly dominant. This is a geopolitically sensitive dependency. Trying to diversify away from it will require major investments.
Branko Milanovic noted that an advanced chip-making plant, known as a foundry, costs around $20 billion. The new globalization will involve shortening strategic supply chains, including for semiconductors.
But this process will take years to materialize. China, which imports more microchips than oil in value, has made establishing foundries a top priority. The greatest challenge is for Europe. Once a serious player in the field of advanced chips, it has let its lead slip.
Bernard Wasow, former professor of economics at New York University stated that another crucial bottleneck is related to the severe shortages of talent, in terms of human skills. According to Deloitte, 40% of businesses in Europe struggle to fill their vacancies due to the lack of people with the necessary training or experience.
Meanwhile, 30% of graduates are working in jobs and roles where the skills they acquired at university are not relevant. At the global level, there is a large mismatch between demand and the supply of talent. Re-globalization thus urgently requires national public-private investment in cultivating these in-demand talents.
To conclude, it is true that the world is heading towards a more protectionist, more nationalist and more regionalized form of re-globalization. While the exact contours of this new globalization remain unclear, what is certain is that it will not be a simple return to the status quo. Rather, it will involve transformations requiring new ways of thinking and new policies to better soothe the hiccups.
NBE sets benchmark with new directive
National Bank of Ethiopia (NBE) has issued the first in its kind directive, ‘open market operations and standing facilities directive no. MFAD/OMO and SFs/001/2021’ that will formalize the money market. The directive will be in effect as of August 2, 2021.
On its preamble, the directive explained that the issuance of the directive has become necessary to establish open market operations and standing facilities as instrument for effective management of liquidity in the financial system for purposes of conducting monetary policy.
It is to be recalled that Capital had reported that NBE had drafted the first directive ever to formalize and involve the existed trust based money market between banks with a modern scheme.
On the directive, NBE says that it has the powers and duties to make short term and long term refinancing facilities available to banks and other financial institutions; and issue its own debt and payment instruments for this purpose.
The directive shall be applicable to financial transactions between the NBE and banks operating in the country that maintains reserve requirements with NBE for the purpose of OMO and SFs.
Banks shall be able to access SFs from NBE and participate in OMO.
The effectiveness of the directive is stated as one that would be the bench marks for the up coming capital market.
The directive article 7.1 stated that if the government securities or NBE securities are trading in the market, the valuation of eligible collateral will be determined by the prevailing market value.
Article 7.2 added that in the absence of market value, the valuation of eligible collateral will be determined by the present value of the future cash flows of the asset, whereby the discount factors will be determined by the central bank and published on its website.
Under sub article 3 of the same article it stated that eligible assets to be pledged as collateral must be registered in the accounts of the respective participant banks opened at the National Bank and maintained in the Book Entry System.
According to the directive under OMO, NBE may conduct main or standard operations, fine tuning or non-standard operations, which is a quick auction when it is deemed desirable to have a rapid impact on the liquidity situation in the money market, or structural operations.
NBE may use five different kinds of instruments including outright transactions, granting collateralized loans, repo or reverse repo transactions, and issuing NBE certificates for its open market operations.
Article 9 of the directive indicates that NBE may issue debt securities (NBE Certificates) for its monetary policy operations or liquidity management. The NBE Certificates shall be issued at a nominal value of one million birr and in multiplies thereof. The NBE Certificates shall be issued at a discount from a per value of 100,000 birr.
The NBE Certificates can be traded on the secondary market, which includes all selling and buying operations, while the certificates trading at secondary market it is limited to only among banks.
The SF has lending and deposit facilities.
The auction has three types of auction formats; fixed price auction, variable price auction, and single or uniform price auction.
The fixed price auction is that NBE sets the rates and the participant banks bid on the quantity. The variable price auction is that NBE sets the overall quantity, and the participating banks bid on the price and successful bids are allotted at individual submitted auction price.
Single or uniform price auction is that NBE sets the overall quantity, and the participating banks bids on the price and one single price (cut-off or stop rate) derived from the auction is awarded to all successful bidders, while the price will be determined by the resulting marginal price from the auction.
