Cogito ergo sum

Cogito ergo sum - I think, therefore I am. [Descartes]


Africa has lost her pride. Dehumanized, patronized, colonized, enslaved, stripped of her resources and flayed in the international trade-markets, it's a betrayal of a continent's people; a scar on the collective conscience.

Unless all Africans participate meaningfully in their domestic economies, Africa will remain the pitiful, aid-slaves of international charity.

Only the weak cannot forgive and in South Africa the outlook is no less absurd. Ethnic perversion is pervasive in leadership and manifest in the consciousness of our people. We claim our own ethnicity and turn a blind-eye to the misappropriation of the collective trust.



                  First they came for the Socialists, and I did not speak out
                  Because I was not a Socialist.
                 Then they came for the Trade Unionists, and I did not speak out
                 Because I was not a Trade Unionist.
                 Then they came for the Jews, and I did not speak out
                 Because I was not a Jew.
                 Then they came for me .... and there was no one left to speak for me. 

[Pastor Martin Niemöller on national complacency when the Nazis came to power]

Ours is a country sickened by public-incompetence. The systemic abuse of political power is premised on personal enrichment. We're a nation hijacked and held ransom by a sponsored tenderpreneur-cartel. In these conditions it's difficult to hope. Under this pall of corruption we, the South African people, all her people irrespective of tribe or ethnic-claim, remain enslaved to our exclusionary past. We say what we don't believe.

“For to be free is not merely to cast off one’s chains, 
but to live in a way that respects and enhances the freedom of others.” - [Nelson Mandela]

Yes we live in sad times. In backyards some pay homage to yesterday's flag; a fluttering symbol of false-entitlement and a moral abomination. Children, born a blank canvas of hope, are khaki-trained, an armed perversion - morally flawed and a false economy premised on mistrust. Others, our young ones, flee this land, some locked-out of the formal markets, a legal penance for the sins of their fathers. More render themselves useless, mercilessly beating themselves on the cross of guilt. Those who will not bend to this whip of self-loathing are declared false-prophets; harbingers of insincerity.

We live in sad times. On gilded podiums some bask in false victory; a perverted shout for freedom 20 years past. It's a rendered, context-poor homily designed to mould the economically-disenfranchised; an army dehumanized still, made desperate in chains of poverty and a green branch, compliant against the agenda of the very few. Children, born a blank canvas of hope, are denied their rights, gather in the pock-marked streets and are forced to the begging bowl and out of the classrooms as their mentors idle under trees of despair. In the dark of night behind high walls of neighboring wealth lies a false illegal financial freedom; a theft of the collective moral conscience of a people forgotten.

These are sad times. In the backstreets of sub-urban hell some suffer a despair-dependent narcotics-induced coma. Gun-toting gangs press children, born a blank canvas of hope, into acts of violent confrontation. Fathers mourn sons dead, in cold blood and mothers become mothers, children themselves.

'When a hyena wants to eat some of its children, it first accuses them of smelling like goats' - an African proverb.

Industry is a shadow of failed planning, state-interference and poor skills' development. Parastatal jobs are an exercise of executive cronyism. Our mineral wealth is a low-skilled, low-paying extraction; an international export, at cost, and for the benefit of multinational stakeholders domiciled elsewhere. Up-skilled, value-add, commodity-processing is an international monopoly from which Africa is politely excused. Trade-deficit is an unintended import and priced at the currency-gap; rated arbitrarily by the free-market controlled for 'political risk'; an economic boon for Asian and Western surplus.

Education is mostly a logistics conundrum for the administratively incompetent. Public schools wait two-to-a-desk for books destined ultimately for the black market. Teachers, qualified at the University of No Name, claim salaries from schools they've never seen. Nurses and doctors queue at emigration for a working wage.

Law enforcement is a toy of public office where the rule of law is a yellow card of restraint rather than grounds for immediate dismissal. Yes it's true. Corruption flows richly in our veins.

Cheap labour underpins a process of exploitation. The boardroom's Eton-acolytes sign-off a 200 x [20000%] wage-gap ratio; paid in sterling, at the executive-suite, but paid in South African rand at the face; substantively absurd in productivity alone. High-fenced lands lie agriculturally dormant; home to aberrant game for the trophy-pleasure of foreign dignitaries, owned and hosted by absentee lords of the manor.

Here 1:3 people persist on - $1.25 pppd; 40000 days equivalent to hunt a cage-bred lion.

In our streets indebted graduates beg a meal; engineers, mostly; denied their place by transitory Asian construction-gangs, hired on a secret handshake or at the logging-table. Elsewhere Asian-dumped steel, forged from African ore, risks 30000 jobs at the local smelter. Downstream energy-costs treble on 'generators' down'; a catch-all for 'unscheduled  maintenance'.

Our economic prognosis is terminal. It's a lethal cocktail of complacency, incompetence and corruption. Unemployment is rising at rates unprecedented in any other comparable, middle-income, developing economy. Labour-market restrictions are tightening. Inefficiencies and falling productivity is pervasive throughout the manufacturing, mining and agricultural sectors. Labour Unions, the current voting base, are more militant, less approachable. In the public sector salaries rise at levels 10 x the inflation-rate whilst 1:3 live below the international poverty-line. Trade & budget deficits are unsustainable. Domestic / foreign capital flight is real; without restraint.

An inherited infrastructure belies a political indifference to the needs of the unemployed. Political priorities / agendas are largely premised on accumulation rather than selfless service. Social grants are predicated on growth rates currently / inevitably unattainable. The debt-trap is unavoidable. These are dangerous times.

Africa stands cap-in-hand, pliant and open for renewed, unprecedented levels of exploitation; a co-authored misery and an inevitable harvesting of resources from which we can never return. It's a future bereft of dignity. The incumbent leadership-structure pays homage to the self-styled African Emperor, an Eastern phoenix. It's a morally-defunct empire of intimidation - by design; and predicated on the silence of the voiceless and perpetuated by state-corruption, national complacency and our tolerance for incompetence.

It's an economic force majeuere..

Where to from here?

For one thing we need to appreciate the burgeoning economic ‘disconnect’ from one region to another. Economic disparities, regional and global, are real and here to stay. Here’s how I see it.

1. The so-called BRICS are all but dead in the water. Aside from China (modest growth) the rest of the team are looking at zero to marginal growth at best. Even Brazil, which raised rates last week in a declining growth environment (historical hyper-inflation jitters), has little chance of beating the average even though they, along with Mexico, are seemingly viewed more positively than all the other economies in that region. 
2. Europe is struggling – period. It’s a self-imposed period of self-loathing rather than a function of external threats.
3. Asian growth is moderate comparable with their immediate past but moderate nevertheless.
4. Japan is ‘in trouble’, by ‘Western economic measurements’; has been for decades and yet enjoys a standard of living seemingly at odds with their GDP-growth. It’s an economic conundrum that might possibly be a function of culture ie: non-spending /savings, rather than anything else. Even so, both Japan and Europe have the financial / structural means to artificially boost their respective economies. 
5. The US is coming up for air at last even if the debt-ceiling is expected to limit their festivities in the next few months. 

The problem in Russia is exactly the same as the one we face in South Africa. Infrastructural-spend / maintenance has been neglected. Commodity prices have plummeted on a scale unprecedented. It’s rumoured that both the oil and iron-ore markets are being manipulated and from the activity on the respective markets that could quite possibly be true. What we don’t appreciate is the following – lower energy prices are stimulatory; significantly more so than giving money to banks to gamble (ie: invest) in the derivative markets. The benefits of lower energy prices is money in the peoples’ pocket; across the board (On the assumption the benefits are not absorbed into the political ether).

The other issue both Russia and SA face is cronyism and the long-term prognosis is much more concerning. Infrastructural neglect from non-compliance, apathy or incompetence has the same end-result. It helps very little to bemoan managerial ineptitude, at state-owned / run enterprises (parastatals), if basic-compliance, compelled by the laws of the day, is effectively / serially circumvented or was ignored in times past. On this point the Zimbabwe-lesson is first-hand experience of the long-term catastrophe caused by misplaced loyalties and or cronyism. Incidentally if Putin was caught ‘flat-footed’ by a collapse in oil markets then, quite frankly, he is more of a threat to the Russian people, in the immediate short-term, than he has already been given the credit for. For what it’s worth that’s been on the cards ever since the US shale-reserve came online, so to speak. In SA the nepotism is less subtle and has the same negative consequences for the country as a whole. The underlying difference, however, between SA and Russia lies largely in the extent of their respective ‘cash-in-the-bank’ reserves. Russia has sufficient for the immediate future; SA does not.

BTW – in my last note to you I said the derivatives market was approximately $600 trillion. I was wrong. It is, in fact, $710 trillion and significantly higher now than it was prior the financial crisis. The risk ‘to the system’ is an obvious code red and the US appreciates the fact. Don’t forget it’s the US banking industry which has the most to lose if the system fails. Hypothetically (ie: for fun) if Putin could /would engineer a black-swan event on global markets or even threaten the US with something along those lines the derivatives market could /would implode. You might be forgiven for guessing that if anything of that sort came to light commodities would recover (remarkably); oil included and sanctions against Russia lifted or lightened.

On the flipside if Russia had to comply with the dictates of sanity only Putin's pride would suffer. Putin likes to box. As an individual he must appreciate the fact that he’s deep in the twelfth looking for a knock-out just to survive. Why they don’t give Ukraine back to the Ukrainians is beyond all comprehension. Access to the Black Sea via Donets’k is in the bag anyway.

Here’s my solution to the economic woes of the world and I will use the financial carrot as a catch-all. Homo sapiens is, after all, a creature of logic premised on material comfort –

• Europe is a ‘welfare-state’ paying good money after bad to protect a lifestyle that is simply obsolete. Siesta time is over. If we are to take Europe seriously then productivity /price efficiency needs redress. Wages must reflect that fact. Protecting intellectual capital is the promise of salvation! The French will revolt..
• Close the tax loop-holes for multi-nationals /transnationals eg: Google, eBay, Intel etc which pay as little as 3% in some countries. Spend this tax-revenue on removing the draconian regulations under which legitimate corporate-Europe currently labours.
• The US political system is defunct. Urgent redress required! Meddling in international affairs is / should be a UN-sanctioned solution. Save the money spent on international peace-keeping efforts and on which moral-legitimacy is worn as a mask for cheaper oil, and reinvest the savings on domestic infrastructure, the manufacturing sector and on national productivity / skills-enhancement programs. 
• Expel China from Africa with immediate effect. Mine the resources and value-add / up-skill the raw material ie: sell the finished goods at a valued premium. China competes in a lob-sided market, premised on skills bought or otherwise and I’m not sure why that has to be. China has the financial resources to absorb the short-term wrist-slap for the ‘good of all’
• If Japan isn’t the perfect example of a nation fed-up with incompetence and mediocrity what is? What Japan has achieved, post WW2, largely hindered by the US btw. is astounding. It’s an example to all that solutions lie in value-add rather than raw product and perhaps, in a more modern context, solutions-driven in technology rather than on human capital alone. Europe’s threat or her obsolescence, if you like, is the forfeiture of technology and other intellectual capital to the East for short-term import-pricing gains at the expense of their own industry.
• As for South Africa if the infrastructural decay continues at the current rate and corruption / incompetence / apathy is not addressed, the best is in the past and that's the truth. Paradoxically, South Africa's issues are, however, possibly the easiest to address if the authorities apply themselves honestly and with some urgency. By way of example the first step [also the easiest] is to declare force majeure at Eskom and cancel the 'electricity at half-price / below cost' contract signed with a private-sector multinational more than 20-years ago. This same multinational uses approximately as much electricity as the rest of the country combined... On this basis Eskom's solvency is assured. Nepotism / cronyism next and an emphasis on adding value to our own raw materials and so on.. 

The chickens & the cows

'...OPEC manipulating supply to drive US shale producers into non-profit...'

Whilst I concede the facts his conclusions are wrong. Here’s the way I see it.

1. The US shale industry is here to stay, either in free-float or with Federal assistance. One of the key policy riders in the US is energy independence. That’s been the case since WW11. If OPEC depress oil  by manipulating oversupply, to such an extent, that shale producers become unprofitable, the US Federal government will subsidise the industry. As it is the tax conditions for US energy companies are being reviewed favourably anyway.
2. The US, very recently, signed an agreement with the Saudis to buy oil at a specific price for the foreseeable future. That means this is not a price war aimed at the US. The price war is, in fact, aimed at Russia. It’s OPEC and the US squeezing Russia out of the European market, destabilising Putin and deflating the political escalation along Russia’s borders.
3. What’s more interesting is a sidelined China and an even less vocal Iran. China buys most of its oil from Iran and if I was to guess they have been appraised of the price war and are being compensated for their cooperation i.e.: for turning a blind eye. The compensation in Iran’s case is pretty obvious given the relaxation of Western sanctions against that country. In China’s case I would submit that a strong Russia on their borders is not exactly in their best interests. This then their motivation for cooperation.

No sir, if OPEC wanted to punish the US the easiest way to do so  would be to demand payment for oil in any currency other than the US $. As long as the US $ remains the international currency of exchange the US controls price through debt. A weakening dollar on long-term debt makes the market progressively cheaper for the US, not so? Get the US to pay in Euros, riyal, Yen or Yuan and we would have a financial Armageddon unlike anything we have ever seen before. The US would immediately default [be unable to pay even the interest] on ALL their international debt and we’d ALL be hammered back to the stone age. 

The financial derivatives market, by way of example and for interest, has an open-interest value of $600 trillion. That means $600 trillion worth of geared debt, on global exchanges, is held by Big Banks on behalf of clients. If the markets collapse, as they did in 2008, banks cease to exist, so too global financial structures. By way of comparison US GDP is about $17 trillion and the US economy is by far and away the largest economy on earth. That means it would take 35 years to pay off the current derivative debt – an impossibility obviously.

The world has been effectively bankrupt for decades ie: ever since we went off the 'gold standard' and have legislated the printing of money without asset-backed security. We’ve made it worse by using this non-asset-based currency for debt and then compounded it further by gearing it up in the derivatives markets by more than 10 times (1000%).

One day both the chickens and the cows will return home; they’ll have to because that’s what we’ll be reduced to, subsistence.

South Africa on the cusp of organised anarchy

When the rules of engagement are rewritten, protagonists must adapt or they lose relevance. South Africa's economic seesaw is teetering in favour of the school-yard bully.

Militant inter-union tension, tantamount to a declaration of war and fought in mine-shafts around the country, is a significant change of emphasis beyond the usual wage-negotiation techniques the investment world has become accustomed to. That's particularly pertinent at this time of the year when wage-negotiation plays an important role in local media headlines. Freedom of association and collective bargaining is one thing; violence and intimidation is another animal altogether. When unions, motivated by membership revenue, resort to intimidation and violence, then by definition, the legitimacy of collective bargaining, a concept entrenched in law, becomes forfeit. Against this economic anarchy is the equal and opposite force imposed by a mature society which demands the moral legitimacy imposed by law and order. Law and order requires a reciprocal political will to succeed. 

As an interim measure, whilst the broader labour complexities are addressed, corporate South Africa must address the productivity risk associated with labour unrest. In South Africa's mining industry, where operational security is broadly at risk from external pressures imposed by organised labour, mitigating that risk justifies a moral departure in the boardroom and more expenditure on mechanisation. The subsequent socio-economic consequences of an inactive workforce is a risk to the political status quo the country simply can't afford. Given South Africa's reliance on the mining industry as a whole, protecting that industry is, therefore, essential to the country's economic and social fabric. 

It's time collective-bargaining revisits its roots and returns to the negotiating table in its legitimate form. The alternative is unimaginable.  

It's stockmarket silly season

Let's get straight to it. Here are the facts:

1. The stockmarket crash of 1929 took place in October;
2. 1987's 'Black Monday' crash took place in October;
3. The financial crisis of 2008, specifically October, recorded the worst ever volatility and 5 of the 10 worst point-drops in the Dow's 100 years of history...

These are NOT the facts; just interpretations* of data:

1. 'Cyclical P/Es, using 10-year earnings as the divisor, suggest the S&P is currently somewhere between 30 & 50% over-priced..' (Doug Short)
2. 'Expect markets to drop 90%; starting now.. '(Robert Wiedemer). For those of you who don't know, Wiedemer predicted the 2008 crash.
3. 'Greatest debt bubble in history..' (Harry Dent) - 'markets could fall as much as 60% in the next few months..'

With respect to these authors these few examples (of many) have been written and re-written; rehashed and remixed and interpreted in some cases, as many would argue, as a means to an end. There's nothing new here. It's the same each year. You might even call it 'cyclical negativity' or even 'Red October' (with apologies).. Even as I write this I can't help but feel a little bemused by my own interpretation of these interpretations. I can, however, predict with some confidence, that somewhere between now and the future, the markets will crash and somebody, perhaps even one from the few I've mentioned here, will have predicted the crash; accurately. Play red long enough; have enough capital and you'll be a winner, at least once and that too is a fact. 

Romney & Obama - a dearth of riches

In the US it's another bout of Let's get ready to ramble* (* with apologies to Michael Buffer) and let's agree, to date at least, not much has been forth-coming from either Presidential-hopeful; the incumbent or the challenger..US voters, ordinary men and women in the main, are faced with a damned if you do, damned if you don't leadership conundrum.

Yes it's easy, as an outsider, to point fingers. There are, of course, many constraints, mostly real, some imagined. Even so, there are too many inherent failures on both sides of the political-farce to lend much hope for a US economic revival in either the short or medium -term. The combination of party ineptitude and the untidy, less-than-witty presentations of their chosen presidential - spokesmen doesn't fill many with much enthusiasm and therein lies the rub.

Perhaps less articulate than he's given credit for, most market-participants grudgingly agree, in broad terms perhaps, with Marc Faber's assertion that the Fed's policy of printing money will 'destroy the world'. The FED therefore, by definition, cannot lend-lead the US economy out of decline. I say lead because that's whats needed here. Leadership is seemingly a global commodity in short supply... Sound political leadership; effective government; restraint on political-pandering and a good deal of strategic forethought is the only hope for the millions of Americans who find themselves either unemployed or under-employed.

Half-way around the world, in South Africa, we face a similar situation, only less dynamic. Leadership, as a concept, is a premise long since lost. Entitlement, corporate ineptitude in the face of crisis and political philandering is commonplace, if not entrenched. It's symptomatic of self-absorbed-largesse, the excesses of the elite and like everything else and without belaboring the point, usually at the expense of the ordinary citizen.

Taxing Paul to stimulate Peter to pay Paul..

Order in the Financial System is as fragile as the atom; the hitherto basic unit of matter. Paradoxically, the word 'atom' is derived from the Greek word atomos or 'indivisible', which is, as we know, not exactly accurate.      

Now, if the ancient Greeks gave us atomos and the Romans gave us fissio or 'fission' and modern Greece gives us sovereign ineptitude; is modern Italy the next economic catalyst of global consequence? If today's Financial System, against which we measure modern evolution, is wholly reliant on stability to hold its form, would it be foolish to imagine a systemic financial fission in our immediate future? If change comes from crisis we could, as we speak, be witness to the dawn of a new financial energy.

If the System taxes Paul to stimulate Peter to pay Paul which is as it is, why shouldn't Paul have the option to write down Peter and pay less tax? If the Financial System has promised Peter that he could be Paul with a little stimulatory luck, then the System needs Paul to make good its promise to Peter even though Peter can never be Paul. If Paul needs Peter or he wouldn't be Paul but Peter and if Peter becomes Paul then Paul is no different from Paul and shouldn't be taxed because Peter is no more.. Now if Paul is not Peter and Peter can never be Paul then Peter lives under a financial illusion conjured up by the System. Seems to me things would be far easier if Peter stayed Peter and Paul was left to be Paul because only the System says Paul is better than Peter..