Where finance and media intersect with reality

In the Blind Spot (Swiss neutrality, inflation truthers, Czechia)

Courtesy of Khairul Abdullah

This edition of the Blind Spot Wrap was compiled by Izabella Kaminska (IK) and Dario Garcia Giner (DGG).

Markets, finance, economics etc…

  • Sri Lanka’s economy faces complete collapse.
  • There is an inflation in the number of stories noting “politicians and central bankers” were complacent on inflation.

    Probably time to do a roll-call of the media names, economists and bankers who were calling out the “transitory” argument as lacking legs early on (despite getting huge heat online for saying as much from all the team transitory voices). There weren’t actually that many of them. This is because a strange stigma became associated with aligning with any inflationista argument from March, 2020 until at least mid-2021. In the early period, this is because it was interpreted as an underhanded criticism of lockdown, and in the months following the Biden stimulus plan, because it was interpreted as an underhanded criticism of Biden.

    Nonetheless, notable inflation truthers, as I like to call them, included Larry Summers, Andy Haldane, Martin Wolf and even Chris Giles. Teun Draaisma and Ben Funnell of Man Group spotted the paradigm shift very early on too. Actually warning about the return of the 1970s, meanwhile, were Peter Hitchens and Liam Halligan. I’m interested in who else you think got it right in a big way (and not in a flip-floppy turned at the last minute but is now pretending they were worried all along way.)

    It’s a worthwhile list to cultivate so that it can act as a warning to future generations of what happens when debate is stifled. (Though I’m even more interested in who was concerned about inflation but felt they couldn’t say anything. A slightly harder list to compile.) – IK

  • Amazon is running out of cheap labour.

    We think of so many of these firms as technology companies. But from Uber to Amazon, what really powers these business models is cheap labour. As labour gets more expensive, the viability of many of these models is going to be tested. – IK

  • Russian commodity traders replace Switzerland with Dubai.

    I’ve just returned from Zurich, so I had a chance to catch up on how Switzerland is coping with the new Cold War and 1970s comeback.

    In short, it’s doing much better than the rest of Europe. On the energy front, Switzerland is less exposed due to its significant hydropower and nuclear mix. Inflation is also pretty subdued, at least relative to what is going on in Europe, the US and the UK. There are two main theories for this. The first is the strength of the Swiss franc, which has the effect of generating very cheap imports for the country. The second is that the country’s food distribution lies mostly in the hands of a duopoly (Migros and Coop). This allows for significant price control and cost absorption, on the basis that the duopolists had a lot of margin to give up in the first place. Nonetheless, inflation is still rising and the SNB hiked interest rates last week in a surprise move by 50 per cent from -0.75 to -0.25.

    On the cold war front things are a little more complicated. Switzerland famously sided with Europe on sanctioning Russia. This is now leading to an exodus of Russian money and business. But the repercussions of this decision — which was taken very swiftly and without the usual plebiscites that are common for almost anything controversial in the country — go much further.

    Switzerland’s neutrality has been the defining feature of the country for generations. There is a good reason for this. Switzerland is a voluntary federation of 26 autonomously governed cantonal districts, with four official languages and a huge diversity of opinion on how things should be run. Power at the government level is strategically kept in check. Can you name the current head of state? Probably not. It’s by design. Extreme neutrality is essential to keep the whole thing together. In that sense, Switzerland is the public blockchain of countries. Some might say the downside of that neutrality is the country’s no questions asked mindset and ambivalence toward harbouring controversial entities and wealth. As long as you can pay your way (proof of wealth instead of work) everyone is welcome used to be the message.

    But Swiss neutrality has been coming under pressure for years now. On the financial side, its greatest export, private banking that can hide ill-gotten wealth, has been all but nipped in the bud. Now that Switzerland’s political neutrality is also being upended by Russian sanctions, I can’t help but wonder if there will be a longer-term impact on the Swiss franc’s status as a “safe haven” currency. If that is the case, there could be far reaching consequences. That said, the very same neutral factors that encouraged private banking in the first place, also encouraged many other business sectors to thrive in Switzerland. Unlike the UK, Switzerland’s economy is therefore much more diversified and arguably more resilient to any downsizing of its financial sector.  – IK

  • Switzerland imported gold from Russia in May, this is the first time it has done so since the Ukraine war broke out.

Russophiles in Burkina Faso:

  • Pro-Russian, anti-French protests took place across several cities of Burkina Faso.

    First, one must notice the identical nature of all Russian flags in the linked video; such events are rarely accidents, and were likely promoted or organised by local elites standing to gain from increasing Russian intervention. However, these protests cannot really be seen as ‘pro-Russian’ in the Western context.

    Such opinions in the ‘Francafrique’ region suffer from a similar geopolitical context as supposed pro-Nazi support across the Middle East and the Balkans (at least towards the start of that hideous regime); it’s far more about positioning against the dominant external power, rather than simply favouring another country’s regime.

    It is entirely unsurprising, therefore, that a region that is still dominated by France politically, monetarily, economically, and militarily almost half a century after their independence, a domination that barely attracts western attention, is turning against their former masters. One wonders how French elites will manage to compete for favour with such external powers, particularly when the more competent one (China) turns their eye properly to Francafrique. – DGG

China China China:

  • 29 Chinese military aircraft entered Taiwan’s air defence identification zone on Tuesday, marking the 10th day of intrusions for a total of 59 planes this month.

Transgender Swimmers:

  • Female trans swimmer Lia Thomas was banned, alongside most transgender athletes, from swimming competitions by FINA, the international swimming federation.

    The new 24-page policy, passsed with a 71.5 per cent majority at FINA. It will only allow individuals who transitioned before the age of 12 to compete in women’s events. The decision comes after Lia Thomas demolished her competitors in several swimming competition, raising media furore both in favour and against transgender athletes participating in woman’s sports. Regardless of where you fall on this issue, it’s ultimately a little sad that someone so young, who has dedicated their life to a sport, finds their passion so consumed by politics and bitterness. We hope you’re doing ok, Lia. – DGG

Covid is still a thing:

Czechia in turmoil:

  • Czech Education Minister Petr Gazdik resigned on Sunday after evidence showed he met with criminal boss Michael Reidl, following Wednesday’s news that the Deputy Mayor of Prague and 10 others were similarly charged with criminal activities linked to the Prague Transportation Company.

    Having undertaken quite some work in the former Czechoslovakian countries, my only surprise is that these allegations have not yet reached every single member of government. You would be shocked at the extent to which these nations, ostensibly clean and democratic members of the EU, seem to be anything but. The possibility remains that these countries are simpy less competent at hiding it. – DGG

The Untied States?

  • Texas Republicans at the GOP state convention in Houston are asking for a referendum on seceding from the United States.

    The issue of Texan independence may seem ridiculous at face value for Europeans. And does crop up again and again (usually whenever there’s an economic downturn.) However, many forget that since Texas was an independent nation for nine years before becoming a US State in 1836, shortly after which it became the seventh state to secede from the Union in 1861, the issue does hold some genuinely unique emotional value for many members of the Texan right.The longer that Washington DC continues to be seen as a safe-haven for opinions these individuals consider blasphemous, the more traction it may gain. – DGG

Ghost guns and Ukraine:

  • Ukrainian special forces are modifying grenades with 3D printed parts for drone strikes.

    The days of indie Syrian metalworkers fastening reclaimed metal parts into grenade fins may be numbered; the integration of 3D-printed parts into the (as yet informal) supply chain for Ukrainian Special Forces is yet another example of how 3D-printed firearms and firearm parts will revolutionise the defence industry. – DGG

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One Response

  1. Not just Swimming’s governing board (FINA), but also Rugby League (IRL). Between the lines, a new competitive open category inclusive of trans athletes seems to be in the works, after research based on collected data.

    “To help achieve this, the IRL will seek to work with the eight Women’s Rugby League World Cup 2021 finalists to obtain data to inform a future transwomen inclusion policy in 2023, which takes into consideration the unique characteristics of rugby league.”.

    https://news.sky.com/story/rugby-league-bans-transgender-women-from-international-competition-12637701

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