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Shifts of Seasons: Seeds of Hope and Creativity (II)

The times we are going through feel intensely uncertain. Environmental uncertainties, economic turmoil, and geopolitical fragmentation are all signs of powerful forces pushing on these barren branches, carried by trees that look dead. But just like in the middle of the winter, when trees appear dead, such appearances can be misleading. Hidden in the cold ground and within these branches also lay dormant seeds and burgeons, just waiting for that signal to come out.

The seed that lay dormant in the ground and the burgeon in waiting during these winter months endures the rough surroundings and the bitter frost. For long weeks and months, they remain hidden and invisible to all until that indiscernible signal from nature. When that slight infinitesimal temperature shift occurs, that seed feels it from deep within its internal DNA, with a secret code triggered to wake up. The burgeon emerges frail and widely exposed to the surrounding aggressions of nature. Yet something happens very clearly. It’s just a matter of faith or belief.

So, where can we focus our hopes in these moments of uncertainty and gloom? Where are these seeds and burgeons in waiting? And let’s be clear that belief and faith in these dormant seeds and burgeons does not mean we are downplaying the challenges. Not at all; it’s just a matter of strengthening the determination and commitment to see through the dark clouds ahead of us.

Allow me to wander here. Here are just a few considerations that may look aimless and without purpose. However, they are a little more tangible and give us a chance to peek outside through the window. A peek that helps us realize how behind these gray and dark clouds, there is a sky, intensely blue and full of hope.

What you are about to hear may sound entirely off-topic, but this kind of lateral thinking widens our vision scope.

Indeed, in the last few weeks, I have been reading a report published by the UNCTAD, the UN organization in charge of trade and development on the topic of Cultural and Creative Industries.

You know, it’s that kind of report that looks intimidating and boring, filled with graphs and tables every other page, with lengthy introductions taking up to ⅓ of the information and pages of acknowledgments made of names that have very impressive professional and academic credentials from all around the world. You know that creating that kind of report took massive efforts from teams of experts scattered all around the world, with many countries and different languages involved.

So it’s more than a regular report, especially when you consider the topic involved in that report. To begin with, I browsed through it, especially paying particular attention to the structure of the outline. I do that when confronted with such a massive piece of work. Instead of feeling overwhelmed, I use that trick that I learned from Tibetan Buddhist monks and nuns; in their traditional learning, they pay a lot of emphasis on understanding the outlines of notable books, from the titles and colophon of the book to the different parts of the work, all the way down to the chapters, titles, subtitles, components, and subcomponents, They don’t start reading a book from A to Z in a linear fashion. Instead, they take a bird’s eye view of the work and learn it by heart. By familiarizing themselves with the whole structure of the book and memorizing it, they end up imbuing themselves with the logical flow of the work. As you may have suspected, this trick only applies to nonfiction. You cannot approach fiction similarly for reasons too obvious to explain.

Try it, and tell me how it works for you.

So for this particular report – “Creative Economy Outlook 2022; The International Year of Creative Economy for Sustainable Development, Pathway to resilient creative industries.” – the narrative goes as follows, in short and simple sentences;

  • Up to recently, trade in the cultural and creative industries mainly took the form of physical goods. It was a trade dominated by China for exports and developed countries for imports. For services in the cultural and creative industries, the reverse was the norm, with developed countries mainly taking the share of the lion.
  • But with technology gaining further ground, this is changing. First, with the digital transformation of the whole industry, the share of services has exceeded physical goods since the mid-2010s. Developed countries are still leading the pack, but the distribution is much more diversified.
  • COVID-19 hit the whole industry quite hard, but it also rebounded nicely.
  • Finally, the new technological potentials are opening the door to yet-to-be-imagined vistas of innovation.

So, that’s what we can draw from that particular report. I am sure you will find a lot more from your reading, but for the present discussion, I prefer to provide you with the gist of it.

If you try to connect the dots, suddenly, you start to see a pattern. In the more industrialized countries, the great resignation has begun to see many professionals giving up on their career dreams. In the newly emerging countries, it’s the rise of new large cities with more educated and vibrant young professionals. It’s all happening while everyone is about to access these new technological developments even faster than thought. All of this is happening fast, in all kinds of directions, and a chaotic manner, making it increasingly challenging to fathom.

But after reading that technical report on Creative and Cultural Industries, I realized that the convergence of new technologies and the human creative potential we are all endowed with would produce an explosion of creativity and intellectual endeavors. Expect some creative and cultural “renaissance” from around the world. And here, I am using the word “renaissance” between quotation marks on purpose because it is a term always associated with the West. But worldwide, the rise of a middle class thirsty for connections with its deeper past converging with the new technologies of Web 3.0 will undoubtedly produce a wave of creative and cultural works at an unprecedented scale. Expect that wave to give a new meaning to the older expression “renaissance”.

These are the seeds waiting to emerge from deep in the ground.


Shifts of Seasons (I)

“Spring passes and one remembers one’s innocence.

Summer passes and one remembers one’s exuberance.

Autumn passes and one remembers one’s reverence.

Winter passes and one remembers one’s perseverance.”

~~~ Yoko Ono

I thought I should start today’s post with this poem.

If you live in the Northern hemisphere, this is the season of the year when trees have nothing on their branches, nothing. But, of course, you then recollect that they were exhibiting some of the most spectacular colors a few months earlier, especially if you are experiencing the “Indian summers” of North America. But, then, trees give up all their leaves. And very quickly, they all look like they are dead for the next few months of winter. And usually, winds, rain, and cold accompany that shift from reverence to perseverance.

Indeed, a few years ago, as I was walking down the street after my morning coffee in Brooklyn, I noticed a little child pointing to the sky. As I looked up, I saw the wonderful golden colors of the leaves shining in the morning sun rays. Had I not paid attention, I would have just continued with my thoughts and missed the hidden message.

That message was straightforward, so simple that I realized that the most obvious is always in plain sight; like leaves on a tree, some habits must be abandoned sooner or later to make room for newer ones. That’s what I was able to understand back then. But it was still a faint hint of something not yet complete, the feeling you have when you start to have an unfinished thought. You know you are getting to something but don’t know what it’s about. So out of sheer frustration, you put it on the shelf, knowing full well that you’ll get back to it, but you don’t know when. And then you forget about it, sometimes for years.

Then some trigger brings it back to the surface of your awareness without knowing why. That happened a few years later. Back then, I was watching the whole of Beijing, China, from the top of the Drumtower in the Northern part of the large square that defines the core of the ancient city. It was a beautiful sight, and the sky was blue on that beautiful day of Spring. I walked outside to the balcony surrounding the whole tower and noticed fascinating golden plates with explanations describing the cycle of seasons – the entire Drumtower is about time and its passing.

And then, I realized that seasons in Chinese culture don’t align with what we are used to in the West. After reading these descriptions on a golden plate, I realized that the end of January and the beginning of February is when Spring starts in Chinese culture. Of course, you may argue that this does not make sense since the surrounding cold and bitter frosts of February are not really a clear indication of the start of Spring. Yet, if you stop and think about it, it’s logical. Indeed, what matters is when the shift of temperatures actually starts, even if our senses do not perceive that infinitesimal change.

Indeed, the end of January and the start of February are when temperatures stop getting colder. Of course, it’s still cold, but it does not get much colder than it already is. Do you see how subtle it is?

In fact, temperatures are stabilizing and might even get slightly warmer, not by a lot, just a fraction. But that’s enough to signal to seeds buried in the ground, the kind of warning that the worse of the bitter cold is behind. That imperceptible shift remains the marker, the milestone Chinese culture uses to indicate that Spring is on the way. A pointer to the change from perseverance to innocence.

All of this remains crucial for us humans who live amid this nature. We should pay attention to these lessons while going through these enormous transitions on the planet. There is a lot to learn, and we’ll get to that in the coming days.

Let’s Create Peace Together

It’s been a long time since I realized we had not heard from each other. My last post was on July 31, 2022. I was focusing back then on digital transformation and the impact it was likely to have on inflation.
Almost six months later, I realized that the highlight on inflation was clearly the proper angle to shed some light on what was to come. The break of nearly six months was necessary; that’s how I feel about it deep inside. Mainly because I was not willing to contribute even more to the echo chamber that we are all bathing in with the dramatic events unfolding around us.
So after a few months of reflection, it is getting clear to all of us that what the world needs most currently are wisdom and cultural awareness. While all the news you can hear about has a lot to do with wars and economic turmoil, perhaps we can also talk about all the efforts to reunite people around the planet.
And indeed, let me tell more about the many activities that I was personally involved in the last few months during that break where you did not hear about me.
First, I participated in a festival in Fes, Morocco, the Festival of Sufi Culture, where many brilliant and beautiful minds were gathered. That event alone gave me hope about the world and its future.
Second, I also had a chance to follow the works of UNESCO, which also gathered in Rabat, Morocco, to deepen its efforts in intangible cultural preservation.
I will provide you more details about these efforts in the coming weeks; it’s my promise to you at the start of this new year, 2023, and the year of the Rabbit. New years start every month if you keep track of the many other recent years across all the world’s cultures; the Chinese new year of the Rabbit began just a few days ago after the beginning of 2023 on January 1. But there will be many other opportunities to renew that promise and keep track of it. Indeed, in the middle of July 2023, the Muslim world will start the year 1445. Nawruz, the Iranian new year will be in mid-March. Rosh Hashanah is expected sometime in mid-September. And many other recent years that you can check here.
While all the troubling news is trickling down through the news channels at an alarming rate, there are also many other efforts that show how many nations are coming together to preserve the very heritage and wisdom that will prevent us from rolling down the path of madness. You can call me a dreamer, but at least that’s the only path to sanity these days. So let’s cultivate that dream together.
Let’s “Create Peace Together.”

The Fragmentation of the World

The fragmentation continues. Political fragmentation in France, societal fragmentation in the United States, monetary and financial fragmentation in the euro zone with this ongoing bond crisis.

In the United States, the Supreme Court’s decision to give states the right to decide for themselves on their own abortion policy seems to leave the door open to other decisions of the same nature.

In France, the political landscape also seems blocked after the legislative elections of last week, which delivered an extremely fragmented landscape.

At the same time, in the bond market and financial markets, corrections are giving way to an improvement, but all this seems only temporary.

However, it is also on a global scale that this fragmentation must also be observed. The BRICS who have come together on their own and have just completed a summit in virtual form. The BRICS (Brazil, Russia, India, China, South Africa).

This summit usually takes place in Beijing and represents the most visible form of the new structure put in place by China around the Asian Bank for International Investments and all the infrastructure projects, better known as the new Silk Road Initiative. The BRICS therefore held their virtual summit and it was an opportunity at the highest level, at the level of heads of state, to confirm their solidarity with Russia, each with more or less different degrees. But it is all the same a certain solidarity however this summit. But this BRICS summit is not just about these 5 countries. It is also all the countries which have subscribed to the AIIB and which are, directly or indirectly, involved in new silk road projects.

With the new international developments, it seems that this project is now crystallizing much more around emerging countries which continue to strengthen their adherence to this project.

On the other side, there is the G7 which is currently meeting. These two blocks, G7 and BRICS now seem to balance each other out in an explicit way. On the one hand, the BRICS much more inclined to take their destiny firmly in hand and on the other hand the G7, which is currently meeting.

This is therefore the state of the world, in the middle of the year 2022, with alliances and partnerships that are gradually being put in place, along commercial, societal and military lines. NATO will also bring together its 30 members in Madrid from June 28 to 30.

So that’s where we are; on the one hand, the United States is grappling with a societal crisis which does not seem to be over and which does not spare Europe either, since this decision of the Supreme Court of the United States on abortion raises fears of similar developments in other countries. These challenges will not stop there and seem to indicate new lines of fracture and fragmentation unsuspected until now.

The other political fragmentation in France is this internal challenge that President Macron encounters in forming a new government. If it is not resolved, we must not exclude a radical decision which could include the dissolution of this new National Assembly. However, this could only occur after multiple attempts by President Macron to form a government, trying to associate all goodwill as much as possible to form a new government. For the moment, we are not at that point, but it is not excluded, especially after many attempts on the part of President Macron.

And then, for the months to come, we must not ignore the current fragmentation in the financial markets in the euro zone. With the inflationary pressures manifesting themselves from one country to another, we are therefore witnessing a change in the position of the European Central Bank, with a tightening of monetary policy to come. However, there too, tensions are exacerbated within the area itself. To fight inflation, the European Central Bank will of course need to tighten its rates, just as all the other central banks have done, whether in industrialized or emerging countries.

The ECB will therefore have to fight inflation, but at the same time we can clearly see that this decision will come up against the need to remain vigilant to the needs of certain countries in the euro zone and in particular of countries whose debt ratio is extremely high, and who in this context of growth have no interest in seeing rates rise so quickly.

We therefore have for the first time in a very long time a divergence of interest between Germany and the countries of the North on the one hand, and those of the South whose indebtedness is reaching its climax. This tightening of monetary policy could be fatal to them. The European Central Bank is therefore faced with this divergence and this dilemma that is extremely difficult to resolve. This is a new element of this fragmentation which risks dealing a huge blow to the euro zone and to the European Union as a whole.

Moreover, such a divergence and such a crisis, such a rise in interest rate differentials between Germany and the other countries of the European Union, the last time this kind of crisis happened was in 1993. It was just at the time of the reunification of Germany. It was therefore during a period when the euro zone had not yet come into force. This was when the Maastricht Treaty was signed.

We haven’t seen such a rise in interest rate spreads since the early 1990s when Germany reunited, of course we also had 2008. Even if the rate level in absolute value is not as high, we are in a much more critical situation today than in the early 1990s and 2008.

This brings us back to the signing of the Maastricht Treaty.

The Maastricht Treaty, for those of you who were not there, was the decision to set up a monetary and economic union, provided that the member countries met a certain number of criteria in terms of budget deficit and debt ratio, these famous Maastricht criteria decided by François Mitterrand and Helmut Kohl; 3% of GDP for the budget deficit and 60% of GDP for debt ratios.

We are very far from it today since we are now at a debt and budget deficit rate for France which is now double what it was at the beginning of the 90s. The stock of the debt is therefore gigantic and any rise in rates means that debt service cannot be covered by the income generated by sluggish growth. The situation will be even more dramatic if we find ourselves in stagflation. And this observation does not only apply to France. It is also valid for practically half of the Euro zone. The European Central Bank is therefore faced with a lethal fragmentation and an insoluble dilemma.

So that is the state of this fragmentation. It doesn’t show anything really promising.

That’s what I wanted to share with you for the time being,

Let me know if you have questions and I look forward to hearing your thoughts. Feel free to comment.




France: Fragmentation at the National Assembly

I was telling you about fragmentation yesterday, in the global economy and in financial markets. Tonight in France, we are witnessing a manifestation of that fragmentation in the political sphere.

We already knew that the newly reelected French President Emmanuel Macron would have trouble achieving an absolute majority. The real results are a lot worse than expected.

At the time of this post, president Macron’s coalition, ENSEMBLE! barely reached 234 (compared to 336 previously, a decline of 102 seats). The left wing NUPES reached 141 (60 previously, an increase of 81 seats). The traditional Right Wing Les Républicains/Other Various Right got 75 (119 previously, a decline of 44 seats), Rassemblement National 90 seats (8 previously, an increase of 82 seats).

Clearly, we are in that second scenario that I told you about few days ago. However, a lot worse scenario than what I described. 

Ensemble! Macron’s coalition did win a relative majority, but way below the threshold of 289 seats. President Macron will now have to rely on the Right Wing Les Républicains, but that’s not even guaranteed. He can also extend himself to the left wing and pull some occasional support from some of the left wing partners within the NUPES coalition or from the left wing parties that have not joined the NUPES. It will still be possible for Macron to expedite his reforms but on a case by case basis and probably on a much harder line than in the previous scenario.

However, at the same time the left wing NUPES will also rely on its large number of seats (141) to create opposition and harden the debate. 

The much better than expected result from the far right Rassemblement National will also create further undercurrents of turbulence. Despite Macron’s ability to rely on the right wing Les Républicains, expect very hard debates, leading to a tense social climate, that some already call the “Fourth Round”.

Overall, this new National Assembly appears very difficult to lead in the foreseeable future.  

Should President Macron find it impossible to gather the support he needs, he may have to call for new general elections to reshuffle the parliament, but only after one year.

In the meantime, expect some heavy turbulence, especially on any topics related to France’s commitment to European treaties.  Indeed, if you take the number of seats of parties that are openly eurosceptic, we end up with 30% of the parliament. That’s enough to create tense debates in the coming legislature.

That’s what I wanted to share with you for the time being,

Let me know if you have questions and I look forward to hearing your thoughts. Feel free to comment.




Fragmentation, From One Crisis to Another

“Fragmentation”, that’s the new word we keep hearing more and more. From the IMF which is warning us about the fragmentation of the financial markets, of the global trading systems, of the supply chains.

We heard it again this week from the European Central Bank which is now concerned about the fragmentation of the government bond market within the Eurozone.

We hear it increasingly from commentators and analysts who want to express their worries about a world that is coming apart at an increasing speed.

Fragmentation is indeed the opposite of integration. And for sure, since COVID, value chains, supply chains and political coordinations are falling apart. The war in Ukraine is only pushing it to a new plateau of chaotic dislocation.

And that new plateau appears to have been reached when the IMF warned, on May 23, 2022 at Davos, that the world economy is going to hit the biggest financial headwinds since world war II.

So when I heard that, and when I saw that the ECB convened an emergency gathering of its governing body this week, it just felt like a perfect storm was just about to hit the world.

For sure, we already knew that the FED was getting ready to hike rates by a large magnitude – it had told us already and it ended up pushing key rates by 75 bp, the largest since 1994.

So all of a sudden, all this ruffle and shuffle on financial markets pushed me back into the past. I started seeing all these crises that I have witnessed in my life back into my mind. It always helps to remember those moments. Reading about them in books and technical notes does not provide any additional flavor and learning. The reminiscence of such events, the very process of getting yourself back to those moments is where the learning happens.

And for those of you who are too young to remember, I highly recommend you to read about these moments by feeling how it would have been for you in person.

You see, there is always that sense that we already know what happened from the history books, that it is old stuff and that it’s just a waste of time. But I beg to disagree and here is why.

The crises I have been privileged to witness personally, either as a market participant, or on the sideline are the following:

August 12, 1982 Mexico – I was just a student in business school

August 17, 1998 Russia – I was a market analyst on Wall Street

September 15, 2008 Lehman Bros – I was working on a corporate social responsibility project

October 20, 2009 Greece – I was working on a corporate social responsibility project

And now 2022

Behind every single climax, there was a silent web of interconnected waves bubbling silently under the surface.

Indeed, the Mexican Crisis of 1982 was a distant aftershock of President Nixon’s decision to suspend the US$ convertibility into gold and the demonetization of gold that followed at the Jamaica conference of 1976. Indeed, once all currencies became floating against each other, without any safety net, then anything that happened with the dominant reserve currency, i.e the US$, would send tremors of instability to the rest of the world. Mexico, one of the US closest economic partners, felt the heat immediately, as soon as the Federal Reserve hiked rates without any restraint at the beginning of the 80’s.

I will go back to each one of these climaxes by telling you more about the feelings and experiential conditions that prevailed for me personally.

Everytime I do that exercise, it connects me closer to an economic theory that a prominent economist provided at the beginning of the 60’s. Every time I examine those successive crises, they become even more clearer thanks to that theory. I am talking about the famous Triffin dilemma. It becomes even more real the more I feel these crises through real and experiential circumstances. I highly advise you to do that for yourself.

Yet, notice also how these climaxes seem to favor August, September and October. Just a notice…Nothing more.

And then, whatever came after that were aftershocks, after effects of a larger dilemma. The dilemma of reserve currencies.

That’s what I wanted to share with you for the time being,

Let me know if you have questions and I look forward to hearing your thoughts. Feel free to comment.