After the Bell: No, you're not alone; the world is a mess
As the world teeters on the brink of chaos, with everything from geopolitical conflicts to the unpredictable whims of Donald Trump stirring the pot, one can't help but wonder if we've traded a pandemic for a global financial cocktail of uncertainty that feels even more volatile than before.
I hope I'm not the only one who feels the world is incredibly uncertain at the moment. And in fact I almost feel less certain than I did during Covid.
At least then I felt that we were all facing the same problem.
It would appear that some senior figures in the South African Reserve Bank agree. On Friday the head of the bank's financial stability project, Nicola Brink, stated during a Monetary Policy Review that 'During the review period, the global financial system e xperienced a degree of uncertainty and volatility that is similar to and in some respects worse than… at the onset of the Covid-19 pandemic'.
President Cyril Ramaphosa seems to agree with the bank. He said today at the Constitutional Court that 'the world has become a very dangerous place now, with all of these conflicts that are flaring up'.
It may seem strange to compare anything in recent times with Covid. I mean, during that time it felt like we were facing financial Armageddon.
Stock markets around the world fell dramatically, at one point the oil prices turned negative (because oil tanks were full, people were paying customers to take the stuff).
But actually, the bank is probably right.
This is because the sheer number of elements that lead to instability is so high now. Then it was just one thing. And the whole world was facing it at the same time, if not exactly united.
Also, it was clear pretty early on that Covid was not going to last. It was not going to be with us for a decade, it was going to end.
Covid is a great example of another dynamic in global markets. That in real terms, nothing ever happens.
Considering how much time, thought and sheer energy is put into trying to work out how markets will react to global events, this is incredibly surprising.
But it does appear to be true. Research shows that actually while markets do react to shocks in the short-term, they tend to recover quite quickly.
There is an important reason for this. As The Economist put it, 'The momentum of markets can be relentless. Shares tend to grind higher over time as consumers spend, entrepreneurs innovate and companies grow.'
It would take something messing with this dynamic to stop this growth from continuing.
But until around 10 years ago, I had also been told that property prices always went up. That if I bought a house it would become more valuable over time.
That has not been my experience. Instead, because I bought in Joburg, values are going backwards.
So the same can happen to markets.
And I do worry that the sheer number of elements that are creating instability in our world may be taking us closer to some kind of greater life-changing market event than at any time since World War 2.
Consider the sheer number of ingredients we are dealing with.
In South Africa, the biggest variable is probably still whether the coalition government survives after Ramaphosa goes.
But the rest of the world is a disaster.
Israel is bombing Iran, which may or may not have nuclear weapons; Iran is responding. Meanwhile Israel is using tanks to shoot crowds of people who are starving in Gaza, creating more trouble for the region.
Russia has invaded Ukraine and may well threaten other countries in Europe.
China now has a leader who has almost absolute power and does not appear to have groomed a successor.
Sudan's civil war continues with no sign of an end, and hundreds of thousands of people are running out of food.
But the biggest agent of instability is, of course, Donald Trump. Because of his position and the power of both the weapons and the economy he commands, he is easily the most important ingredient in this toxic cocktail.
But this also underscores how quickly the world has changed in the last six years.
Before Covid the global economy felt like it was doing okay, and we expected our economy to grow as we put State Capture behind us.
Instead the world feels like it is on fire.
I do think we have to be conscious of our own journey through time though.
As I have got older, so the world in which I grew up has receded. As it becomes more and more different to what I grew up in (so often for the better), so it may be harder to understand.
A friend said to me once that he gets really irritated that the rugby authorities change the laws every season because that makes it more and more different from the game that many people now watching used to play when they were younger.
I think that's a good way of understanding how the world changes us.
It also means that probably everyone around you feels the same way.
But for the moment, I think there is good reason to feel uncertain.
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Israel-USA war on Iran – A multitude of cats set among an infinity of pigeons
The Iranian-Israeli conflict has taken an even more dangerous turn with the attack by the US on Iran's nuclear sites. Is there a way forward from this, and does history offer us any help in understanding what can be done to bring the aerial war to an end? 'Everyone has a plan until they are punched in the mouth.' — Mike Tyson Some serious history lessons In August 1914, German Kaiser Wilhelm II suddenly became nervous about launching an all-out war with France. This was about to take place on behalf of its ally, Austria, in its fight with Serbia, following the assassination of the heir to the Habsburg throne in Sarajevo. This movement towards an invasion of France was a consequence of the tangle of treaties and agreements tying Serbia to Russia, and Russia to France – versus Germany to Austria – the infamous 'blank cheque.' But the Kaiser was informed by his army's general staff that such a halt or even a reverse of the military mobilisation would create massive chaos on the rail network, and such a precipitate, ad hoc decision like the one the kaiser had proposed simply could not be undertaken. Thereafter, it was just a series of short steps before all the major European powers (and eventually America) were drawn into prolonged war. That war destroyed four empires, opened the floodgates for a devastating influenza epidemic and set the scene for a second global conflict 20 years later as a consequence of the vindictive peace treaty enforced on a vanquished Germany. Had the German general staff been able to foresee the future, they might have given their emperor's query a second thought instead of the order to the army and the railroads to proceed as planned. Following an even more destructive World War 2 and the development of atomic weapons, soon enough it was coming increasingly clear to leaders of a growing roster of nuclear powers, especially after the Soviet Union had its own bomb, that the world had become a very different place than it had been prior to Alamogordo, Hiroshima and Nagasaki. By the 1950s, doctrines such as Mutual Assured Destruction – MAD – were helping define the strategic postures of nuclear-armed nations. But it became very clear that using nuclear weapons on the new battlefields of the world would lead to even more devastating consequences than conventional fighting. Analysts like Herman Kahn began constructing a rigorous, theoretical hierarchy of combat, the ladder of escalation, that addressed the way nations would consciously move on to increasingly destructive combat until the full-on deployment of nuclear weapons took place – but with a crucial caveat that there were off-ramps on that ladder to counterbalance such potentially dangerous ideas such as 'launch on warning'. That was the idea that if it became clear a nuclear attack was imminent on a nation by its antagonist, the intended victim would launch its own retaliatory strike before the incoming missile and rockets had actually struck their intended targets. Instead, every single move up that escalatory ladder needed to be consciously contemplated before carrying them out, automatically, lockstep, like those German troop trains, lest civilisation itself perish this time around. Or, as physicist Albert Einstein had reportedly responded to the question about what kinds of weapons would be used in a future World War 3, that while he didn't know the answer to that question, he believed World War 4 would be fought with sticks and stones. There is, in fact, a frightening roster of mistakes and miscues that easily could have set off nuclear warfare, even if disaster had been averted in time. By the 1980s, many doomsday scenarios had been published in novels, or made into cinematic or made-for-television films. These included a very dark, black humour film, Dr Strangelove, and the harrowing The Day After. The former is the Stanley Kubrick classic of the end of the world by mistake, while the latter had been viewed on American television by more than 100 million people. It became the only American TV programme ever watched uninterrupted, in full, and without interpretive commentary, on Soviet TV. The Day After portrayed the destruction to the world through the circumstances of ordinary people in Lawrence, Kansas, as nuclear attacks progressively destroyed the nation. Works like this helped greatly in sensitising global publics into some serious thinking and worries about nuclear weapons. By this point, increasingly aware of the dangers of such weapons, the Soviet Union, the US and its European allies painstakingly negotiated nuclear test bans and strategic arms limitation treaties, as well as a Nuclear Proliferation Treaty to limit the expansion of nuclear-armed nations. That treaty did not, however, preclude Israel, North Korea, India or Pakistan from developing their own nuclear weapons and the missiles to deploy them at their presumed antagonists. And, presumably, too, it did not prevent Iran from undertaking some of the steps towards that as well. With these developments as prelude and foundation, we get to the heart of the challenge now roiling the Middle East – and the wider world. While the Israelis have not publicly described their nuclear weapons stockpile, let alone to even having admitted to having one, it is generally understood the Israelis have a sufficient stock of such weapons that they can creditably be seen as a bulwark against any outright military invasion of their nation by another nation – although the way those weapons would be deployed remains unclear. How could such a weapon be effectively deployed against a non-state actor like Hamas or Hezbollah, scattered into thousands of small cells, or let alone a nation that harboured them? (South Africa faced the same moral and practical conundrums once it had developed a small stockpile of such weapons – reportedly in cooperation with Israel – back in the 1980s. Could they have been used against the small, scattered formations of Umkhonto weSizwe or Apla in the frontline nations, let alone the capital city of a country like Zambia that had been harbouring those liberation group forces, or even – more horrifically, still – a black township rising in insurrection and threatening to overwhelm a nearby city? None of these possibilities has ever realistically been contemplated. The Israeli strategic doctrine and Iran's nuclear developments Over time, Israeli strategy has evolved into one of denying the possibility that any neighbouring antagonist state, such as Bashir al-Assad's Syria or Saddam Hussein's Iraq – and more recently, Iran – actually had the capability to develop nuclear weaponry to counterbalance its own undeclared but real nuclear capabilities. In accord with that policy, nuclear reactors in Iraq and Iran were effectively destroyed by Israeli air power. For years, the Netanyahu government has been pressing America for increasingly stringent measures to restrain Iranian nuclear advances. The accord hammered out during the Obama administration (the P5+1 of China, France, Germany, Russia, the United Kingdom, the United States, the European Union and Iran) had reached the Joint Comprehensive Plan of Action, the JCPOA, to ensure Iran's nuclear programme would be exclusively peaceful. It had plausibly placed limitations on Iranian nuclear developments, including various inspections and other enforcement measures. By most estimates, it had put the possibility many years off into the future of Iranian success in generating sufficient amounts of fissile material (uranium-235, the radioactive isotope of that element) through hi-tech centrifuges from the much more common uranium-238. Very foolishly, the first Trump administration abrogated American participation in the accord, thereby giving Iran licence to again make efforts to assemble stocks of the radioactive isotope well beyond the 25% concentration needed for electric power or other industrial efforts. The International Atomic Energy Agency noted such efforts were heading past the 60% level of concentration, a level close to the levels of concentration needed for weapons-grade uranium. This decision by the Trump administration helped get the ball rolling to the present crisis. Consistent with Israeli doctrine, concern that Iran was well on the way to developing nuclear weaponry, the Israelis elected to carry out attacks on a range of Iranian targets, designed to degrade the Iranian military command and control structures, kill commanders of both the regular military and Revolutionary Guards, as well as various facilities related to uranium processing. This had come after the recent missile and rocket attacks on Israel, which had been largely warded off by the Iron Dome anti-missile defence system, acting in cooperation with Western and certain Middle Eastern forces. Historical American and Iranian tensions Of course, an antagonism between Israel and Iran stretches back to 1979, following the overthrow of the US-backed Shah Pahlavi and his government in a pro-democracy popular uprising that was dominated and derailed by the Shia religious establishment led by Ayatollah Ruhollah Khomeini. The resultant authoritarian theocracy defined the US and Israel as enemies of the new Iran. Looking further back in history, since the early 1950s, US assistance to elements of the Iranian military, which overthrew Mohammad Mosaddegh's government as part of an acrimonious dispute over control of the country's oil resources, remained a sore point for many Iranians. Over the years, political and economic reforms, plus restrictions on the power of the rural clergy, plus the growing corruption of the Shah's government – aligned with the US and Israel – gave many Iranians reasons to support the Shah's departure and a view that the US and Israel were the country's enemies. Of course, other tensions, such as a rivalry between forces backed by Iran and Saudi Arabia in civil wars elsewhere in the Middle East, have kept Iran in a state of hostility towards other regional powers. It also provides an incentive for Iran to strengthen a web of proxies such as the now-departed regime in Syria, the Houthis, Hamas and Hezbollah. Iran's strategic doctrine In recent months, however, the collapse of the Assad regime in Syria, the virtual destruction of Hezbollah in Syria and southern Lebanon, and a nearly similar fate for Hamas in Gaza amid all the horrific death and destruction in that territory, probably helped nurture Israeli leaders' feelings that now was the time to deal as decisively as possible with Iran and its nuclear ambitions, despite any putative international norms about non-interference with domestic affairs or aerial attacks on another nation. Accordingly, the Israelis carried out overwhelming aerial attacks on Iran's missile launcher sites, command and control centres and, crucially, ancillary nuclear facilities. Israeli air power, however, did not extend to destroying those deep underground facilities housing those arrays of uranium centrifuges crucial to uranium isotope separation. Because of that, the Netanyahu government has been pressing hard for the Americans to deploy their massive bunker-busting bombs – devices never previously used in combat – to render grievous damage to the three key Iranian nuclear processing facilities at Nafanz, Isfahan, and Fordow. The American engagement After days of hinting about doing it – or not – the American military carried out that mission over the evening of 21-22 June. Not surprisingly, President Trump spoke in glowing terms about this very complex military effort, praising it for giving concrete form to his insistence that the US would never tolerate a nuclear-armed Iran. It is important to note, however, that US analysts had remained divided over whether Iran was clearly on the trajectory of actually concentrating the uranium up to weapons grade, to actually building a nuclear weapon, and to being able to marry such a device to a missile successfully. Imperial overreach? However, deep in the heart of the apparent success of such moments and exertions, there always lurks the possibility of overstretch or overreach, especially for Israel, even when the goal is not territorial aggrandisement, as opposed to neutering an opponent's military capabilities. One presumed hope on the part of the Israelis is that in the face of the damage of continuing aerial hostilities, ongoing economic sanctions and pent-up demands by many members of Iranian society for a chance at freedom of expression, Iranians will themselves rise up to put an end to the oppressive theocratic rule in Iran. This hope may well be illusory, as over the years, the regime has repeatedly been willing to engage in harsh repressive measures against popular unrest. Thus, subsequent outcomes from all this are not clear, even if Iranian nuclear ambitions appear to be shattered, at least for some time into the future. It is not clear what the future trajectories for Iran, Israel or America are in the current conflict. So far, at least, there is no indication Israelis have an intention of climbing up the ladder of escalation until they rise to the use of nuclear weaponry, however. In all this, the Iranian government may now be facing something approaching some existential territory of its own. Does it continue attempts to move forward with its nuclear ambitions, regardless of the damage and the massive cost to rebuild and restart it? Does it contemplate carrying out alternative responses, such as attempting to close – once again – the Gulf of Hormuz? That seaway transports a major share of global consumption of natural gas and oil from the wells of producer nations and any move to do so would have virtually instant impacts on oil prices and the stability of supply globally. Or, is the Iranian government willing to push the remnants of Hamas and Hezbollah (plus the Houthis in Yemen) to carry out efforts vis-à-vis Israel, despite the costs to those depleted movements? Or, perhaps, will Iran attempt to retaliate against the swathe of US military facilities well within range of its current missiles? As far as the Iranians are concerned, so far, they have appealed to global public opinion over a rather substantial violation of territorial integrity, even as they have indicated a kind of willingness, even now, for some kind of negotiations to bring the crisis to an end. Such statements, however, have not prevented them from continuing to fire missiles at Israeli cities. All of this is in the face of the US president's language that has wobbled between talk of negotiations and continuing belligerence. Ultimately, over this past weekend, the US clearly chose the latter. For the Israelis, they must confront what kind of off-ramp they are willing to enter, as opposed to an ongoing missile exchange with a wounded, but not vanquished, Iran and the terrifying potential for ascending Herman Kahn's escalatory ladder? And, if they do continue such an aerial duel, will the damage inflicted detract from any ability (or willingness) to reach a modus vivendi with the remaining Persian Gulf states such as Kuwait and Saudi Arabia, although the latter has insisted no such embrace is possible without an end to the fighting in Gaza and a real path for a Palestinian state as part of a two-state solution. As far as the Americans are concerned, their own path is also less than clear. There are something like 40,000 US military personnel scattered across the Middle East, all within destructive range of the kinds of missiles now being used against Israel. The US president has already thrown down the gauntlet to the Iranians that they not attack any of those facilities (or by inference any diplomatic facilities) unless the Iranians wish to endure yet further attacks by US forces – something clearly possible, given the success of those overnight attacks against Iran's nuclear facilities. If that sequence of events were to happen, how would that affect American relationships with the rest of the region? The US President's political problems There is also a challenge for Donald Trump's own political circumstances and the possibilities for his gaining the passage of legislation he favours. There is also the troubling matter of whether the president should have (or must have) gained the formal support of Congress before launching this attack. There is already a visible, increasingly angry split among his supporters (just tune into any of the Sunday television political talk shows in America) about whether the country should continue with Trump's America First/no foreign wars promised by Trump as a presidential candidate, or should his party automatically support the muscular international interventionism this bombing run demonstrated and that many in his own party had decried as a war that should not involve the US. And elsewhere, and what next? Further afield, while the Russians may well see this engagement by the US as a way America is again tangled in a conflict seemingly without an end, given their own costly, floundering assault of Ukraine, they may not be in much of a position to do much beyond being voluble in international bodies like the UN Security Council or on social media. Further to the east, the Chinese will certainly be studying the way the US exercised its precision military capabilities thousands of miles from home bases, even as they contemplate their moves towards gaining further, additional leverage against Taiwan. The fundamental challenge for all of us is how this most dangerous Middle East conflict can be brought to a conclusion without the utter destruction and devastation of the region's two most powerful nations – or even to avoid any possible threats of the use of the ultimate weapon, should the the Israelis come to believe their existence was under imminent threat. These are dangerous times, and there is no clear way forward – at least not yet. My own truly bad-case fear is that an Iranian missile or an Iron Dome defensive missile destroys one of the holy sites that are clustered close together in the greater Jerusalem area. What would that provoke? It is important to remember that some conflicts last for decades or longer. Central Europe was devastated for a century by the effects of the Thirty Years' War. In the ancient world, the Roman-Carthaginian struggle included three actual periods of intense conflict and only ended with the virtual extinction of Carthage as a city and nation. Somehow, a way must be found to bring this current episode to an end, but how? One wonders how the recent hostilities between India and Pakistan – both nuclear powers – had been tamped down before they both started their climb up that escalatory ladder. There is a topic worthy of a doctoral study and an analysis of whether there are any lessons that can be extracted from that – or even the Cuban Missile Crisis of 1962, for example – for dealing with the current Middle East conflict before something even worse occurs. Finally, is there anything nations not directly involved in the fighting can do to help ameliorate things and push the combatants away from further conflict? But this may require much more than pious pleas for an end to the fighting. DM
Daily Maverick
4 hours ago
- Daily Maverick
After the Bell: No, you're not alone; the world is a mess
As the world teeters on the brink of chaos, with everything from geopolitical conflicts to the unpredictable whims of Donald Trump stirring the pot, one can't help but wonder if we've traded a pandemic for a global financial cocktail of uncertainty that feels even more volatile than before. I hope I'm not the only one who feels the world is incredibly uncertain at the moment. And in fact I almost feel less certain than I did during Covid. At least then I felt that we were all facing the same problem. It would appear that some senior figures in the South African Reserve Bank agree. On Friday the head of the bank's financial stability project, Nicola Brink, stated during a Monetary Policy Review that 'During the review period, the global financial system e xperienced a degree of uncertainty and volatility that is similar to and in some respects worse than… at the onset of the Covid-19 pandemic'. President Cyril Ramaphosa seems to agree with the bank. He said today at the Constitutional Court that 'the world has become a very dangerous place now, with all of these conflicts that are flaring up'. It may seem strange to compare anything in recent times with Covid. I mean, during that time it felt like we were facing financial Armageddon. Stock markets around the world fell dramatically, at one point the oil prices turned negative (because oil tanks were full, people were paying customers to take the stuff). But actually, the bank is probably right. This is because the sheer number of elements that lead to instability is so high now. Then it was just one thing. And the whole world was facing it at the same time, if not exactly united. Also, it was clear pretty early on that Covid was not going to last. It was not going to be with us for a decade, it was going to end. Covid is a great example of another dynamic in global markets. That in real terms, nothing ever happens. Considering how much time, thought and sheer energy is put into trying to work out how markets will react to global events, this is incredibly surprising. But it does appear to be true. Research shows that actually while markets do react to shocks in the short-term, they tend to recover quite quickly. There is an important reason for this. As The Economist put it, 'The momentum of markets can be relentless. Shares tend to grind higher over time as consumers spend, entrepreneurs innovate and companies grow.' It would take something messing with this dynamic to stop this growth from continuing. But until around 10 years ago, I had also been told that property prices always went up. That if I bought a house it would become more valuable over time. That has not been my experience. Instead, because I bought in Joburg, values are going backwards. So the same can happen to markets. And I do worry that the sheer number of elements that are creating instability in our world may be taking us closer to some kind of greater life-changing market event than at any time since World War 2. Consider the sheer number of ingredients we are dealing with. In South Africa, the biggest variable is probably still whether the coalition government survives after Ramaphosa goes. But the rest of the world is a disaster. Israel is bombing Iran, which may or may not have nuclear weapons; Iran is responding. Meanwhile Israel is using tanks to shoot crowds of people who are starving in Gaza, creating more trouble for the region. Russia has invaded Ukraine and may well threaten other countries in Europe. China now has a leader who has almost absolute power and does not appear to have groomed a successor. Sudan's civil war continues with no sign of an end, and hundreds of thousands of people are running out of food. But the biggest agent of instability is, of course, Donald Trump. Because of his position and the power of both the weapons and the economy he commands, he is easily the most important ingredient in this toxic cocktail. But this also underscores how quickly the world has changed in the last six years. Before Covid the global economy felt like it was doing okay, and we expected our economy to grow as we put State Capture behind us. Instead the world feels like it is on fire. I do think we have to be conscious of our own journey through time though. As I have got older, so the world in which I grew up has receded. As it becomes more and more different to what I grew up in (so often for the better), so it may be harder to understand. A friend said to me once that he gets really irritated that the rugby authorities change the laws every season because that makes it more and more different from the game that many people now watching used to play when they were younger. I think that's a good way of understanding how the world changes us. It also means that probably everyone around you feels the same way. But for the moment, I think there is good reason to feel uncertain.
