June 2023 – Nick Corbishley

The Digital Euro, Like All Prospective CBDCs, Has a Serious Marketing Problem

CBDCs may be all the rage among central bankers, but as long as they offer little in the way of public benefit while posing huge risks to privacy, anonymity and other basic freedoms, they will struggle to gain traction.

A few months ago, European Central Bank (ECB) President Christine Lagarde had a rather surreal phone conversation. Under the mistaken impression she was speaking with Ukraine’s strongman President Volodymyr Zelensky when in actual fact she was talking to a notorious group of Russian pranksters, she opened up about the ECB’s plans for the digital euro, freely admitting that one of its main objectives is control and surveillance of people’s spending habits (something we have been warning about for the past year and a half). Her exact words:

“There will be control. You’re right. You’re completely right. We are considering whether for very small amounts, you know, anything that is around 300, 400 €, we could have a mechanism where there is zero control. But that could be dangerous…”

Lagarde also cited the war in Ukraine and Europe’s increasingly hostile relations with Russia as justification for a CBDC, saying: “I don’t want Europe to be dependent on an unfriendly country’s currency,” such as China’s or Russia’s. She also said the fate of a digital euro would be decided in October.

Here’s the recording in full:

ECB Leading the Way on CBDCs in the West

October is now just three months and one day away. As Reuters reported this week, the European Commission has already published draft legislation that will give legal underpinnings for a digital euro, assuming “the ECB decides to issue one in the coming years.” That seems to be a fairly sound assumption. The German financial journalist Norbert Häring has analysed the proposed legislation in depth and concludes that the only identifiable function of the digital euro is to “help displace cash and bring Europe closer to total digital surveillance”.

Of all Western central banks, the ECB is furthest ahead in the race to launch a CBDC, though it is still far behind China and India, both of which are already at the pilot stage of their respective CBDCs. In a talk last week with executives of European commercial banks, the Governor of the Banque de France, François Villeroy de Galhau, described the creation of a digital euro as a “duty” for Europe’s central bankers (a word Christine Lagarde has also used in the past).

“It’s very probably our duty to issue a CBDC, but it is our will to issue it with you, commercial banks, and not against you,” he said, adding that central banks are “complementary and not competitors on money and payments.” But Villeroy de Galhau also made it crystal clear that the ECB is determined to digitise so-called “public money” in the Euro Area: “As everything becomes digital, why should central bank money be the only thing to remain on paper?”

Some commercial lenders are concerned that central bank digital currencies (CBDCs) will lead to the disintermediation of the private banking system by offering users a safer place to store their money: i.e., a central bank. But Villeroy de Galhau attempted to allay such fears, insisting that the digital euro would not replace other forms of money. In fact, money, he said, “is and will remain a public-private partnership.”

A Serious Marketing Problem

One thing that is becoming increasingly clear is that the ECB’s digital euro, like all prospective central bank digital currencies, has a serious marketing problem — not just among commercial banks worried about the threat it could pose to their business model. As the FT reported last month, there are “mounting questions among consumers, financiers and politicians over exactly what the project actually aims to achieve and whether the potential risks outweigh the benefits”:

These questions have only grown as the immediate threat from cryptocurrencies has faded along with the decline in the value of bitcoin and other rival forms of money…

Some European policymakers fear that a failure to make a clear case for the digital euro will undermine the project before it is even born — that it will come to be seen as a solution that does not quite know what problem it is solving.

“What is the compelling reason for making this reform?” This is the big unanswered question,” says Ignacio Angeloni, a former ECB official who is now a part-time professor at the European University Institute in Florence. “I don’t see any big failures in the market that require the public sector to step in and provide a digital euro.”

Getting the Narrative Right

As we recently saw in Nigeria, CBDCs may be all the rage among central bankers, but as long as they offer little in the way of public benefit while posing huge risks to privacy, anonymity and other basic freedoms, they will struggle to gain traction.

Under the stewardship of Godwin Emefiele, its former governor, the Central Bank of Nigeria tried just about every ruse under the sun to expand public adoption and use of the eNaira, including removing half of all cash in circulation. But to no avail. Cash is still King in Nigeria and Emefiele is behind bars.

In Europe, central bankers are equally confident that the digital euro is just what the Euro Area’s floundering economy needs. But some politicians — who still have to care about annoying little things like public opinion, at least come election time — have serious reservations…

Read the full article on Naked Capitalism

Mexico’s AMLO Government Refuses to Bow to US Sanction Threats, Ups Ante in Fight Over GM Corn

Washington is threatening to expand its sanctions regime to Mexico, its second largest trade partner, for wanting to protect its own native crop diversity as well as its citizens’ rapidly worsening health.

Almost three decades after NAFTA was signed, Mexico has overtaken the United States as the world leader in childhood obesity. As diets rich in native corn and other traditional foods have been supplanted by ultra-processed foods and beverages, most of them coming from the US, Mexico is now in the grip of an alarming health crisis. This issue was already discussed in a VOXEU study cross-posted here in 2018, the findings of which indicated that “across Mexican states, a one standard deviation increase in the unhealthy share of food imports from the US increases the likelihood of individuals being obese by about 5 percentage points.”

According to that article adult obesity rates more than tripled in Mexico between 1980 and 2012, from 10% to 35%. Today, the rate is 37% today, the fifth highest in the world. Over 12% of the adult population has diabetes and a further 22% prediabetes. Almost half (47%) of adults have hypertension — the exact same proportion as the US.

Unless current trends are reversed, close to half (43%) of all children between the ages of 5 and 19 could be obese by 2030, according to forecasts by the Food Health Alliance. Mexico’s AMLO government is determined to step up to the plate (apologies) but it faces a wall of resistance from its biggest trading partner, the US, which provides 80% of Mexico’s food imports.

Mexico already enacted one of the strictest food labelling laws on the planet in 2020, much to the horror of global food and beverages companies. To them Mexico is a vital market, consuming more processed food than any other country in Latin America. The US, EU, Canada and Switzerland, home to some of the world’s biggest food companies, tried to derail the new legislation. But to no avail. The arrival of Covid-19, which is particularly lethal to people with three comorbidities — obesity, diabetes, and hypertension — strengthened the government’s case and resolve.

The AMLO government has also passed new legislation to ban trans fats from all processed foods, which will take effect in September. And it is trying to ban the consumption of GMO crops, albeit poquito a poquito. On December 31, 2020 Mexico’s President Andrés Manuel López Obrador (aka AMLO) issued a decree calling for all imports of GMO crops, including corn, as well as the “probably” carcinogenic weedkiller glyphosate to be phased out by the end of January 2024. Crucially, the decree enjoyed the support of Mexico’s Supreme Court.

But the decree terrified US farmers, particularly in the corn belt, Big Ag companies and global biotech behemoths, for good reason: More than 92% of the corn grown in the States is GMO, and Mexico, where corn was first domesticated around 9,000 years ago, is currently the biggest export market for US corn, all thanks to NAFTA. Its second biggest market, China, has been gradually reducing its corn imports from the US due to a combination of weak domestic demand, cheaper supplies from Brazil and the spectre of escalating tit-for-tat trade war with the US. Between them China and Mexico accounted for over half of all overseas purchases of US corn last year.

Faced with the threat of retaliatory measures from the US, AMLO’s government issued a new presidential decree earlier this year. It includes exemptions for feed corn, which counts for the lion’s share of U.S. exports. In its new decree the ban only applies to GM corn used in tortillas and corn-dough, which is supplied almost exclusively by Mexican producers of white and native corn varieties. The government reserved the right to substitute GM corn for animal feed some time in the future.

Only four percent of US corn exports are white corn, and most of that does not go into tortillas. In other words, the new decree will have minimal impact on US growers, at least for some years to come. Yet even that did not placate the US government.

At the beginning of this month, Washington convened a trade dispute panel, arguing that the new decree still violates the U.S.-Mexico Canada free trade agreement and is based on bad science. A week letter, the Canadian government joined the scrum arguing that Mexico could extend its GM ban to other crops. The panel of handsomely paid experts will now spend around half a year studying the complaint before releasing its findings, which could lead to the imposition of trade sanctions on Mexico if the country is deemed to have violated the USMCA trade agreement.

But if the US and Canada’s escalation of their trade dispute with Mexico was meant to snap the Mexican government’s resolve, it appears to have had the opposite effect. Instead of bowing to the threats of trade sanctions, Mexico’s government has upped the ante. On Saturday, it imposed a 50% tariff on white corn imports with the aim of boosting national production and preventing the entry of GM corn. Mexico imports little white corn — the kind used for human consumption — mainly from the US and South Africa.

“It may be that they take us to a panel, but this is a matter of public health,” AMLO said in his daily morning conference, adding that Washington has refused to jointly carry out an investigation with Mexican scientists to study the harm caused by the consumption of GM corn. “There are many interests involved,” he concluded.

AMLO’s decision to impose a tariff on imports of white corn comes after corn growers in the state of Sinaloa shut down the local airport in Culiacán for two days to protest against low international corn prices. The hope is that the import tariff will help reduce the downward price pressures for local growers. Mexico’s President has also said he will sign a decree banning all tortilla shops from buying GM corn:

“I am about to sign this week (an agreement) so that only white and non-transgenic corn is used in tortilla shops. This will be accompanied by the establishment of tariffs so that [GM corn] is not imported and purchased from Mexican producers ”

AMLO’s latest actions will presumably elicit yet more threats from Washington and Ottawa. But the stakes appear to be too high for Mexico’s government to back down at this point…

Read the full article on Naked Capitalism

Is A New Housing Crisis Brewing in Spain?

Spain is one of the European economies that was hardest hit by the COVID-19 virus crisis, in part because of its huge dependence on tourism. In fact, according to figures published in February by the Organisation for Economic Cooperation and Development, Spain is the OECD country (out of 38) where the real income of families has fallen the most since the pandemic. It is also the EU country that has suffered the biggest fall in per-capital income since 2020, and has been overtaken on this indicator by Slovenia, Lithuania and Estonia.

Now, after years of falling real incomes, millions of families are facing skyrocketing mortgage payments as a result of the European Central Bank’s rapid-fire interest rate hikes.

Blame Game Begins

The blame game has already begun in central government circles. After taking a thrashing in the recent local and regional elections, Pedro Sánchez’s government now faces an uphill slog in next month’s generals. As mortgage costs surge, the government is desperate to pin responsibility on the European Central Bank (ECB) and its Spanish subsidiary, the Bank of Spain. Asked in an interview about the state of the Spanish economy and the potential impact of the ECB’s latest round of interest rate hikes on Spanish homeowners, Spain’s Economy Minister Nadia Calviño said:

“You need to ask [Luis de] Guindos, [Vice President of the European Central Bank], and [Fernando] De Cos [governor of the Bank of Spain]; they are the Spaniards behind the rise in mortgages.”

Calviño is right, of course. So, too, was Sánchez himself when he said on Tuesday that “the [Spanish] Government has no powers over monetary policy.” But his government — like all EU governments — is partially to blame for high inflation due to its ongoing support for sanctions on Russia, Europe’s biggest provider of energy and other vital commodities. This is, without doubt, one of the main drivers behind the massive surge in Europe’s energy prices and overall inflation.

But the mere fact that Spain’s prime minister and economy minister are both trying to shift the burden of responsibility for rising mortgage rates to the central bankers is notable, since senior politicians rarely blame central banks for anything unless they are in a truly tight squeeze. Of course, Sánchez could have added that Spain’s central bank also doesn’t have any meaningful influence over monetary policy in Spain, since Spain’s government handed all decision making powers in that arena to the ECB when it joined the euro at the start of this century.

For Spain, where the consumer price index (CPI) clocked in at a relatively low 3.2% in May, further interest rate hikes are no longer necessary, said Calviño, adding a caveat: the ECB needs to consider Europe “as a whole.” And in the Euro Area as a whole average inflation was 6.1% in May — almost double the rate in Spain. In six countries, all of them in Eastern Europe (Lithuania, Estonia, Latvia, Slovakia, Czechia and Poland), inflation is still above 10%.

The ECB embarked on its current hiking path in July 2022, when it increased its main deposit rate from -0.5% to 0%. Since then it has hiked a further seven times, to the current rate of 3.5%, the highest level since 2001. All of this is apparently necessary to squeeze as much life out of the economy as possible by smothering consumer demand, triggering a recession, destroying millions, with the ostensible goal of bringing down inflation to a more manageable level. This ignores the fact that surging prices are, to a large extent, the result of supply-side factors, including, of course, the boomerang effects of the EU’s 11 sanctions packages against Russia, its biggest energy supplier.

While inflation has indeed fallen, the Euro Area, like the US, still has negative real rates. Meanwhile, the ECB’s rapid rate hikes are triggering all sorts of unpleasant after effects — many of them intended. They include rapidly rising costs for homeowners as mortgage rates surge. Spain is particularly vulnerable to this trend since around three-quarters of its mortgage holders have variable rate loan contracts linked to the ECB’s deposit rate, although they are generally adjusted only once a year.

Housing Bust 2.0?

Spain has already witnessed one of the most spectacular housing booms and busts of this still rather young century. During the peak of the boom phase, from 2003-05, around 700,000 homes were being built per year, more than were being built in Germany, France, Italy and the UK combined, with an aggregate population four times greater than Spain’s. By the time the dust from the subsequent bust had largely settled, in around 2015, over 600,000 families had lost their homes (and bear in mind that in Spain mortgages are recourse, meaning that banks can — and in most cases did — go after the borrower for all outstanding debt once the house is resold).

In recent years banks, builders, large real estate developers and the previous Rajoy government have done everything they can to create a new housing bubble, with a certain degree of success. By 2019 prices in some of the country’s biggest property markets, such as Madrid, Barcelona and some of the coastal and island markets, had regained much but not all of the ground lost in the previous bust. However, in other less desirable markets, home prices had barely risen, and in some they were below where they had been in Q1 2015, when the national low point occurred.

In 2020, the year of the COVID-19 lockdowns, Spain’s housing market stalled — as it did in most countries — before picking up pace once again in 2021. In 2022, the total number of residential property sales reached 650,000, their highest level in 15 years.

But that partial recovery is now in serious danger…

Read the full article on Naked Capitalism

US Troops Are in Peru to Counter Chinese and Russian Influence in Latin America, Reports Peruvian News Outlet

Peruvian troops’ “training alongside US forces will help to improve their capabilities and strengthen the operational performance of [Peruvian] Special Forces, boosting their interoperability with NATO systems and doctrine.”

As Peru descends even deeper into political chaos and ungovernability, the main priority for its unelected President Dina Boluarte is basic survival. So says a piece in the Peruvian daily La Republica, adding that Boluarte’s dire approval rating (14%-17%) is a result not just of the 60 protesters’ deaths on her watch but also her abject lack of management ability. As vice president, Boluarte helped to topple and replace her former boss, Peru’s elected President Pedro Castillo, now languishing in jail, sparking riots throughout the country. But since then (December 7), her short-lived presidency has brought nothing but bloodshed, chaos and division.

Peru is currently in the grip of its worst ever Dengue outbreak, which is hitting poor communities — many of the same communities that voted for Castillo — particularly hard. Five days ago, the Health Minister Rosa Gutiérrez resigned over criticism of her management of the crisis. Gutiérrez’s replacement, César Vásquez, faces allegations in Peru’s Congress of influence peddling in early 2021. It is against this febrile backdrop that Boluarte chose to break the news five days ago that she will not be calling general elections until 2026 — despite the fact she has repeatedly pledged to call new elections some time this year, has zero democratic legitimacy, is broadly despised by the public and is under investigation for numerous human rights violations.

But Boluarte still enjoys the support of the US Embassy*, and for the moment that is what counts. In fact, there are 1,172 US soldiers on Peruvian soil right now or at least on their way there. As I reported in my May 26 post, Why Are US Military Personnel Heading to Peru?, the Boluarte government and Peru’s Congress — which ranks even lower in the public’s estimation than Boluarte — have authorised the entry of US troops onto Peruvian soil between June 1 and August 29. They also authorised the entry of 11 US military aircraft, two boats, two trucks, rockets, grenades, detonators, satellite communication equipment, machine guns, pistols and ammunition.

War Games in the New Cold War

Since that article, more details have seeped out about the US military’s presence in Peru, which is certainly out of the ordinary. US troops have entered Peru periodically for decades, but never for periods as long as this. “Juegos de Guerra” (War Games), an in-depth report published by the weekly newspaper Hildebrandt en sus trece, wagers that the main reason for the US troops’ mobilisation is as a show of force to Washington’s main strategic rivals, Russia and China, which are “eroding” US influence in the region.

“There is a global political confrontation between the United States and China and Russia. Peru is key because we are located at a strategic point in the Pacific basin, a gateway for China and access point to Brazil’s huge market on the Atlantic seaboard. We are a hinge”, Wilson Barrantes, former director of Peru’s National Intelligence Directorate (DINI), told the weekly newspaper.

Most of the US military personnel will be taking part in Resolute Sentinel 2023, a military exercise that will be staged across a number of regions of Peru between June and August. The 12th Air Force-led U.S. Southern Command (SOUTHCOM) exercise was first held in 2021 when the US deployed 129 military personnel to Honduras, El Salvador and Guatemala. A year later, the military contingent was multiplied by seven and Belize joined the list of participating countries. The third edition will be held for the first time in South America, in a single nation: Peru.

Before the exercise begins, a contingent of 42 members of the US Special Forces will participate in training with Peru’s Joint Intelligence and Special Operations Command, the Joint Special Force and the FAP Special Forces Group. An additional 160 US soldiers, manning nine aircraft, will train with personnel from the Peruvian Air Force, Special Forces (GRUFE), the Space Operations Centre (Copes), and the National Satellite Image Centre (Cnois). Then, a total of 970 members of the US Air Force (USAF), Space Force (USSF) and the US Special Forces will participate in Resolute Sentinel 2023. An additional 65 US military personnel will be staying put until the end of the year to oversee ongoing training programs.

Preparations for the exercise were thrashed out between the US Embassy in Lima and Ana Cecilia Gervasi Diaz, Peru’s Minister of Foreign Affairs. Gervasi Diaz was appointed to the role by Boluarte on December 10, just three days after Castillo’s impeachment and imprisonment.

NATO’s Moves in Latin America

In late December, shortly after Castillo’s fall, the Mexican geopolitical analyst Alfredo Jalife-Rahme warned in one of his video conferences (which we covered here) that the United States and China are “in a war for Peru’s soul”. As I noted at the time, this “war” of which Jalife speaks is rather one-sided, given that China, unlike the US, does not tend to meddle in internal politics in the region, or at least hasn’t until now…

Read the full article on Naked Capitalism

The UK’s Tory Government, With Labour’s Help, Just Took Another Big Step Toward Outlawing Peaceful Political Protest

“The move – which uses secondary legislation to bring the powers into force – violates the constitutional principle of the separation of powers because the measures have already been rejected by Parliament.”

It seems that the UK government is determined to use just about every trick up its sleeve to outlaw peaceful protest. In February, it lost a vote in the House of Lords on the Public Order Act to broaden the interpretation of “serious disruption” (of other people’s day-to-day activities) in the already draconian Public Order Bill, to mean “anything more than minor”. Undeterred, the Home Secretary (the British equivalent of attorney general) Suella Braverman then tried to reinsert the change via secondary legislation, which has less parliamentary oversight and cannot be amended.

“A Make-or-Break Moment for Parliamentary Democracy”

It was, according to The London Economic, the first time ever that a British government has tried to use secondary legislation to directly overturn the will of Parliament. To try to stymie the move, Green Party Baroness Jenny Jones tabled a “fatal motion” to kill off the passage of the proposed legislation, triggering a vote in the House of Lords on June 13.

“This is a make-or-break moment for parliamentary democracy”, Baroness Jones said. “The Lords defeated the government on this issue and the Minister is now acting like a seventeenth-century monarch by using a decree to reverse that vote. What is the point of Parliament if a Minister can just ignore the outcome of debates and votes by imposing draconian laws on the public?”

A good question. Unfortunately, the fatal motion that Baroness presented in the Lords did not pass. Only 68 members of the house, mainly from the Liberal Democrat Party, voted in favour while 154 voted against. The Labour Party, which has been prevaricating on this issue for months, officially abstained.

“The result,” tweeted Prem Sikka, one of just 10 Labour Peers who rebelled against his party’s whip to vote for the motion, is that the “government has removed our right to protest.” Shortly after the vote, the human rights campaign group Liberty launched legal action against Braverman for unlawfully bringing in by the back door anti-protest legislation despite not having been given the powers to do so by Parliament:

The move – which uses secondary legislation to bring the powers into force – violates the constitutional principle of the separation of powers because the measures have already been rejected by Parliament.

By bringing in these powers, the Government has been accused of breaking the law to give the police ‘almost unlimited’ powers to shut down protests due to the vagueness of the new language.

The Government’s plans to lower the threshold of what constitutes ‘serious disruption’ at a protest were previously voted out of the Public Order Act by Parliament earlier this year (30 January).

Liberty says the Home Secretary has now changed the law entirely in a way that is an overreach of her power – defining ‘serious disruption’ as anything that causes ‘more than minor’ disruption.

The Public Order Bill comes just a year after the government passed the Police, Crime, Sentencing and Courts Act, which imposed onerous new restrictions on protests and public assemblies. Under previous legislation, UK police forces had to show that a protest may cause “serious public disorder, serious damage to property or serious disruption to the life of the community” before imposing any restrictions. Under the new act, they can place restrictions on any protests that might constitute an existing offence of public nuisance, including imposing starting and finishing times and noise limits.

Now, the Rishi Sunak government is trying to redefine the meaning of “serious disruption” in order to give police forces even freer rein to stamp out protests. The ultimate goal, it seems, is to give police in England and Wales new discretionary powers to nip any protests in the bid before any disruption even begins. By broadening the definition of “serious disruption” to mean “anything more than minor,” the bill will mean (in the government’s own words) that “the police will not need to wait for disruption to take place and can shut protests down before chaos erupts”.

Shami Chakrabarti, the Labour peer and former director of Liberty, described the government’s attempt to get even more powers as “very troubling”:

“The definition of what counts as serious disruption is key to this bill because it is used as a justification for a whole range of new offences, stop and search powers and banning orders. If you set the bar too low, you are really giving the police a blank cheque to shut down dissent before it has even happened.”

In recent testimony to a parliamentary committee, Adam Wagner*, a London barrister who is a member of the Equality and Human Rights Commission’s panel of counsel and author of the book Emergency State, warned that the Public Order Bill will criminalise peaceful protest “in a way that hasn’t been done before” and will result in “a lot more peaceful protesters in prison”:

It treats peaceful protest like knife crime, drug dealing or terrorism. And I don’t mean that metaphorically; I mean it directly. These are serious crime disruption orders, terrorism disruption orders, stopping people from doing that thing in the future. These are the kinds of measures we have used to disrupt terrorism, knife crime, drug dealing and gang violence. I’ve been involved in lots of cases involving those kinds of orders.

I think what the bill will end up doing — if it’s used by the police, and the police will be under pressure to use it in particular instances — the end result will be lots more protesters in criminal courts, in very long, complicated trials that will involve looking at the proportionality of the protest in question… The other thing we will see is a lot more protesters in prison and a lot more peaceful protesters in prison.

Squeezed from Both Sides

The UK, like many of its European peers, has witnessed a rise in political protests and strikes since last Autumn, largely in response to the stagflationary forces unleashed during the virus crisis and exacerbated by European governments’ self-harming sanctions against Russia. While the UK is forecast to sidestep recession this year, inflation remains stubbornly high at 8.7%. It is not just the prices of basic goods and services that have surged; so too has many people’s tax bill — the result of the Boris Johnson government’s decision in 2021, when Sunak was chancellor of exchequer, to freeze tax allowances and thresholds in cash terms at a time of surging inflation.

The resulting fiscal drag will raise significant sums for His Majesty’s Revenues and Customs as the average effective tax rate (total tax paid as a share of total income) rises more quickly over time, notes the Office for Budget Responsibility:

This happens as nominal earnings rise relative to tax thresholds, so that more of taxpayers’ income is taxed, and more of what is taxed falls into higher tax bands… Our latest estimate is that these measures will increase receipts by a combined £29.3 billion a year (1.0 per cent of GDP) in 2027-28… Based on HMRC ready reckoners, this would be equivalent to a 4p increase in the basic rate of income tax.

This is happening at the same time that costs of many basic products and services — particularly food — are surging. As a result, more and more working families, many of them debt-strapped, will fall into poverty. According to the Joseph Rowntree Foundation, 14.4 million people were living in poverty in the UK in 2021-2, including 4.2 million children, 8.1 million working-age adults and 2.1 million pensioners. More than half of the people in poverty lived in a family where at least one adult is in work (54%). Unsurprisingly, poverty among private renters has also increased – up from 32% in 2020/21 to 35% in 2021/22.

By early autumn last year, the frustration was boiling over. In October, protests over rising energy bills exploded across the country, drawing large turnouts. In 2022 as a whole the country suffered the highest number of strikes since Margaret Thatcher was prime minister. Among the legions of workers protesting for higher pay to offset the cost-of-living crisis were rail workers, nurses, ambulance drivers, postal delivery staff, bus drivers and civil servants. The government’s response was to propose legislation allowing employers in key industries to sue unions and sack employees if minimum levels are not met. From WSWS:

[The proposed bill] forces a proportion of UK employees to work during a strike, denying them the basic right to withdraw their labour and sabotaging effective industrial action.

Currently targeting the rail, firefighting, health and education sectors and impacting one in five workers, the law could be extended to cover ever wider swathes of the workforce.

A Broad Global Shift Towards Authoritarianism

What is happening in the UK is part of a broad global trend. Even before the COVID-19 pandemic upended an already fragile global economy, inequality and social divisions were already rising fast around the world. The Global Financial Crisis of 2008 and the unwillingness of governments to tackle the underlying causes of the crisis — including huge levels of private debt (much of which was shifted onto public ledgers), unfettered speculation in the financial markets and the creation of ever more destructive financial instruments — have fuelled political instability and polarisation….

Read the full article on Naked Capitalism

Central Bank of Nigeria’s Governor Has Been Suspended and Arrested After Waging All-Out War on Cash

For the moment, it is not entirely clear why Godwin Emefiele has been removed from his post and detained by Nigeria’s secret police, but there are a whole slew of possible reasons.

Something rather out of the ordinary occurred in Nigeria, Africa’s most populous nation and largest economy, this past weekend: the (now former) Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, was suspended from office by the country’s newly elected President Bola Tinubuand. Hours later, Emefiele — who had been at the helm of the CBN for nine years, during which time the Nigerian currency lost 65% of its value and inflation almost tripled — was taken into custody by Nigeria’s secret police, the State Security Service (SSS).

Governors of central banks, which are generally independent authorities, are rarely suspended from their posts, and they are hardly ever arrested. For the moment, it is not entirely clear why Emefiele has been detained but there are a whole slew of possible reasons. The arrest follows a months-long investigation into his office by the SSS, which tried unsuccessfully to arrest him in December on allegations of “financing terrorism, fraudulent activities, and economic crimes of national security dimension.”

All-Out War on Cash

Those “economic crimes of national security dimension” presumably now include waging an all-out war on cash, with dire consequences for Nigeria’s already embattled economy. Between January and February, the CBN withdraw all high-denomination notes from circulation and failed to replace them with the newly designed notes it had promised, triggering a cash crunch. The central bank also placed stringent limits on the daily cash withdrawals of anyone who could access cash. As with India’s brush with demonetisation in 2016, the result was unmitigated chaos and economic pain — in a country where 63% of the population was already poor and 33% unemployed.

In March, the central bank finally paused the cash swap program until the end of the year, but only at the dogged insistence of Nigeria’s Supreme Court. By then, the lives, jobs and businesses of untold numbers of people had been upended. Inflation soared to an almost 18-year high. Preliminary data showed that economic growth for the first quarter of 2023 came in more than one percentage point lower than in the previous quarter, which Nigeria’s National Bureau of Statistics attributed to the “adverse effects of the cash crunch.”

What’s more, irreparable damage was done to public trust in the country’s central bank and banking system, which is ironic given that lack of trust is one of the biggest obstacles to public adoption of the country’s floundering central bank digital currency (CBDC), the e-Naira. The online newspaper Premium Times called for the arrest and prosecution of Emefiele, arguing that the cash withdrawal limits the CBN had imposed were an infringement on people’s basic rights:

“[M]ost have had to live with a frightening range of infringements since the banknotes swap policy came into effect. These have ranged from the economic (loss of earnings platforms across the economy’s informal sector), through the emotional (having to beg for cash from friends, family, neighbours and strangers to meet basic needs) to the conceptual (just struggling to make sense of the policy’s design, implementation and expected outcomes).”

According to the central bank and Buhari government, these infringements were a price well worth paying in order to achieve the policy’s ostensible aims (bringing more cash into the formal economy, curbing money laundering and terrorism financing, preventing vote buying in the upcoming general election, increasing tax revenues, and advancing the country’s floundering CBDC). Emefiele hailed the cash swap as a success. For Nigeria’s Finance Minister Zainab Ahmed, the “only sore point [wa]s the pain it has caused to citizens.”

Among its laundry list of reasons for pursuing demonetisation, published in October, the CBN said the redesign of the currency would “help deepen our drive to entrench a cashless economy as it will be complemented by increased minting of our eNaira.” Yet most Nigerians had no chance of using the eNaira since they do not own a smart phone or have access to the Internet. Of Nigeria’s approximate population of 220 million, between 25 million and 40 million people actually have a smart phone. More than half of the population is unbanked.

In other words, the overwhelming majority of Nigerians had no possible means of using digital payment methods even if they had wanted to. As more than half of the cash was drained from the economy, they had no means of transacting. Many of them took to the streets to protest. Banks were vandalised; some were even burnt to the ground. At the height of the protests, in mid-February, a coalition of civil society groups demanded that the CBN issue the new notes and end the suffering of millions of Nigerians — a demand that was rejected by the central bank and the Buhari government.

IMF: “Disappointingly Low” Public Adoption of eNaira

Most of the people who have been able to download the eNaira app and have chosen to do so, have not bothered to use it. In a recent working paper, the International Monetary Fund (IMF) — which played a key role in the CBDC’s development and roll-out — described the Nigerian public’s adoption of the CBDC as “disapppointingly low,” with fewer than 2% of the downloaded eNaira wallets actually being used:

The average number of eNaira transactions since its inception amounts to about 14,000 per
week—only 1.5 percent of the number of wallets out there. This means that 98.5 percent of wallets, for any given week, have not been used even once. The average value of eNaira transaction[s] has been 923 million naira per week—0.0018 percent of the average amount of M3 during this period. The average value per one transaction has been 60,000 naira.

There are also political reasons for Emefiele’s removal from office and subsequent arrest. The (now-former) central banker tried to transition into party politics last year by running for the presidential ticket of the ruling All Progressive Congress. He had some powerful backers. As NC reader Negrodamus noted in a comment to a previous article of mine, when that bid failed, Emefiele used the country’s printing presses to try to prevent the primary victor, Tinubu, from winning the election:

[The] CBN announced the deadline for the currency swap 14 days [before] a national election? Odd timing. Why?

The CBN governor contested & lost in the primary that produced the eventual winner-Tinubu. It was thought that Tinubu’s entire machinery was based on money. So the governor in cahoots with a cabal in the office of the presidency decided to turn off the tap in a bid to deny him the Presidency by withdrawing currency from the economy (you simply cannot make this up). Take note, the policy was announced after the primaries and before the general elections.

Unfortunately this did not work for the CBN governor & co and now the courts have forced him to backtrack as there is a new president-elect and due to huge public outcry. The current presidency cabal seeing the plot has failed has abandoned Emeifele, the CBN governor.

To what extent CBN’s disastrous cash swap program was driven by Emefiele’s political ambitions is impossible to discern. Clearly those ambitions played an important role — and now that his political rival, Tibunu, is in power, he could be about to pay a very high price…

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Europe’s Strawberry War Heats Up As Germany Sends Cross-Party Delegation to Spain

Strawberry fields forever? Maybe not in water-starved south-eastern Spain.

Germany’s Bundestag sent a cross-party delegation to Spain this week to investigate a controversial proposed irrigation law in the southern region of Andalusia. The law has already caused friction between Spain’s central government, majority controlled by the nominally left-wing Spanish Socialist Workers’ Party (PSOE), and Andalusia’s Junta, controlled by a coalition of the conservative Popular Party and far-right VOX. The Junta’s proposed law will regularise nearly 1,900 hectares of berry farmland currently irrigated by illegal wells, some of them in the endangered Doñana national park, one of Europe’s largest wildlife sanctuaries and a UNESCO world heritage site.

“For Doñana it would be a disaster,” said Juanjo Carmona of the local branch of the World Wildlife Fund for Nature (WWF).

A photo of the (now much depleted) wetlands of Doñana National Park taken by Gabriela Coronado Hernández in 2017.

The park’s diverse ecosystem of marshes, lagoons, pine forests and dunes stretches across 122,000 hectares — almost the size of London. It lies on the migratory route of millions of birds and is home to many rare species such as the Iberian lynx. But its iconic wetlands are rapidly drying up.

A Fruity Powerhouse

Doñana is nestled on the southern flank of Huelva province, which is the powerhouse of Europe’s berry industry. After switching from crops such as corn and nuts to red fruits in the 1970s and ’80s, it now produces over 90% of Spain’s strawberries, roughly 30% of the EU’s and is a major source of other red fruits. But growing these fruits on such a scale requires huge reserves of sunlight (not a problem) and water (a much more serious problem).

Spain is suffering one of its worst droughts of recent years. In March and April, the country received just 36% and 22% of average rainfall respectfully, and Andalusia, like all of Spain’s Mediterranean coastal regions, has been particularly hard hit. The reservoirs of the Guadalquivir basin, Andalusia’s longest river, are at just 23% of capacity; those of the Guadiana, are at 31.93%, and the Segura, 35%.

It is against this backdrop of acute drought and water scarcity that Andalusia’s regional government has proposed a new irrigation law to expand the irrigable land in the region. The law has sparked alarm in Brussels, which has threatened Spain with financial penalties over the proposed plan. UNESCO is also concerned, having repeatedly warned of the potentially dire consequences of over-exploitation of the region’s aquifer. In a statement last week, the UN body said the proposed measures “could threaten the very reasons for the recognition of Doñana National Park as a UNESCO World Heritage site.”

This past week, representatives of the Environment Commission of the German Parliament have been in Madrid to meet with government officials, business groups and environmental organisations. They were supposed to visit Huelva and other parts of Andalusia but pulled out at the last minute, claiming they did not want to interfere in Spain’s upcoming general election. But perhaps the decision also had something to do with to the hostile reception that probably awaited them.

The ostensible purpose of the visit was to address issues related to “water scarcity and consumer protection,” according to the press release from the lower house of the German Parliament. The statement notes that the drought in Spain could affect German consumers, given that “nearly 27% of fresh fruit and vegetables [consumed in Germany] comes from Spain”.

Boycott versus Counter-Boycott

The visit follows a petition by German environmental association Compact calling on German supermarkets to stop selling imported berries grown near the endangered wildlife sanctuary. The campaign warns that by growing cheap strawberries for Germany and other northern European countries, Spain risks destroying one of its most important natural habitats. And that trend could get worse after right-wing parties swept the board in the recent local and regional elections…

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WHO Forges Partnership With EU to Create Global Digital Vaccine Passport System

The World Health Organization (WHO) adopts the EU’s expiring digital vaccine passport as a global standard, as we warned would happen over a year ago.

Yesterday (June 5) the World Health Organization (WHO) announced on its website the launch of a “landmark digital health partnership” with the European Union. As part of this agreement, WHO will be taking up the EU’s system of digital COVID-19 certification “to establish a global system that will help facilitate global mobility and protect citizens across the world from on-going and future health threats, including pandemics.”

As we warned back in March 2022, when WHO began dropping hints that it was ready to endorse COVID-19 vaccine certificates, this means that digital vaccine passports are going to become both a universal and a permanent feature of the global health and travel landscape.

That article, Are Vaccine Passports About to Go Totally Global?, reported that T-Systems, the IT services arm of Deutsche Telekom which had played a key role in making the EU’s vaccine passport systems interoperable, had been chosen by WHO as an “industry partner” in the introduction of digital vaccine passports as a standard procedure. This was apparently not only for COVID-19 vaccines but also “other vaccinations such as polio or yellow fever, across 193 countries” as well as presumably other vaccines that come on line in the future.

A “Monstrous Undertaking”

Yesterday, the result of all that work was finally made public in what the German financial journalist Norbert Häring describes as a “monstrous undertaking” that “makes a whole series of alleged conspiracy narratives come true.” WHO’s Director General Dr Tedros Adhanom Ghebreyesus announced that the EU’s expiring digital COVID certificate will be used as a model to establish a global digital health certificate.

“Building on the EU’s highly successful digital certification network, WHO aims to offer all WHO Member States access to an open-source digital health tool, which is based on the principles of equity, innovation, transparency and data protection and privacy,” said Tedros Adhanom. “New digital health products in development aim to help people everywhere receive quality health services quickly and more effectively.”

When it comes to the EU’s COVID-19 digital certificate — the so-called “Green Pass” — it is hard to fathom what exactly Tedros Adhanom means by the two words “ highly successful”. As a means of reducing transmission of COVID-19, the vaccine passports used in Europe (and most other places) did precious little, for the simple reason that the vaccines to which they are tied are non-sterilising.

Indeed, COVID-19 vaccine passports may have actually exacerbated the spread of the disease by creating a false sense of security among vaccine recipients. How else to explain the fact that by the end of 2021 the European Union, whose 27 member states had been using vaccine passports to one degree or another for half a year, was once again ground zero for the COVID-19 pandemic? Also, a recent study by Cleveland, now peer reviewed, found that any protection provided by the bivalent COVID-19 vaccine during the Omicron phase wears off “in a few months”. And over time, more prior vaccine doses translated into “increased risk of COVID-19.”

Yet in November 2022, the governments of all G-20 economies — including China and Russia — acknowledged the importance of “recognizing digital and non-digital solutions, including proof of vaccinations,” in combating COVID-19 and future pandemics. They also called for the establishment of “trusted global digital health networks.” WHO, working hand-in-hand with the EU, is now in the latter stages of making that happen.

Globalising “European Best Practices”

Yesterday Stella Kyriakides, EU Commissioner for Health and Food Safety, described the agreement as “an important step” for the digital action plan of the EU Global Health Strategy:

By using European best practices we contribute to digital health standards and interoperability globally—to the benefit of those most in need. It is also a powerful example of how alignment between the EU and the WHO can deliver better health for all, in the EU and across the world. As the directing and coordinating authority on international health work, there is no better partner than the WHO to advance the work we started at the EU and further develop global digital health solutions.

The perverse irony is that WHO initially opposed (at least in public) vaccine passports because it was not yet clear whether the vaccines actually prevented transmission of the virus.

“We at WHO are saying at this stage we would not like to see the vaccination passport as a requirement for entry or exit because we are not certain at this stage that the vaccine prevents transmission,” WHO spokeswoman Margaret Harris said at a UN news briefing in April 2021. “There are all those other questions, apart from the question of discrimination against the people who are not able to have the vaccine for one reason or another.”

Now that we know for sure that the COVID-19 vaccines do nothing to prevent transmission of COVID-19 in the Omicron era and may actually exacerbate it , WHO has decided to endorse COVID-19 vaccine passports for global travel. This is happening as concerns are growing about the safety of the COVID-19 vaccines, particularly the mRNA shots. It is also happening at the same time that WHO is seeking to significantly bolster its role in shaping health policy globally through a pandemic treaty and planned amendments to the International Health Regulations (IHR).

If the EU’s COVID-19 vaccine certification system is broadly adopted by WHO’s 194 member countries, it will presumably mean that anyone who is not up to date with their vaccine schedule will not be able to cross international borders in the future, though testing prior to travel may be an option, as it is in the EU.

If COVID-19 vaccines become compulsory to cross most or all international borders, it would essentially mean the end of two fundamental ethical principles underpinning modern medicine: bodily autonomy (the right to make decisions over one’s own life and future); and bodily integrity (the right to self-ownership and self-determination over one’s own body). In other words, if we ever want to travel again we will no longer have any say over what goes inside out body. And that will include COVID-19 vaccines (and perhaps other gene therapies) that are neither safe nor effective…

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EU’s COVID-19 Vaccine Procurement Scandal Continues to Grow Despite Deafening Media Silence

“Under Commission President von der Leyen, the tendency of EU institutions (and officials) to evade their due accountability by collectively hiding behind a democracy-defying bulwark of opacity has reached alarming proportions.”

If you blinked, you probably missed it: The European Commission has renegotiated its highly controversial COVID-19 vaccine contract with Pfizer-BioNTech, against a backdrop of almost zero press coverage. When parts of an interim report on the contract renegotiation recently leaked out, it was not to MEPs or the EU public but to journalists from the Financial Times and the Reuters news agency. And then the story quickly disappeared. Which is probably no surprise given how little difference the renegotiation will make, as Martin Sonneborn, a German MEP and former editor-in-chief of the Satirical magazine Titanic, documents in a withering account:

If their reports are correct, then the Commission is proposing to replace Pfizer’s existing €10 BILLION payment obligation with a €10 BILLION payment obligation to Pfizer.

An interesting shell game.

The EU may even end up paying more for less (more on that later).

The renegotiation had become necessary because many EU member governments had grown weary of amassing (and paying for) ever-larger mountains of COVID-19 vaccine vials that hardly anyone wants and will never be used. Yet new supplies kept arriving. As I reported in January, Germany’s government had accumulated more than 150 million unused vials in its central warehouse and was even talking of cancelling or reducing the additional orders it had made through the EU Commission for 2023 and 2024. Many states in Eastern Europe were saying much the same.

This was enough to get the Commission, kicking and screaming, back to the negotiating table. But if past is prologue, the most important details of the renegotiation will never be made public.

“Disappearing Ink”

On May 26, the Commission announced it had reached a deal with Pfizer to revise the terms of the May 2021 contract. The new deal cuts down the 450 million doses that were still due to be delivered in 2023, and spreads them out over the next four years. As Politico noted in its piece Pfizer, the EU, and Disappearing Ink, “that’s all the information you get. The Commission isn’t revealing the new number of doses that member countries must buy, nor any of the financial terms of the amended contract.”

Sonneborn has tried to make some sense of the bare bones on offer (machine translated):

It is about “adjusting” the gigantic (third) von der Leyen-Pfizer contract, with which the Commission had made a binding commitment to purchase 900 million doses by the end of 2023. Around 400 million of these units have already been delivered, and the remaining 500 million still have to be accepted by the EU members this year.

The starting point for the renegotiations are the 500 million doses still to be purchased. At the list price of 20 euros/dose, this results in a liability (from the legal contract concluded in 2021) of €10 billion.

According to the Financial Times, the renegotiated contract now envisages reducing the total number of vaccine doses to be purchased from 500 million to 280 million. In the future, 70 million vials are to be purchased per year, with the delivery period being extended to 2026. Pfizer is willing to cancel the units that were originally ordered but have not been purchased in return for a “cancellation fee” of €10/dose, but only if the EU accepts a higher price for the vials to be delivered by 2026. In dark corners of the schoolyard (and the pharmaceutical industry) this is called a “flexibility fee”…

[T]hese [new vaccines] are no longer to be priced like the previous one (20 euros per shot), but according to a new, as yet unknown pricing system, which provides for an equally “adjusted” higher price for every future “adjusted” vaccine.

If we haven’t miscalculated, then at least another €5.6 BILLION euros from binding EU contracts will go to Pfizer’s balance sheets books and offshore accounts, if they haven’t burst by then. And in view of Pfizer’s current sales price of 110 to 130 dollars per dose in the USA, we are so dizzy that we can no longer reliably calculate the result here. That would correspond to 280 million 100 euro notes.

To summarise: The Commission is proposing to give up 220 million originally ordered Pfizer doses for a cancellation fee of 2.2 billion euros and in return is giving up a new order disguised as a renegotiation of 280 million units, for a sum of between €5.6 and €28 billion.

One seeming result of the renegotiation is that Pfizer-BioNtech have secured a quasi-monopoly in the EU for their hugely lucrative vaccine business. According to an unnamed source cited by the FT, if Pfizer-BioNTech were to ship around 70 million doses a year over the next few years, it would more or less cover the entire market. This would surely contravene the EU’s antitrust laws, and is a serendipitous outcome for a medical product that has proven to be not nearly as effective or as safe as initially marketed. In fact, BioNtech is facing a rash of lawsuits in its native Germany for suspected injuries and adverse events caused by its COVID-19 vaccine.

Given the original vaccine contract is the single largest procurement deal the Commission has ever signed and that EU taxpayers will essentially be footing the bill for vaccines that most of them do not want and will not take, one might expect that its renegotiation would be a matter of broad public interest. Yet the story has met a wall of deafening silence from the continent’s mainstream media (with Politico proving an honourable exception).

More worrisome still, VdL’s Commission is seeking to carve out a much larger role for itself in securing joint procurement deals for the EU’s 27 Member States, not only in healthcare but also in energy and arms…

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