It was late Sunday morning when I found myself having a slow breakfast on one of the main historic streets in Warsaw. It’s called Faubourg de Cracovie and it is one of the best-known and most prestigious streets of Poland’s capital, surrounded by historic palaces, churches and manor houses.
It comprises part of the Royal Route that runs from Warsaw's Royal Castle and Old Town, south to King John III Sobieski’s 17th-century royal residence at Wilanow.
The King was an able military commander, most famous for his victory over the Turks at the 1683 Battle of Vienna, after which the Pope hailed him as the savior of Christendom.
Sobieski ruled over Poland and Lithuania for 22 years.
He had a French wife - Marie d'Arquien, known in Poland by the diminutive form "Marysieńka", which actually sounds sweet if you understand the language.
The Royal couple became famous for their love letters, written from 1665 to 1683, when they were parted either due to John III Sobieski's military engagements or her travels to Paris. The letters give insight into the authentic feelings of the loving couple and also their reflections on day-to-day decisions made by the king, as he consulted his wife about them.
That late morning I was sitting outside, having a glass of hot red wine and feeding a small bird with almonds so it stayed on my rustic wooden table and kept me company. Just up the street a young blonde woman was playing violin and she was really good at it.
It was the type of a morning that is hard to recreate anywhere else.
Warsaw suffered heavy destruction at the beginning of the Second World War, in September of 1939. Then, during the uprising in August of 1944 the town was totally leveled by the Germans. It’s a shame really, because Warsaw was of the most beautiful cities in the years leading to the war. It was known as the “Paris of the North”.
After the war the Poles rebuilt the landmarks, which simply means none of these are real, just recreated.
Interestingly, from the founding of the Poland Kingdom in 1025 through to the early years of the Polish-Lithuanian Commonwealth created in 1569, Poland was the most tolerant country in Europe, and that’s saying something given what went on in Western Europe at that time.
For centuries it became a shelter for persecuted and expelled European Jewish communities and the home to the world's largest Jewish diaspora of the time.
As Poland regained independence in the aftermath of World War I, it became one of the world's largest Jewish centers of over 3 million people.
Later, World War II and the Nazi prosecution of the Jews ended that chapter of history, as we all know. It was the worst ending imaginable.
Geopolitics is like real estate, it has three important rules: location, location, location. Poland is the bridge between Germany and Russia - with wide open planes it is the narrowest place to cross east-west between the Baltic Sea and the Tatra mountains in the south. Every major European confrontation happens here, whether fought secretly (typically) or an all out war.
This country is hard on people, I don’t live there anymore and need to learn to let it go. Maybe one day I will.
The Baltic Dry Index, which tracks the cost of moving bulk commodities and is considered a leading indicator of global trade, is down more than 50% since the start of the year. The Index represents the cost of renting an ocean-going container ship to move goods from, say, Chinese factories to the Port of Los Angeles.
Brokers in Singapore and London said capsize vessels, the largest ships that move bulk commodities like iron ore, coal and aluminum, were chartered in the spot market for as low as $8,200 a day on Thursday, a $500 decline from Wednesday. Break-even costs for carriers can be as high as $15,000 a day, and daily rates in the capsize market hovered above $20,000 last year. The ship executives say the bulk seaborne freight business is suffering from the lowest demand in two years, while China’s trade tussle with the U.S. is making the market more volatile.
There are some specific, possibly temporary things going on here - you may blame weak demand from China over the Lunar New Year and from Brazil after Vale SA’s iron ore disaster, in which a mining dam burst, triggering a flood. And Vale has suspended production at a number of sites, but the void will be largely covered by iron ore shipments out of Australia.
But, as they say on late night TV - wait, there’s more.
China totters precariously as signaled by abrupt slowdowns among its principal suppliers---Japan and South Korea. There are also broader forces at work. The trade war isn’t just a piece of political theatre for the US. They really do need factories to come back home if they want to avoid a populist and/or socialist revolution.
It’s possible that the whole free trade/mobile capital/cheap labor/long supply chain Age of Globalisation, with its assumption of unlimited rich-country demand and plentiful cheap energy for transport was just an artifact of a very specific time.
It was unsustainable to begin with.
Thing is, that the Chinese economy is based on integration with the global system and access to hard currency paying consumer markets of mammoth size. It will only work if it’s possible to bring raw materials and energy from beyond the continent, process them at home, ship the finished product, and the whole long supply chain has no security interruptions anywhere. That is an awfully long list of requirements for a country to function, requirements that China is completely unable to guarantee on it’s own. They need US navy for security, cannot survive in anything different than the current global order.
Which is now changing.
Most important thing to understand about China is the fact that this is not an economic entity, this is a political/military entity and it’s stability is not guaranteed. The maps they showed you at school of one big China? That’s an exception, not the rule.
In the North, the Yellow River is not navigable and the area is wide-open plains with two thousand years of history of civil conflict.
In central China the Yangtze River is navigable and Shanghai is a New York or Toronto of China – this is where the money is. Down south you have sub-tropical mountains covering most of the territory and some good ports down at the Pearl River delta. It took 2000 years for the Chinese from the north to ultimately exert control over south and they see this part of the country as a permanent secessionist problem. Think Hong-Kong.
Between Shanghai and Beijing the deal was this: you have the money, we have the guns, so to make it work they traded off leadership – one is in charge growth and one is in charge of security and unity. Until last March, when the elites made Xi a president for life in China. He now has more power in his hands than any emperor in the history of the country to face global change that is underway.
They say that the only thing in life that never changes is constant change itself. Most people are not comfortable with it. Call it the unbearable lightness of being.
Thing is, I like it that way.
This winter is cold in the Midwest. Last week’s report said that Chicago was colder then Antarctica. They had to put the rail track switches on fire in the windy city so the ice melts and the trains can go in the right direction.
The energy output of the sun peaked in 2015 and has been crashing faster that anyone thought possible, and this is according to NASA charts.
Toronto had temperatures so low that a new BMW X5 that serves us as a winter car gave up and now needs a new engine. The crankshaft and bearings broke in one messy spectacle just down the street from the house, in a big example of sloppy engineering. They should test the cars where they sell them, I would think.
The enthusiasts of electric cars had a wake up call of sorts: that the battery range is temperature dependent - it shrinks dramatically when it gets cold.
On the subject of cars, electric and otherwise - one morning last November en route to Tokyo was a Gulfstream G650 with Carlos Ghosn, the charismatic executive who’d engineered the Renault-Nissan alliance and now served as chairman of both companies.
This corporate alliance struck when Renault rescued Nissan from the edge of bankruptcy in 1991 by paying $5.3 billion for about a third of its shares.
Nissan was a financial mess at that time, but the relationship evolved in a direction that might charitably be described as awkward.
Ghosn was arrested by prosecutors upon arrival at Haneda airport in a situation that looks like more than the comeuppance of an executive who flew his Gulfstream too close to the sun. It looked like a palace coup.
Nissan has said that Ghosn engaged in a wide pattern of unethical behavior, but the criminal charges against him pertain only to some foreign exchange transaction and to allegations that he concealed the true scale of his retirement compensation—money he has yet to receive. One could say that he was arrested in anticipation of things.
French government’s response is remarkably missing, specially given the fact that it owns a majority stake in Renault and president Macron was touring an assembly plant with Ghosn not so long before the big guy’s arrest.
Wide smiles and all that.
The Ghosn’s case will turn on a simple question: how could a sophisticated global automaker, with battalions of lawyers and auditors and abundant bureaucratic infrastructure, not know what it was paying its chairman?
In the Tokyo prison Ghosn is interrogated daily without the possibility to take notes to prepare defense with his lawyers. He also asked for blankets because it is cold in the cell and he has lost a lot of weight.
And he is not charged with anything yet.
Try to pull this nonsense on a North American executive and see what happens to you.
It seems the big chill is also elsewhere - the Chinese government is cracking down on capital flows from China to other countries, particularly to fund real estate projects, after a reckless binge of buying up everything in sight.
This leaves the construction of some trophy properties in LA and San Francisco on hold for now as the Chinese developers are being forced to unload these toys.
Obviously the work stoppage due to lack funding is rattling some nerves in California.
The Chinese government is also now a net seller of US treasuries, a small thing but significant.
A new world order is taking shape.