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Short Notes

The confluence of a few modest streams can give you a mighty river.

Just so the converging of the unexpected in human lives.

In its Global Risks 2013 report, the World Economic Forum highlights various risks it considers most worrisome for the next ten years.

One of them it ended up calling Digital Wildfires in a Hyper-connected World.

It concerns mostly reputational risk faced by large global companies if something gets misrepresented through global social media, potentially instantly brewing up a monstrous and costly storm.

Even faulty information can then lead to terrible costly downsides in reputations tarnished.

But why stop there?

There seem to be two fears operating out there.

The one is that the start of Fed tapering will sink the Rand far beyond its current levels, providing a fresh boost to our inflation.

That concern continues to filter through steadily from SARB public utterances. They are not alone.

The other fear concerns the behaviour of our mining labour and unions, but stretching beyond them to other sectors of the economy with their unionised cadres.

Will excessive wage demands and costly strike action lead to new wage/price spirals boosting inflation?

That could unite our foreign investors and traders in further sinking the Rand as well.

Together these two forces, the one determined in foreign capitals, the other in our own backyard, create a sense of palatable downside risk for the Rand.

There is this deep seated global unease.

Once the leading central bank (the Federal Reserve or Fed for short) withholds its largesse, will we shrivel on the vine, like a plant starved of water?

There is this deep unease about imminent drought.

The Fed has added $3 trill to its balance sheet since 2008, merrily buying US Treasury bonds and residential mortgage bonds.

This spout of new money flooded US markets, and by implication global markets, elevating financial asset prices (bonds, equities) and commodities and EM currencies to ever grander heights.

Allowing the spout to spout less surely means less demand for such assets, higher US bond yields, rich country investors favouring such US assets more, causing a loud sucking sound as capital cascades back towards the US, pushing the Dollar stronger and EM currencies weaker?

Our 52 million South Africans are increasingly connected.

Nielsen (2011) reported more South Africans (over 29 million) using cell phones than radio (28 million), television (27 million), personal computers (6 million) or telephone landlines (5 million).

That defines the means of our social media interface, allowing us to swap impressions on an exponentially growing scale.

But what do all these South Africans believe and do? What is the spread, where do they congregate?

Traditional market research selects groups of people whose make-up reflect much larger populations, asks questions and then feels statistically confident to attribute answers to these larger populations as well.

It is an old, trusted methodology, if costly.

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