Israel's international war finance, flight capital in Singapore, how Moody came to love Meloni & native American deaths of despair
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Khaled Jarada is a young Palestinian artist, born in 1996 in Gaza. His work concentrates on the human form, in shades that stress serenity and its undermining. With thanks to Abdalhadi Alijla.
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Israel’s war debt
Israel has borrowed billions of dollars in recent weeks through privately negotiated deals to help fund its war against Hamas but is having to pay unusually high borrowing costs to get the deals over the line. Since Hamas’s attack on October 7, Israel has raised more than $6bn from international debt investors. This has included $5.1bn across three new bond issues and six top-ups of existing dollar and euro-denominated bonds, and more than $1bn of fundraising through a US entity. Investors said recent bonds had been issued in so-called private placements, a process through which the securities are not offered to the public market but instead sold to select investors. The final pricing of the deals was not disclosed. However, bankers said they had priced in line with what they would expect from a public deal. Of two dollar bonds issued in November, Israel is paying coupons of 6.25 per cent and 6.5 per cent on bonds maturing in four and eight years’ time. That is much higher than benchmark US Treasury yields, which ranged between 4.5 and 4.7 per cent when the bonds were issued. The deals were arranged by Goldman Sachs and Bank of America respectively. In contrast, Israel issued a 2033 dollar bond in January with a coupon of 4.5 per cent, a much smaller spread — or gap — above Treasury yields, which were 3.6 per cent at the time. Israel’s bond issuances to help fund the war are viewed as controversial in some parts of the debt market. While some investors, for instance in the US, have been keen to lend to the country following the October 7 attacks, others view the fundraising as anathema, given the humanitarian cost of Israel’s invasion of Gaza. Investors and analysts noted that the bumper issuance was done through private placements rather than via open syndications and roadshows, which are usually carried out when new bonds are launched. The reason for this, they said, could be to raise funds for the war effort quickly or without attracting unwanted attention, and could be a sign of how nervous some investors had grown about buying Israel’s debt. “The reality is that, for a lot of investors, Israel at the moment carries too much ESG [environmental, social and governance] risk, especially for some emerging market investors where Israel is off benchmark,” said Thys Louw, emerging market debt portfolio manager at fund manager Ninety One…
Investors note that Israel’s debt, which has a double A minus credit rating from S&P, is trading at a chunky discount to countries with similar credit ratings such as South Korea … Brazil, which has a triple B minus credit rating from S&P, six rungs lower than Israel, issued a seven-year dollar paper this week in its first-ever foreign currency sustainable bond with a yield of 6.5 per cent. Israel has also turned to individuals and municipalities to raise debt. Israel Bonds, which is registered in the US but affiliated to Israel’s finance ministry, has sold more than $1bn of bonds since October 7, almost doubling the amount it had raised for the year. … More than 15 US states have invested in Israel Bonds since the war broke out including Florida, New York, Texas, Alabama, Arizona and Ohio. “We have never faced such huge support, in terms of the numbers or the scope of investments, by so many people,” said Naveh. “It allows the ministry of finance in Israel to raise billions of dollars of additional debt to fulfil all its special missions following the war.”
Source: FT
What’s the impact of the war on Gaza on the Palestinian economy?
This program from Al Jazeera, featuring an interview with Raja Khalidi, sets out to explore a question too little asked:
The UN warns the war on Gaza could set back development in the Palestinian territories by as much as 16 years. The Palestinian territories are dependent on Israel for their labour and goods markets and for basic services like water and electricity.
They are locked in a cycle of underdevelopment caused by decades of Israeli restrictions and occupation. Palestinian GDP stood at just over $20bn last year. By comparison, Israel’s economy is worth nearly $500bn.
Plus, how is Lebanon’s economy being affected by the spillover of the conflict?
Back to the future - the capitalism of family lines
After the rise and fall of intense fascism-talk around Trump’s presidency, capitalist crisis amid ballooning inequality offers an enduring alternative analogy with the 1930s. And it brings all kinds of problems, here explored at the top end — where ultra-high net worth families seek to manage their wealth:
The global queue to set up a family office in Singapore has stretched to as long as 18 months, with a backlog of wealthy investors encountering stricter new regulations in the Asian financial hub. Family offices, demand for which boomed during the pandemic and which have come to symbolise Singapore’s ambitions as an investment destination, have come under additional scrutiny in the wake of the city-state’s biggest money laundering probe. The number of Singapore-registered family offices, which manage tens of billions of dollars of private wealth, has leapt from just 50 in 2018 to 1,100 at the end of 2022, according to the Monetary Authority of Singapore.
Source: FT
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Native American deaths of despair yield more questions than answers
At the Federal Reserve Bank of Minneapolis, some important research introduced by Elliot Charette and Andrew Goodman-Bacon:
Measuring death rates is not as easy as it seems. Solid data on national and state death rates go back decades, but more granular information about who died, and where and why they died, is not so readily available. To protect privacy, the Center for Disease Control only reports death totals for localities and causes for which there were are least 10 deaths. This makes it especially hard to learn about deaths for racial groups in small areas, like reservations, and from specific causes, like drug use, alcohol abuse, or suicide. Coroners and medical examiners also fill out race and ethnicity information on death certificates, and comparisons with self-reported census data suggest that the coroners often get it wrong.
Here we get to the study by Randall Akee, Donn Feir, Marina Mileo Gorzig, and Samuel Myers Jr.:
Thus, the authors first had to tease out accurate measures of deaths of despair for misclassified populations that tend to live in sparsely populated areas. To do so they used data from every death certificate from 2005–17, combed through the detailed cause-of-death codes, and adjusted for the likelihood that officials misclassified Native American decedents as some other race. They measured deaths of despair as the share of deaths attributable to drugs, alcohol, or suicide.
The results, shown in the figure below, reveal that Native Americans without a college degree suffer from deaths of despair more than twice as often as similarly educated White people (14.5 percent of deaths versus 6.3 percent of deaths). For Native American adults, deaths of despair were outnumbered only by deaths from heart disease from 2005–17. In addition, deaths of despair occur earlier for Native Americans. In particular, suicides peak in the late teens and 20s—when people would otherwise be investing in themselves, starting careers, or forming families—rather than the 50s and 60s, the ages when suicides peak among White Americans.
Native American women and girls face the largest differentials: deaths of despair comprise over 10% of all deaths among Native American women and girls – almost four times as high as the proportion of deaths for non-Hispanic white women and girls. However, the factors related to these patterns are very different for Native Americans than they are for non-Hispanic white Americans. Improvements in economic conditions are associated with decreased deaths from drug use, alcohol use, and suicide for non-Hispanic white Americans. On the other hand, in counties with higher labor force participation rates, lower unemployment, and higher ratios of employees to residents, there are significantly higher Native American deaths attributed to suicide and drug use. These results suggest that general improvements in local labor market conditions may not be associated with a reduction in deaths of despair for all groups.
The differential is especially stark amongst young people:
h/t Natasha Lennard