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By Mayank Kejriwal, University of Southern California 

– The world is a networked place, literally and figuratively. The field of network science is used today to understand phenomena as diverse as the spread of misinformation, West African trade and protein-protein interactions in cells.

Network science has uncovered several universal properties of complex social networks, which in turn has made it possible to learn details of particular networks. For example, the network consisting of the international financial corruption scheme uncovered by the Panama Papers investigation has an unusual lack of connections among its parts.

But understanding the hidden structures of key elements of social networks, such as subgroups, has remained elusive. My colleagues and I have found two complex patterns in these networks that can help researchers better understand the hierarchies and dynamics of these elements. We found a way to detect powerful “inner circles” in large organizations simply by studying networks that map emails being sent among employees.

We demonstrated the utility of our methods by applying them to the famous Enron network. Enron was an energy trading company that perpetrated fraud on a massive scale. Our study further showed that the method can potentially be used to detect people who wield enormous soft power in an organization regardless of their official title or position. This could be useful for historical, sociological and economic research, as well as government, legal and media investigations.

From pencil and paper to artificial intelligence

Sociologists have been constructing and studying smaller social networks in careful field experiments for at least 80 years, well before the advent of the internet and online social networks. The concept is so simple that it can be drawn on paper: Entities of interest – people, businesses, countries – are nodes represented as points, and relationships between pairs of nodes are links represented as lines drawn between the points.

Using network science to study human societies and other complex systems took on new meaning in the late 1990s when researchers discovered some universal properties of networks. Some of these universal properties have since entered mainstream pop culture. One concept is the Six Degrees of Kevin Bacon, based on the famous empirical finding that any two people on Earth are six or fewer links apart. Similarly, versions of statements such as “the rich get richer” and “winner takes all” have also been replicated in some networks.

These global properties, meaning ones applying to the entire network, seemingly emerge from the myopic and local actions of independent nodes. When I connect with someone on LinkedIn, I am certainly not thinking of the global consequences of my connection on the LinkedIn network. Yet my actions, along with those of many others, eventually lead to predictable, rather than random, outcomes about how the network will evolve.

My colleagues and I have used network science to study human trafficking in the U.K., the structure of noise in artificial intelligence systems’ outputs, and financial corruption in the Panama Papers.

Groups have their own structure

Along with studying emergent properties like the Six Degrees of Kevin Bacon, researchers have also used network science to focus on problems such as community detection. Stated simply, can a set of rules, otherwise known as an algorithm, automatically discover groups or communities within a collection of people?

Today there are hundreds, if not thousands, of community detection algorithms, some relying on advanced AI methods. They are used for many purposes, including finding communities of interest and uncovering malicious groups on social media. Such algorithms encode intuitive assumptions, such as the expectation that nodes belonging to the same group are more densely connected to one another than nodes belonging to different groups.

Although an exciting line of work, community detection does not study the internal structure of communities. Should communities be thought of only as collections of nodes in networks? And what about communities that are small but particularly influential, such as inner circles and in-crowds?

Two hypothetical structures for influential groups

In a manner of speaking, you likely already have some inkling of the structure of very small groups in social networks. The truth of the adage that “a friend of my friend is also my friend” can be tested statistically in friendship networks by counting the number of triangles in the network and determining whether this number is higher than chance alone could explain. And indeed, many social network studies have been used to verify the claim.

Unfortunately, the concept starts breaking down when extended to groups with more than three members. Although motifs have been well studied in both algorithmic computer science and biology, they have not been reliably linked to influential groups in real communication networks.

Building on this tradition, my doctoral student Ke Shen and I found and presented two structures that seem elaborate but turn out to be quite common in real networks.

The first structure extends the triangle, not by adding more nodes, but by directly adding triangles. Specifically, there is a central triangle that is flanked by other peripheral triangles. Importantly, the third person in any peripheral triangle must not be linked to the third person on the central triangle, thereby excluding them from the true inner circle of influence.

The second structure is similar but assumes that there is no central triangle, and the inner circle is just a pair of nodes. A real-life example might be two co-founders of a startup like Sergey Brin and Larry Page of Google, or a power couple with joint interests, common in global politics, like Bill and Hillary Clinton.

Understanding influential groups in an infamous network

We tested our hypothesis on the Enron email network, which is well studied in network science, with nodes representing email addresses and links representing communication among those addresses. Despite being elaborate, not only were our proposed structures present in the network in greater numbers than chance alone would predict, but a qualitative analysis showed that there is merit to the claim that they represent influential groups.

The main characters in the Enron saga are well documented by now. Intriguingly, some of these characters do not seem to have had much official influence but may have wielded significant soft power. An example is Sherri Reinartz-Sera, who was the longtime administrative assistant of Jeffrey K. Skilling, the former chief executive of Enron. Unlike Skilling, Sera was only mentioned in a New York Times article following investigative reporting that took place during the course of the scandal. However, our algorithm discovered an influential group with Sera occupying a central position.

Dissecting power dynamics

Society has intricate structures at the levels of individuals, friendships and communities. In-crowds are not just ragtag groups of characters talking to one another, or a single ringleader calling all the shots. Many in-crowds, or influential groups, have a sophisticated structure.

While much still remains to be discovered about such groups and their influence, network science can help uncover their complexity.

About the Author:

Mayank Kejriwal, Research Assistant Professor of Industrial & Systems Engineering, University of Southern California

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Neil DeVotta, Wake Forest University 

Sri Lankan President Gotabaya Rajapaksa formally resigned on July 15, 2022, having earlier fled the country amid widespread protests in the Southern Asian nation.

The man who replaced him, Prime Minister and now interim President Ranil Wickremesinghe, is likewise facing calls to go amid political and economic turmoil.

Although the drama escalated over a matter of days – during which the presidential palace and the prime minister’s residence were both occupied by demonstrators – the crisis is years in the making, argues Neil DeVotta, professor of politics and international affairs at Wake Forest University.

The Conversation U.S. asked DeVotta, who grew up in Sri Lanka and specializes in South Asian politics, to explain what brought about the crisis and where the nation of 22 million goes from here.

Can you talk us through the latest events?

What happened in Sri Lanka was really quite revolutionary. For the first time in the country’s history, you had a president resign – and in the most humiliating manner.

Gotabaya Rajapaksa had earlier announced his intention to step down but did not do so immediately, because once he did that he would lose his presidential immunity from prosecution. Instead he fled the country, first going to the Maldives and then to Singapore. Some claim he may now be looking to get to Saudi Arabia – all of which is somewhat ironic given that Dubai, the Maldives and Saudi Arabia are Muslim states, and during his tenure in power Rajapaksa stood accused of encouraging Islamophobia to bolster his lock on power.

The catalyst behind all this was a protest movement. Demonstrators have since left the president’s and the prime minister’s official residence, but the protest movement has only partly succeeded. They wanted Rajapaksa and his brothers gone. But many also wanted the ouster of Prime Minister Wickremesinghe.

Instead, Wickremesinghe, who was not elected to Parliament and got a seat only through a national list that tops up the legislature, has now been sworn in as interim president. So a man with no mandate – his party got only a small fraction of the 11.5 million valid votes cast in the 2020 election – is now acting president and may end up with the job full time once the Sri Lankan Parliament holds a secret ballot on July 20, 2022.

What was the spark to the crisis?

The spark was really set off in April 2021 when Rajapaksa announced a ban on fertilizer, herbicides and pesticides.

Successive Sri Lankan governments have long been living beyond their means and employing a debt rollover strategy to keep the country afloat – in short, the country was relying on new loans, alongside revenue from tourism and international remittance, to pay down its debt.

But then came COVID-19, which severely affected tourism and contributed to what economists call a “balance of payments crisis.” In other words, the country was unable to pay for essential imports or service its debt. This pushed the government to abruptly announce a ban on herbicides and fertilizers – something they hoped would save the country US$400 million dollars on imports annually. The president had previously indicated that the move to organic agriculture would take place over 10 years. Instead, it was implemented abruptly despite warnings over the impact it would have on agriculture yields.

That led to farmers’ protesting. They were soon joined by sympathetic unions. The balance of payments crisis went far beyond farming. It got to the point when the government couldn’t pay for almost anything it was hoping to import, leading to shortages in medicines and milk powder. And that led to people from other sectors also protesting.

On top of this, the government was printing money to pay for goods. This inevitably led to inflation – which is running above 50%.

The tipping point came when people found that they could no longer pay for cooking gas and fuel. A few weeks ago, the government announced that it would provide fuel for essential services only, shuttering schools and ordering workers to stay at home.

So this was a purely economic crisis?

Not quite. While the spark was a balance of payments crisis, I believe that underpinning the mess is a deep-rooted ethnonationalism that has allowed and encouraged corruption, nepotism and short-termism.

Since at least the 1950s, Sri Lanka has been in the grips of Sinhalese Buddhist nationalism. The Sinhalese make up around 75% of the population, with Tamils at around 15% and Muslims at 10%.

Sinhalese Sri Lankans have long been favored when it comes to access to universities and government positions. This has been to the detriment of not only the country’s minorities but also its governance. It has led to a decay in how the state functions. Sri Lanka has ended up with a system that disregards merit and is instead rooted in enthnocracy – rule by one dominant group. And that has helped spread nepotism and corruption.

The fact that the Rajapaksa brothers helped brutally suppressed and defeated a three-decade Tamil insurgency bolstered their credentials among Sinhalese Buddhist nationalists and consolidated their grip on power.

That civil war, which ended in 2009, also contributed to the current crisis. Through the conflict, the Sri Lankan government ran national deficits to finance the counterinsurgency.

After the war, the Rajapaksas looked to develop the country by building up its infrastructure. What the country instead got was “blingfrastructure” – vanity projects, often financed by China, that were dogged by corruption and graft. One such project is an airport that sees very few planes land or take off. I visited the Mattala Rajapaksa International Airport in 2015, and the only other people there were a coachload of students from a school on a field trip. Nothing has changed since then.

Other such wasteful projects include a conference center and cricket ground – called the Mahinda Rajapaksa International Cricket Stadium – not far from the Mattala airport that hosts next to nothing. And then there is the Lotus Tower, the tallest communications tower in South Asia, which was supposed to contain other facilities and was ceremonially opened in 2019 but remains out of operation.

The construction of such projects has been dogged by suggestions of corruption. Such projects largely involved Chinese construction firms, often using Chinese laborers – including Chinese prisoners, in the case of the Hambantota Port, now leased to China for 99 years because Sri Lanka could not pay its debts. Sri Lankans themselves have benefited only little.

On paper it looked like the country was developing and GDP was rising. But the growth was from external money rather than goods and services generated in Sri Lanka.

Chinese loans with short terms and high interest played no small role in quickening Sri Lanka’s debt problem. As a result, the country currently owes between $5 billion and $10 billion to China, and its overall debt stands at $51 billion dollars.

What happen next?

The most important thing that Sri Lanka needs going forward is political stability. Without that, you will not get the help required from the international community.

And Sri Lanka is not going to get out of its economic mess without help from international actors, such as the International Monetary Fund, the Asian Development Bank and the World Bank. It also needs help from partners like India, Japan, China and the U.S.

As it is, Wickremesinghe, the interim president, has said the country will suffer shortages in goods until the end of 2023.

Sri Lanka needs large-scale, long-term economic restructuring. And for that to happen, the government will have to restructure its bilateral debt – the IMF will not give Sri Lanka money simply so that it can pay off its debt to China or any other entity.

But China knows that cutting any debt deal with Sri Lanka will mean that other countries that hold large Chinese debt – like Pakistan and some African countries – will expect the same. And Beijing doesn’t want to set that precedent. On the other hand, China will most likely have to work with Sri Lanka and other bilateral donors, especially now that the Rajapaksas are out of power. It needs to cultivate goodwill to maintain influence in the island and will not want to be seen as exacerbating Sri Lanka’s woes.

The IMF will also likely expect painful measures to tamp down costs if it is to come to Sri Lanka’s aid. It will most likely insist that Sri Lanka free float its currency rather than peg it to the dollar, since right now Sri Lankans abroad are using unofficial channels – and not the banking system – to remit foreign currency. So it will likely have to devalue its currency beyond what it already has. The IMF will also likely expect that the government cut back on the number of state employees – which currently stands at around 1.5 million people.

This will be a very painful process, and it will take some time. And it will likely worsen the country’s turmoil in the days ahead.

About the Author:

Neil DeVotta, Professor of Politics and International Affairs, Wake Forest University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Ino.com

Market distortions appear from time to time in different instruments and sometimes it offers opportunities. I spotted one of a kind for you in the chart below.

There is a quarter of a century of amazing correlation between crude oil futures (gray, scale A) and platinum futures (green, scale B) in the chart above. The rally and the simultaneous climax in 2008 with the following tremendous collapse into the same valley the same year are the bright spots of that strong sync.

These two instruments have been swapping the leading role as sometimes oil has been showing the path to the platinum and vice versa. The strong rebound in the past financial crisis in 2009, as well as the robust recovery in 2020 has been led by platinum futures.

The long-lasting depreciation period from 2011 till 2020 has several mis-correlation spots and overshoots in the oil price. In 2020, the two instruments have synced again as the platinum price appreciated strongly to levels unseen since 2014 and crude oil was catching up.

Last year something went wrong as the price of the metal could not progress higher after hitting the 6-year top of $1,348 in February 2021. In spite of this, the link remained strong for some time longer.

The oil price has paused its rally making the sharp zigzag in the area of the platinum price peak as if it was “inviting” the metal to continue hand in hand sky high, but in vain. This is when the divergence has started to grow and reached the ultimate gap this year.

What’s next? Possibilities that come to my mind would be a huge drop in oil price down to the $50 area to match with the current platinum level, the strong recovery of the metal’s price to around $1,600 to catch up with the oil price, or the third path would be a compromise, both instruments close the gap equally to meet in between around $75 for crude oil futures and $1,200 for platinum futures.

Every news feed tells us why oil is rising daily. What about the platinum depreciation? Let’s check its fundamentals.

In the first quarter of this year, the platinum market is in the oversupply of 167 thousand oz. Both parts of equilibrium are down, but demand dropped harder.

Three of four main components of platinum demand have decreased, especially industrial and investment components. The automotive demand remains flat. Total demand declined 26% (-541 thousand oz.) year-on-year, which is huge and it doesn’t support the metal’s rally.

Let us check the price chart of platinum futures.

The price of platinum futures moves downwards in the second red leg within a large pullback to retest the broken resistance.

The retracement was already deep enough as it dropped below the 61.8% Fibonacci retracement level. The next support level is located at $730 (78.6% Fib). The touch point of retest is located even lower around $670. Though, the market price has more room for a further weakness.

The price shouldn’t fall below the invalidation level of $562 where the current growth point is located. The first upside barrier is too far now at $1,348 (2021 peak).

This April I called the oil price to skyrocket to $176. These days, it is not a bold projection anymore as “Global oil prices could reach a “stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts”, JPMorgan Chase & Co. analysts warned.

The updated oil futures chart is below.

The oil price has advanced almost $30 since April, however the previous top of $130 was not touched. There is a retest of the blue uptrend channel support now and the situation could change anytime soon.

The bounce back in the uptrend could fuel the price to retest the all-time high of $147 at least. On the other hand, the breakdown could send the price into a deep pullback to the broken orange resistance around $50.

The latter is the price area where crude oil would close the gap to catch up with platinum according to the first chart above. It is an amazing coincidence of different charts.

High energy prices are the main driver of the current persistent inflation. Platinum is an industrial precious metal and its depreciation reflects the falling demand affected by gloomy projections of the economy and the tightening Fed. This combination could result in the stagflation (stagnation + inflation) of the economy.

Intelligent trades!

Aibek Burabayev
INO.com Contributor

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

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Source: Market Distortion: Crude Oil vs Platinum