The Arab Dilemma: Dictators, the Dollar, and Demographics
By John Galt
January 31, 2011
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The American financial and mainstream media seem to be absolutely fascinated that an Arab nepotist system and oligarchy could be brought down with street riots only, as as happened in Tunisia. The problem is that the people who continue to focus on the “big picture” aspects and just assume that because oil prices are high and the citizens can be bribed that all is well behind the veil. The truth is somewhat more difficult for them to accept however as the social media has been buzzing about the internal issues which are destroying the societal structure of these nations from Morocco to Egypt, and soon to spread to the Arabian peninsula in force. For decades the receipt of our petrodollars meant unrivaled wealth for the ruling families and their ability to suppress dissent was comparably simple either through the use of brute force, religious leaders being bribed to inflame the masses in the name of Islam, or simply providing massive welfare programs which essentially paid the population to remain at home and silent. In addition to maintain order on their borders and within the Arab League, the petrol states often subsidized their neighbors to insure that the Islamic world remained united against their foes, be it Israel, Communism, or in some cases, the United States.
I. DICTATORSHIPS GALORE
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The chart above only begins to tell the tale of wow for those “pro-democracy” loons who think that centuries of human behavior can be changed overnight because of Twitter or the invention of the Blackberry and iPhone. There is no app called “iFreedom” which installs an American style of government in the region and the hot spots which were foreign to the majority of American citizens just fourteen days ago. The hopes and aspirations of the left in our country and Europe that in some cases centuries old traditions and beliefs will fall to the wayside because of a speech and the jutting of one’s chin are smoking crack. Some nations are ready for change and will see a shift in political leadership. Others will become more repressive and slaughter the fools who think hope and change will stop a 125 mm round heading for their torso as they march and chant.
The American leftist idealists are actually seeking not to replace the old oligarchies with a new republican or democratic form of government in these nations, but to usurp the Islamic Democracy movements and allow their original allies from the 1960′s and 1970′s to ascend to positions of power, creating a twisted Leninist-Mao Islamic Republic model as envisioned with the original Soviet Revolution of the early twentieth century. Reality hits them square in the eyes however when powerful leaders like the House of Saud express explicit support for dictatorships like those in Egypt. Thus when you hear the cries of support for usurping decades of dictatorship, remember what happened in the 1970′s when President James Earl Carter allowed staunch anti-communist allies in South Africa, Rhodesia, Southwest Africa, and Iran to twist in the wind and extend the suffering of the citizens of those nations well into the twenty-first century.
II. Thank You Ben but the Arabs Do Not WANT Any More Dollars
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The Middle Eastern nations really do not have any desire to obtain any more dollars. In fact if anything, the desire to partner up with other nations wishing to avoid the dollar is becoming quite apparent as they intensify their trading relationships with China and India. The nation of Saudi Arabia in fact has expedited their cooperation and trade agreements with the Chinese communists as indicated in this article from Le Monde Diplomatique, China and Saud Arabia: Just Good Friends , January 2011 edition, where the highlights of the improved relations, as well as low points, are reviewed in detail. The U.S. Dollar has been on a steady decline versus the major world currencies since the first major peak in the post-recession 1980′s, and once again after 2001 when Greenspan engaged in the turbo printing policies which Bernanke continues to expand upon to this day. This is best exhibited by the Fed’s own chart of the Trade Weighted U.S. Dollar Index versus major trading currencies, the most accurate measurement of the strength of the dollar:
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The policy of degrading the U.S. dollar has created a huge problem overseas as the price of foodstuffs, despite record production levels for almost two decades now, continues to achieve annualized increases as reflected by the chart below overlaying the Trade Weighted Dollar Index against Major Currencies versus the inflation rate (cumulative, NSA) for food:
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Thus the policy of creating a more competitive America via depreciating the dollar might seem logical from the Fed standpoint, the consequences have been quite dire. Over the past forty years we have continued to increase yields and production of foodstuffs, yet the deterioration of our dollar has done nothing to improve the price of food. Since America is the leading producer of food in the world, the use of depreciated dollars being exported overseas to the Middle East and North Africa only having the same dollars losing value as they come back to purchase foodstuffs has created institutionalized food inflation overseas which only fuels the nightmare we are witnessing on television now.
This policy of destroying the dollar has also impacted the American consumer yet few wish to admit it until they fill up their gas tanks or go grocery shopping for a family of four or more. That is best illustrated by using the same chart against the energy inflation over the same period as above:
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So much for “Quantitative Easing” helping the lower and middle class in America and the world.
III. The Demographic Time Bomb
The mainstream media in the United States and much of the West has finally elected to cover the chronic unemployment problems in the MENA(Middle East-North Africa) nations as the riots and protests expand on an almost daily basis. Years of repressive rule by regimes with no formal economic training nor desire to engage in anything beyond crony capitalism and Euro-Socialism has left a vast wasteland of opportunity dying in the deserts of the region, with only bribery maintaining the peace and quite in many of these countries. However when one peels the layers of the onion back, a well-educated workforce in many nations has created not just unrest, but an underemployed almost caste like system where only royal family members in the monarchies or those who achieve favor with the oligarchs can find work to match their educational skills. In the story from Arabian Business on January 18, 2011:
Arab world needs 40m new jobs in next 20 years
there is one key sentence which should alarm the West and especially those in Washington, D.C. who stay married to traditionalist views of the region:“We are all in need of economic integration, and without it we cannot sustain… with what is happening across the globe,” Rashid said, alluding to last week’s uprising in Tunisia. “Everyone is for regionalisation.”(sic)
The problem with the Arab version of “regionalism” and creating a unified economic bloc, it would not behave like a NAFTA or European Union type of structure. The young and old all long for the glory days of empire when the Caliphates of Islam ruled from Spain to India and the center of world commerce flowed through their region while the world bowed down to the sword of Allah and the followers. Thus the demographic time bomb has a fuse which has been lit, and thus far two of the bombs have exploded in Tunisia and Egypt, with the fuse getting dangerously short in Yemen, Jordan, Algeria, and many other nations in the MENA region.
For these regions I warn my readers, do not accept the Washington think-tank doublespeak nor the professorial nonsense some may espouse in the weeks ahead that everything will be fine and U.S. foreign policy is sound. Regardless of the outcome of the Egyptian crisis, there are more problems to come as the region experiences the onslaught of decades of self inflicted despotism antagonized further by the incompetence of the world’s central banks.