Thursday, March 10, 2011

A Handy Guide to the Revolts in the Middle East—And Their Likely Effects On Us

The Middle East and North Africa. Click to enlarge.

In 1848, protests and revolutions swept through Europe. The specific causes were different in each country, but the underlying cause was the same everywhere: The middle and upper middle classes—politically powerless in these absolutist monarchies—wanted more control over their lives. 

We are having an 1848 moment in the Middle East: Autocratic governments in two of these countries have been overthrown outright (Tunisia and Egypt), one is sliding into civil war (Libya), and a host of others are teetering. A few other undemocratic governments beyond the Middle East are very worried that their restive populations might get ideas—China, I’m looking at you. 

The immediate spark for these revolts has been the rising price of food—but the fuel for this bonfire has been decades of political marginalization for large swathes of the educated population of these Middle Eastern countries.

Autocratic regimes never fare well during economic downturns. The Global Depression that began with the financial crisis in 2008 is slowly but surely picking up a head of inflationary steam, which has been squeezing the middle classes in these countries. A middle class being squeezed economically eventually oozes out political unrest—as we have been seeing throughout the Middle East and North Africa. 

Now, in early March 2011, with the fate of these various revolts still unclear, it would be wise to go over them, and see where they are in each country. And it would be wise, too, to examine how these various revolts in the Middle East will affect the rest of the world in the short- to medium-term. 

So to begin: 

• Tunisia: One of the things we forget is that, when history decides to move, it can move fast. President Zine El Abidine Ben Ali had been in power in Tunisia since 1987, winning crooked election after crooked election, all the while supported by the United States and especially France. 

All was copacetic for decades—until one morning, December 10, 2010, a 26 year-old vegetable vendor named Mohamed Bouazizi had his cart confiscated by a policewoman in the city of Sidi Bouzid. She insulted him and reportedly spat in his face. When he tried to get redress from the local municipality, he was rebuffed. Out of frustration, humiliation, and likely impulsive foolishness, he doused himself in gasoline and set himself on fire, in protest at the unfairness of it all.

The outrage this triggered in the rest of the Tunisian population is remarkable. Protests started in Sidi Bouzid, then quickly spread throughout the rest of the country, even as the government of President Ben Ali tried very seriously to quell it: Tear gas, riot police, the whole shebang.

But it didn’t work. Ben Ali found himself fleeing the country for his life, and settling in Saudi Arabia with (allegedly) one-and-a-half tons of Tunisia’s gold. Interpol put out an international arrest warrant against him.

What was key in the Tunisian revolt was that the middle and upper-middle classes joined in the protests: Their sense of disenfranchisement made the revolt happen.

Why did they join? Because of food prices: They had been steadily rising, crippling the middle classes’ ability to feed itself. That’s the reason for all protests, all revolts, all revolutions: Food, not freedom. Freedom is just a nice bonus. 

• Egypt: Inspired by the Tunisian revolt, and sparked too by rising food prices, Egyptians started their own revolution on January 25. Emphasizing non-violence, the revolt—really just a series of strikes, work-stoppages and peaceful marches and demonstrations centered around Tahrir Square in Cairo—achieved its objective in short order: On February 11, President Hosni Mubarek stepped down, after more than 30 years in power.

(There had been prior disturbances involving Coptic Christians, who had been targetted by radical Muslims, up to and including a New Year’s bombing of a church, which killed 21. Certainly the Coptics—feeling that justice was not being accorded them—joined the protests against Mubarek’s regime. But they weren’t a decisive factor in Mubarek’s resignation. Violence against Coptic Christians has resumed, but it is clearly separate and distinct from the revolt that brought down Mubarek.)

The Mubarek regime was unprepared for the revolt—but it certainly had the military and the men to put it down. By all calculations, the Mubarek regime should have been able to quell the revolt—easily. The problem was, it lacked both the will to violently defend itself, and the support of any large sector of the populace.

Because Mubarek didn’t have the will or gumption to order the military to quell the protests, the military wavered—and that was Mubarek’s doom. He fled Egypt on February 11, leaving Egypt in political tatters.

The military formed a Supreme Council of the Armed Forces—basically an 18-man junta—which immediately guaranteed that Egypt would live up to its international treaties and responsibilities, and further guaranteed that there would be free and open parliamentary and presidential elections within 6 months. Before the revolution, presidential elections were scheduled for September; likely this will be when the general election will be held.

As of last week, the Prime Minister installed by Mubarek, Ahmed Shafik, was forced out by the opposition and by protestors, for being too closely allied to Mubarek. The caretaker administration is being run by Primer Minister Essam Sharaf. There is still a heady feeling in Egypt, but according to friends on the ground, the country is slowly getting back to normal.

The Egyptian revolt showed the rest of the region just how easily an autocratic regime could be overthrown, even after decades in power. 

• Libya: Protests against Col. Muammar Gaddafi began in early February, sparked by the success of the revolts in Tunisia and Egypt. On February 20, the revolt spread to Tripoli—from then on, it was game on, with the protestors taking control of the eastern coastal cities and towns, while Gaddafi held on to Tripoli on the western coast, and the all-important oil fields to the south. Since then, there has been sporadic fighting—more like tussling than a real, bloody civil war.

The reason Gaddafi has not been able to put down the revolt quickly and effectively is because his military is not what people thought it was. For the last 40 years—really since he took power in a coup d’état—Gaddafi has consistently kept his military weak so as to prevent it from becoming a threat to his power. Because of this policy, his weak military is keeping him from putting down the revolt swiftly and outright.

Gaddafi’s air force is the only military resource that has been proving effective in doing any damage to the rebels.

That’s why the so-called “international community” has been toying with the idea of enforcing a no-fly zone over Libya—that air force is the only strong piece Gaddafi has on the board. The Gulf Cooperation Council (GCC) is practically doing hand-stands, pushing for a no-fly zone—but so are the Brits and the French.

The GCC—essentially a regional conference dominated and controlled by Saudi Arabia—wants a no-fly  over Libya zone because it’s the next best option to what they really want: An American and allied forces invasion of Libya. Since the GCC know they can’t get that—yet—they’re pushing for a no-fly zone. The GCC are afraid that Gaddafi victorious will export trouble to the GCC states (Saudi Arabia, Bahrain, Qatar, UAE) in retaliation. So they want him gone.

Britain has the most awkward diplomatic situation, with regards Libya: When the troubles there broke out, the Brits wanted to simultaneously protect their oil interests—which they realized would be damaged perhaps irreparably by a prolonged civil war—and at the same time wanted to make up for the embarrassment of having been in bed with Gaddafi for so many years, up to and including releasing the Lockerbee bomber in 2009. So the Brits have de facto sequestered Gaddafi’s assets in the UK, while egging on the Libyan rebels. Problem is, Gaddafi hasn’t fallen as quickly as Mubarek. Indeed, the fact that Gaddafi is still holding on means that he might overrun the rebels and regain control of Libya as a whole—and where would that leave the Brits? In a very deep bind. So Britain has to make sure that Gaddafi is deposed one way or another—they cannot afford to have Gaddafi regain control of Libya, and then extract revenge on the Brits. A no-fly zone—which would deprive Gaddafi of his best weapon against the rebels—is the cheapest, easiest solution.

The United States has been on the fence about Libya because of a combination of surprise and conflicting interests: The surprise was that Gaddafi was internally a lot weaker than anyone anticipated. The conflicting interests is, the U.S. doesn’t want Libyan oil production disrupted—which would force up worldwide prices. A continuing Gaddafi regime would ensure Libyan oil production. At the same time, though, the U.S. wouldn’t mind seeing Gaddafi gone—U.S. antipathy towards him goes back to the Nixon administration.

Meanwhile, as the days pass and both sides dig in, it’s looking increasingly that a civil war will break out in Libya. Scratch that: A civil war has already broken out in Libya. Gaddafi controls the western coast, the rebels control the east, the dividing line between the two somewhere between the towns of Surt (also Sirte) and Ra’s al Unuf (also Ras Lanuf). Refugees (mostly migrant foreign workers) are fleeing by the thousands. American and European nationals have been evacuated.

Oil production, refining and shipping has been disrupted—Gaddafi’s own planes and artillery are attacking the oil processing and refining capabilities of the eastern coast. And though Libya produces 1.5 million barrels of oil a day (barely 15% of what Saudi Arabia produces, a bit more than a third of what Iran produces), it is mostly light sweet crude. So any disruption will have a larger impact on the world markets than the number of barrels would imply. We are already seeing this impact in oil prices.

Bottom-Line: Libya is key to the whole region. If Gaddafi goes down, or if the rebels succeed in forming some sort of more-or-less stable regime in the eastern half of Libya (as they seem quite capable of doing, considering how they captured a British covert team literally the second they landed on Libyan shores, and then placidly handed them back), then every other mutinous nation in the Middle East will have a clear, compelling example of how to topple a hard autocratic regime, and organize a new one to take its place.

In other words, if the Libyan rebels win—either by taking over all of Libya, or by creating a stable eastern enclave—the rest of the Middle East will follow into open rebellion. 

• Saudi Arabia: A lot of knowledgeable people say that an uprising in Saudi Arabia would be a disaster. Fact is, it is already happening—the only question is whether the uprising will interrupt Saudi oil production and supply.

There are two focal points to the problems in Saudi Arabia: One is the minority Shia Muslim population in the north east, especially in and around the port city of Dammam—smack dab in the middle of the Saudi oil fields. The second focal point of unrest is spread throughout the country, and comprises the disenfranchised Saudi middle-class, who have been bought off over the decades by the Saudi royal family (who of course control the oil), but who have no say in the destiny of their country.

The Shia population in Saudi Arabia—concentrated historically exactly where the oil is, in the north east and along the shores of the Persian Gulf—have been traditionally treated like shit by the Sunni royal family. (The differences and antagonism between the Sunni and the Shia almost perfectly encapsules Freud’s dictum about the narcissism of small differences. But before we get all condescending and arrogant towards Muslims for hating and killing one another over paltry religious differences, let’s be honest enough to recall how much hatred and murder was committed between Catholics and Protestants over our own paltry religious differences. Let’s recall how even today, some of us still dismiss members of the opposing camp over nothing more pressing than the virginity of Mary and transubstantiation.)

One would think that the Saudi Shia would be in league with (or at least allied to) the Iranian Shia just across the waters of the Gulf—but that’s not necessarily the case. The Saudi Shia are Arab, whereas the Iranian Shia are Persians. Think of the differences between, say, French Huguenots and German Calvinists—religious affiliation doesn’t necessarily trump national antagonism.

Besides, the Saudi Shia have found a better ally in the disenfranchised Saudi middle-class. The middle-class’s lack of real political power in Saudi Arabia has been assuaged by the freebies the oil riches have allowed the Saudi royal family to give them—the free education (through university overseas), free health-care and subsidized housing. But all these freebies have not erased the cold hard fact that the Saudi middle-classes do not have control over their destiny—they are for all intents and purposes chattel of the Saudi royal family.

One must keep in mind how corrosive this can be—in fact, the United States has experienced first hand the results of this neo-serfdom: The majority of the terrorists who carried out the hijackings of 9/11 were members of this disenfranchised Saudi middle-class. These terrorists identified the United States and American capitalism as the ultimate reason the Saudi royal family controlled their destinies—that’s why they wanted to strike a blow not just against American military and political symbols (the Pentagon and the White House and/or the Capitol), but also against American economic symbols (the Twin Towers).

So this Saudi middle class anger—diffuse though it may be—is nothing to take lightly. The Saudi royal family certainly isn’t—that’s why they’re gearing up.

Dissident and protest groups have called for a “Day of Rage” on March 11 in Saudi Arabia—this coming Friday. A lot of talking heads and mouthpieces of the Saudi regime say that it will be a “non-event”. Maybe, maybe not. But then, if the Saudi regime really believed that the March 11 Day of Rage would be all-wind-no-thunder, then they wouldn’t be sending 10,000 troops to the north east and Damman, now would they.

Will the U.S. intervene if a Saudi rebellion really gets going? Yes—no question. And the United States would side with the Saudi royal family. The U.S. has bases in Saudia Arabia, men and matériel primed and ready—all of it to defend Saudi oil.

If (and perhaps when) American soldiers start putting down and killing Saudi Arabian rebels in order to save the corrupt House of Saud, that would be the moment America loses every single Muslim from Morroco to Pakistan. 

Yemen: About a month ago, in sympathy to the Egyptian and Tunisian revolts, protestors began gathering in Yemen, demanding the ouster of President Ali Abdullah Saleh.

A New York Times story, reporting on how security forces in Yemen opened fire on protestors on Tuesday, inadvertently says it all:
Tens of thousands of antigovernment demonstrators have assembled outside the [Sana] university, and the number of protesters appears to increase each day. The gathering now stretches for more than a mile. [. . .] In addition to growing in size, the demonstrations here have become more diversified. Students and unemployed young people initially dominated the rallies, but now people from all segments of Yemeni society have joined in.
To repeat: People from all segments of Yemeni society have joined in. Ominous.

Yemen produces about 300,000 barrels of oil a day—not Saudi Arabian-league production (9 million per day), but very respectable.

However, the real issue is, the Obama administration has been carrying out a covert war there—much as Nixon did in Cambodia once upon a time. The U.S. alleges that Yemen has become a training ground for terrorists—and has been carrying out drone strikes, which have killed Yemeni civilians. 

Bahrain: Not a big oil producer, just shy of 50,000 barrels a day—Cuba produces more. But as Reuters reports, “The majority of Bahrainis are Shi'ites but the island, home to the U.S. Navy's Fifth Fleet, is ruled by the U.S.-backed al-Khalifa family, who are Sunnis.”

The street demonstrations going on in Bahrain have been aimed at toppling the government and giving the Shia majority a voice in Bahrain’s governance. (Khalifa family members sit on the throne and in the prime ministership, along with most other important cabinet posts.) Again, the protests were sparked by food price inflation, and inspired by the successes of protestors in Tunisia and Egypt.

With all due respect to the wonderful people there, Bahrain in and of itself is trivial—a tiny island nation of less than 1.25 million, with meager oil supplies. But its strategic location—smack dab in the middle of the Persian Gulf—makes it essential. “Home of the U.S. Navy’s Fifth Fleet”—need I say more?

• Kuwait: The Associated Press is reporting “Police barricaded a main square in Kuwait's capital Tuesday before planned protests for greater political freedoms.”

The Kuwaitis are basically a single tribe—but some of this tribe are in the money, and the rest are not. Like the Saudis, the Kuwaiti royal family essentially bribes the rest of the population to keep them docile, while controlling the riches of the country.

But crucially, the Kuwaitis have a huge non-national population—only about one third of the 3 million people in the country are actually Kuwaiti: The rest are expatriate workers. Only about 7.5% of this non-Kuwaiti population are American or European—the rest are Arab, Palestinian, Indian, Pakistani and assorted other Asian. And unlike native Kuwaitis who are not members of the royal family, these migrant workers have no rights, no free anything, and no security of any sort. (Imagine if two out of every three people in the States were illegal Mexican migrant workers, and you get the awful, creepy picture.)

So political protests in the emirate are very, very dicey. On the one hand, political protests by Kuwaitis against their government are for greater enfranchisement of the Kuwaiti middle class. On the other, this political protest could conceivably spread to the migrant, non-national population—who easily have the numbers to take over the whole place. And this would really matter—Kuwait produces 2.5 million barrels of oil a day. 

Is the revolt and takeover of Kuwait by its migrant population even possible? Sounds outlandish, absurd—but it could well happen. After all, three months ago, no one would have dreamed that Mubarek would be deposed, and Gaddafi embroiled in a civil war. If Saudi Arabia becomes a flash point, then literally anything is possible. 

Iran: They’re cool—they got rid of their authoritarian strong man back in ‘79. And the disturbances last year notwithstanding, the ayatollahs running the Islamic Republic are fairly secure in their position in Iran—and they have the Western democracies, especially the United States, to thank for their security.

After all, if the U.S. hadn’t been so hell-bent on sanctions and various forms of retaliations and annoyances against Iran, the Iranian people might have focussed their economic disatisfaction on the ayatollahs.

Instead, because trade sanctions and other such punitive measures hurt no one except the common people—and since the U.S. has been so blatant about imposing sanctions—the Iranian people in their majority view the United States as the enemy, not the Imams. Hey, if some foreign power—say the Chinese—kept railing against Nancy Pelosi or John Boehner, and kept imposing sanctions on the U.S. for allowing them to remain in power, wouldn’t you hate the Chinese with a passion, a hatred which would override any dislike you might have of Pelosi or Boehner? Of course!

That’s what’s happening in Iran—thanks to the blind and idiotic American foreign policy.

Is This An Islamic or Religious Revolution?

In a word, no: The events happening in North Africa and the Middle East are not religiously inspired, or led, or even religiously influenced. Lazy Western media pundits, and certain Western politicians with interventionist agendas might want to portray these revolts as being Islamic in nature—especially Radical Islamic: That bugaboo always sells. But they are not.

These revolts are secular through and through, because they are born out of middle class frustration at their political disenfranchisement, and the economic squeeze that they are currently enduring.

This is why China is so concerned. Like Tunisia, Egypt, Libya and Saudi Arabia, China has a tacit agreement between the people and the leadership, in China’s case embodied by the Communist Party: We will run the country autocratically, but we will deliver economic progress—so you will keep quiet and go about your business while we hold on to political power.

That tacit agreement has worked like a charm—so long as China has been growing, and people’s material lives have been improving. But with rising consumer inflation in China—especially as regards food—the Chinese Communist Party is very afraid of the people revolting, and demanding a voice in their governance.

But back to the Middle East and North Africa: The reason some Western pundits and politicians are eager to paint the revolts as potentially “radical Islamic movements” is that it would give a justification for the West to support the continuation of these autocratic regimes—the corrupt, despicable Saudi royal family most especially.

If the rebels in the Middle East and North Africa are seen for what they are—middle class people sick and tired of corrupt regimes keeping them down—then it becomes virtually impossible for the Western democracies to support the autocracies as they are overthrown by the people one after the other.

This points to the key question:

Why Is This Happening Now, Instead of Before?

The immediate trigger for these revolts and protests has been rising food prices. 

Why have food prices been rising? Because of the inflation Ben Bernanke, the Chairman of the U.S. Federal Reserve, has been exporting by way of his easy money policies and Quantitative Easing. 

Because of the money-printing The Bernank has been doing via Quantitative Easing, the dollar has weakened against other currencies around the world. 

This has bouyed up asset prices in the United States—it’s why the stock markets are at the levels they are, following their collapse back in 2008, and why housing prices haven’t sunk as far down as they should. 

But it’s also made commodities—including food—exceedingly expensive, in nominal dollar terms. 

Because the dollar is the reserve currency, when food prices go up in dollar terms, it is more expensive for food importers, regardless of whether or not the food is from the United States or some other country. 

The reserve status means that, via QE and its iterations, Ben Bernanke has been exporting inflation to the rest of the world—which has made food more expensive, and therefore triggered the revolts in the Middle East that we are seeing.

But that’s the specific reason as to why the revolts in the Middle East and North Africa are happening now. The more important question is:

Why Is This Happening At All?

The Bible tells us: You reap what you sow—God is not deceived. In the case of the Middle Eastern and North African revolts, History is not deceived: Tunisia’s Ben Ali, Egypt’s Mubarek, Libya’s Gaddafi—they were all supported by the United States and Europe. The same goes for the other regimes in the region that are teetering, including most especially Saudi Arabia.

The democracies of the West betrayed everything that they stood for—they deliberately, calculatedly supported these strong-man regimes, against the will of the people of these countries.

Why? Simple—the price of oil. Strong men and autocratic regimes allowed the exploitation of the region’s oil resources by Western companies practically for free—that’s why the various Western democracies installed them, or allowed them to remain. Had the oil been in the control of the people of the Middle East and North Africa, higher royalties would most assuredly have been paid. Thus a gallon of gasoline would long ago have been in the US$7 to US$10 range, if not higher.

Because of the cheap oil, the West and the rest of the world did not need to develop any sensible alternative to oil. The depressed prices—bought and paid for by sacrificing the aspirations of the middle classes in North Africa and the Middle East, and propping up autocrats and corrupt royal families—ensured that oil remained the cheapest source of energy. And it made it uneconomical to go research and implement alternate fuel sources. 

That’s why the U.S. and Europe supported these Middle Eastern and North African strong-men: For the sake of cheap and dependable oil. 

(The exception to this rule was Egypt: The U.S. was bribing Mubarek to the tune of $2 billion a year not because of oil—it was so that Egypt would play nice with Israel. Turns out that much of this U.S. pay-off made its way not to the Egyptian people, or even to the Egyptian military, but to Mubarek’s pockets. Which is the same story across the region in the oil rich countries: The autocrats took the money, the people took a big fat bagel.)

In order for this system to work, of course, the strong-men had to keep a lid on the people. The Saudis and the Kuwaitis tried to bribe their people, the other countries with larger populations tried to intimidate them by military force and the threat of a secret police.

But in the end, no amount of bribery or intimidation was enough to wipe away the fact that all of the illegitimate regimes of the region had to keep their boot on the shoulder of the people in order to stay in place.

This worked okay, so long as food was affordable, and there was at least the illusion of material progress.

But now? With food prices spiking? With a general downturn in the global economy? Not so much. 

Which leaves us with the $62 trillion question ($62 trillion being roughly the total GDP of the world):

How Will This Affect Oil—and the Dollar?

After all, that’s what really matters in the short- and medium-term: How will these revolts affect the production, supply and price of oil.

The answer is, it depends: It depends if the protests peter out or don’t. Libyan oil production is for all intents and purposes halted—but Saudi Arabia is making up for it by pumping an additional million barrels of oil a day. So Libya doesn’t matter, for now.

However, if the Gulf states—especially Saudi Arabia—suffer disruptions in their oil production?

Oh boy . . . 

In January 1979, the Revolution that overthrew the Shah interrupted Iran’s oil production. When it came back online, it was half what it had been before the Revolution. As a direct result of this, worldwide oil prices shot up catastrophically, bringing with it rising prices across the Western economies, culminating in March 1980, when inflation reached an annualized rate of 14.8% in the United States. 

The only way this spiralling inflation did not turn into hyperinflation was because of the mamoth interest rate hikes of the then-Chairman of the Federal Reserve, Paul Volcker. He had to hike interest rates almost 5% above the rate of inflation, in order to halt it—and he was only able to rein in that beast after three years of high interest rates.

The cost of this killer interest rate hike was the worst Post-War recession ever, up to that time. Consider the following chart.

The current Fed chairman Ben Bernanke seems to think that curing inflation is a snap. He said so on 60 Minutes this past December. But the fact is—and to be perfectly vulgar—inflation is a bitch to bring to heel. 

If oil prodution is disrupted because of the problems going on in the Middle East—which is completely within the “possible-to-likely” category at this time—or catastrophically, if there is a disruption of oil production in Saudi Arabia—then we would have a repeat of 1979. 

Oil prices would spike quickly to $200 and beyond—how far beyond is anyone’s guess. But the immediate nightmare would be the ripple effect of that rise in oil prices: Food prices would be soon to follow. 

In other words, the inflation Bernanke has been exporting will come back at the United States like a boomerang, and clock him upside the head. 

But unlike Paul Volcker, who could raise interest rates 5% above the rate of inflation in order to halt it, the U.S. Federal government’s fiscal situation is too weak. With the current $1.6 trillion deficit, the Federal government now borrows more money via Treasury bonds than it takes in via tax receipts—it simply cannot afford to pay higher interest rates for the money it borrows to fund its continued operation. 

If the Federal Reserve were to raise interest rates in order to halt inflation, it would make further Federal government debt so expensive that the government would literally go broke. 

Bernanke and the members of the Federal Reserve Board know this—so they won’t raise interest rates in order to halt rising consumer prices.

Therefore, if the generalized revolt in the Middle East affects production and supply of cheap oil, then inflation in the United States will ramp up just as quickly as it did in 1979–‘80 following the disruptions caused by the Iranian Revolution. But unlike in 1980, the Federal Reserve will not have the bullets or the balls to halt inflation by raising interest rates. Which means that inflation in the United States will spiral relentlessly, catastrophically out of control.

From the self-immolation of a street vendor in Tunisia, to the collapse of the reserve currency: 2011 is looking to be quite the year.

If you’re interested, you can find my recorded presentation “Hyperinflation In America” here. I discuss in detail what I would do, if and when the dollar crashes.


  1. GL, THANK YOU! As someone who only started waking up within the last 8 months or so, I've got a lot of catching up to do. Your writing has been a small but clear and important part of increasing my understanding of the big picture.

    It can be tough to weed through the glut of unnecessary information out there. Thank you again for this excellent summary. I also appreciate the humor!

  2. I just returned from Egypt, so want to make a few comments on that section of your post. From what I gathered while there, January 25 was National Policeman Day to honor the 500,000 police who tortured and shook down ordinary Egyptians every day. The police were the operating system for Mubarak's torture. When we were there for one week, we did not see one single policeman anywhere as they are all now keeping a low profile. And re: the wavering on shooting protesters, from what I understand, Mubarak did order the army to fire on protesters but the army refused. Mubarak did not use the army as his torture arm and the army controls parts of national industry that Mubarak had begun privatising to outside corporations, so they were not against his ouster. And, finally, we attended a Coptic protest outside TV Center while we were there. They were being defended by a line of Muslims who were there to prevent thugs from causing violence. The 'thugs' seem to be part of that torture and shake down racket that is losing the most post Mubarak. The Coptic protesters were demanding the arrest of the former Interior Minister who they believe ordered the bombing of the church in December in order to incite sectarian divisions in the country.

  3. It doesn't matter what started the revolutions. To even bring up what started them is simply trying to change the point. The point is what they will usher in, and that most assuradely is Islamic regimes that hate the US.

    And as far as the US "going against everything they believe in" in supporting these regimes, you did a fair enough job yourself in destroying that notion with the rest of your article.

    Look, when it comes to a dictator that will be somewhat friendly with the US, or a democracy that will play economic war (and possibly real war) with the US, the choice isn't even a choice. Anyone that thinks we should support a democracy in that choice, well, i just don't know what's going on in their minds.

    Of course you are right about Ben. He'll do nothing right. I would only add in the analysis of him that is really doesn't matter what happens in the economy or markets. His answer is always and in every way to add money to the equation. Always.

  4. You say: "Libyan oil production is for all intents and purposes halted—but Saudi Arabia is making up for it by pumping an additional million barrels of oil a day. So Libya doesn’t matter, for now."

    But Arabian oil is not a direct substitute for Libyan. Libyan is lighter, "sweeter" and most European refineries are adapted to this kind of oil and will have a lot of trouble trying to refine Arabian oil instead. So Libyan oil do matter, at least for Europeans!

  5. What is even more interesting than this information, is that these riots were predicted in October of 2010. This is all a perfect orchestration toward the New World Order. Google or YouTube Lindsey Williams-a Pastor who has the ear of the Elite who are pulling the strings. Fascinating yet scary stuff.

    The fall of the Euro will signal that the dollar will fall within 2 weeks. Then voila, riots in the U.S.A. Be prepared everyone.

    The most important thing to know however, is that this is a spiritual battle. It is a more basic battle than fighting over religions. It is a battle between good and evil. The most important thing to do is to Get your own spiritual house in order.

  6. I'm confused. You "blame" Bernanke for exporting food inflation, but the result is the downfall of some of the worst dictators in world history. THAT'S A GOOD THING! Seems like you should congratulate Bernanke??? Also, you mention that the revolutions are secular. I agree. No Al-Queda. Al-Queda has been saying for decades the only way to oust these autocrats was with violence and a return to "Islamic" ways.

    So, Bernanke has deposed rotten dictators AND marginalized Al-Queda.

  7. Come on Gonzo. I have trusted your articles in the past. YOU HAVE TOT SEE THE BIG PICTURE.

    So Israel/International bankers are hiring African mercenaries to drive around and shoot things up. Paying them 400 to 800 a day to 'fight' for Ghadafi, and the US rolls in and provides 'military advisors' and arms for the rebels so that they can keep the fight up. They are even promising them that they will not be prosecuted under international war crimes.

    The US military is there to 'control' they will NOT get involved. They are there to guide the revolution and make sure that the 'rebels' put up a big enough fight. They will not directly militarily engage.


    Saudi is next to REVOLT as GOOGLE/facebook has organized a 'day of revolution'--THIS FRIDAY.


    The GOAL is to jack up OIL to accelerate the demise of the US and then double cross anyone holding US dollars as they tank the dollar(Think Weimar) and roll out a new world currency. Causing a larger war between the big boys. ISLAM vs US/ISRAEL and slamming the world into a debt death spiral as they jack INTEREST RATES and buy up everything that they don't already own for pennies on the dollar as the US housing market TANKS another 30-40%


    OIL WILL GO ABOVE $150 a barrel before the end of 2011.
    SILVER TO OVER $50 by summer.(Won't be hard--Physical Silver is Already over $40 an ounce)

    Money as Debt
    Damon Vrabel
    Eustace Mullins

  8. GL,
    Congratulations on a very well thought-out post which has clearly had a lot of time & research put into it. A agree with most of your observations but do have one tiny quibble.
    Insure is when you pay a monetary premium to protect against an event's occurrence.
    Ensure is guaranteeing an event will happen.
    This may seem like nit-picking but continually using the wrong word detracts from an excellent article.

  9. Dear Antonne,


    I will have to hire you to ensure correct usage—thanks!


  10. GL,
    You are generally right on most issues. Why do you peddle the official George Bush version of Saudi Hijackers with box cutters story of 9/11?

  11. Brilliant insight and analysis of an extremely complex scenario. I have never heard anyone (especially the “News”) even come close to making any sense of all this. Of course, few would be able to distill what you have.

  12. It is stunning to see this all line up the way it has and Walid Shoebat talked about this and Egypt in 2007.

  13. I love the conspiracy theorists comments, as they make for dramatic reading. But who are "they" and why would they sink the boat. For a NWO? I like what California woman said about getting our own spiritual house in order. The truth is that there are angelic forces at work who intend evil. Yes, there are evil people, too, but how much can people do? Not much, if not in power. The powers that be (demons) have their Man who is to come and they have their generals in control of nations (Cosmocrats) Human history is headed to a wonderful conclusion, but in the meantime this age is headed for a horrible one, but not for all.
    > come and see

  14. Gonzalo, I have some Persian friends here in America who maintain that fully 2/3 of Iranians are against the current regime...maybe not overtly yet. Moreover, many of those who left in 1979 went only so far as to Kurdistan in northern Iraq. They are awaiting the time at which they can return to Iran, claim their confiscated assets and rid their homeland of the insidious regime.

  15. Great article. Keep in effort doing.

  16. I have one question: without the dictators, wouldn't there have been be much CHEAPER oil, because a free market in oil fields would have enhanced production and lowered prices, instead of being an artificially tightened dictators' monopoly / OPEC-cartel?

  17. GL

    I was beginning to think you had become one of these rebels and absconded to the Middle East. It’s been a while since you posted, and I can see why now.
    I firmly believe that oil will top $150 within the next couple of months, which in turn pushes the price of everything else up.
    I also believe that America is at a turning point, I read that 400 wealthy people control more money than 150 million Americans, this is a serious situation to be in, and cannot continue without the middle class taking some kind of stand (Riots, Protests, Uprisings)
    The World needs to wake up to the fact that so many elitists wealthy individuals are corrupting society, ordinary working people are suffering at the hands of these so called leaders, who quite frankly have no fucking clue what they are doing.
    It amazes me that human beings such as Ghadafi, Mubarek, Ben Ali and the Saudi Royal family had an opportunity to make life for their citizens good, with all the wealth from oil over the years, but squandered it on themselves.
    Citizens in the USA are beginning to realize that what they once had has been squandered by the corrupt Banks, Fed, Insurance companies, Corporations et al.
    It time for all everyone to take a stand and demand change for the good of all.

  18. It starts:

  19. What about Iraq? They are trying to throw off their dictatorship also.

  20. Yes, that's why people in some oil-rich middle eastern countries live in mud huts, while they should have been extremely rich. Just look at Norway, a country with only two things Oil and Fishing.. How come they keep ranking among the top 5 in the world??? Uhhmm..


    and here your commander inchief and his dangerous wife.
    they follow the lines of the wolfs straight away, but do not talk about childabuse in the usa and europe.
    because that should make their friends unhappy, ist it.

  22. indian, really teleprompter should be outlawed in the white house. I don't think they have any idea of what they just read us off that teleprompter screen.. How come you never see real live debates, talks or interviews of these people? Because then there's no teleprompter with the master's words for them to speak.

  23. Fellow commenters:
    I believe that the main point of GL's essay is that "this is a high oil price path to hyperinflation".
    I think that, in the last few months, GL has been trying to show that there is no way out.
    He showed the high interest path leading to inflation: Bernanke stops QE then interest rates go up which collapses the bond market and voila: hyperinflation.
    He showed Bernanke monetizing the deficit at infinitum and the infinite growth of the dollar leading to: hyperinflation.
    I've been trying to figure out, over and over again, of a way out of this debt crisis and I can't figure it out.
    I agree with GL, there is no way out, just hyperinflation.

  24. You always seem to forget that within a year of the Revolutions, the Kings were back in power with a vengeance.

    Berlin and Vienna would have their most reactionary monarchs in their countries' entire history, and in other countries also the kings were back in business.

    Only in France the King was removed, and instead they got an Emperor, not a very good one who would lead France to its greatest defeat in its existence to boot.

    The Kings will win. And they will elim everyone who stood against them.

  25. Just curious. Why wouldn't Bernenke raise interest rates to fight inflation, claiming he had no choice? The debt service would then bankrupt the govt. and everything would be privatized. Corporations move in and take control of the whole game. Full blown lazies-fair is installed. Game over. Mission accomplished.

  26. Great article. Always read your stuff. Love the insight!

  27. Not so fast.

    There is a clear and obvious Government policy attack on EVERY commodity, presently underway. The cessation of QE2 will add to it.

    Commodities got demolished in 2008 2009.

    Food is a commodity. They will probably take it in half by June.

  28. GL ...

    As America moves towards a society where more and more wealth is controlled by an elite group of rich people - aren't we turning into a country run by oligarchs? Isn't that what happened to the USSR after the regime fell, and they became Russia??

    Meanwhile, in the Middle East. It's not clear how these new governments will align concerning US policies. Or how Obama will choose to try to engage them. I would not be surprised if the price of oil moves higher. But isn't the real issue Sunni vs. Shiite? We may be watching a fundamental shift in the balance of power between Muslim sects, not just between Middle East nations and the USA. It is nor far from clear that the USA can maintain a hold over Iraq into the future. So if Iraq re-aligns with Iran, that would make the new Shiite nation the single largest oil producer in the world. Not to mention the military power that goes with it. Don't you think this might be the real concern of the Saudi's?


  29. Great article GL-- and again we think alike. My last few blog articles are about the inequality and disenfranchisement in the Arab world. While in many aspects this is an empowering moment for the people of this region, it looks like it will be a long and bloody struggle: this weekend already the Saudi police have fired into the crowd.

    On one point I disagree-- ever so humbly. I can forsee no situation in which Obama orders US troops to quell an uprising for democracy on behalf of a corrupt monarch, especially in the Muslim world.

    But I agree that for us in the West, this has no good ending. Remember that hoarding is also a danger, exaserbating shortages, especially in poorer nations. Thanks to the magic of the credit default swap, a few economic collapses in exotic locales have the danger of crashing the entire global financial system. This danger increases daily with Bernanke's printing presses and revolutions going hand in hand. I'll leave you with my "The Day After" scenario:

  30. Super analysis and I don't care how many words you misspell! Your content supersedes minor word misuse.
    You make a compelling case that the turmoil in the oil producing states is not something that will blow over in a few weeeks.

  31. Another fantastic post, thank you Mr. Lira.

    So many variables coming to a head this month: Day of rage in Saudi Arabia, Kuwaiti protests getting heated, nerve gas (?) in Yemen, civil war in Libya, dithering of UN/NATO/Uncle O, EU failing, and finally the return of Sayyid Muqtada al-Sadr to Iraq (okay, back to Iran again); dollar index going down, gas prices going up, inflation ramping, idiots in charge, and where will the events in Madison, WI lead?

    So much going on today. My only thought is that I feel the pain of what looks like is coming our way, so that my kids do not.

    C deK

  32. I have to agree with the unrest in the middle east, but keep your eye on china is correct.

    Current play's in progress is to finish the tie-in between russian energy with china. Have total unrest in the mid-east to raise oil cost, thus causing inflation, but the key is to the turmoil. Have another conflict so that the average Joe American will be up in arm's against the Muslim's and vice versa.

    Allow this conflict to hyper-inflate all consumables and drain what the elitist banksters have not been able to drain.

    It's ok to have physical silver and gold, but what are you going to pay for that block of meat and a loaf of bread when your child is crying with hunger? Bankster's have the time on there side and we don't. Like a wolf sitting outside a cave just waiting for the injured and scared deer to come running out. They will get our silver and gold.

    Remember China? While this un-rest start's, start's the conflict's and is keeping us sheeple's eyes off the ball, we are being drained and our friend's on both sides are being slaughtered............China is now sucking up the resources of Russia so they do not have a over throw.

    Now back to the U.S. The bankster's have crashed the Dollar and drained the Average U.S. citizen to a grinding hault. All the natural resouces in the U.S. such as park area's, Alaska, gulf coast's are basically in the bankster's control.

    Us sheeple have drained our soul's fighting another of there war's, put our families through very hard times even if you have a stock pile of silver to buy 10,000.00 half a beef to feed friends and family to have stolen on the way home by a lug the bankster's foreclosed on in 08'. Remember China?

    Here are a couple part's out of post's I pulled that we really should pay attention to.

    "The most important thing to know however, is that this is a spiritual battle. It is a more basic battle than fighting over religions. It is a battle between good and evil. The most important thing to do is to Get your own spiritual house in order."


    "I love the conspiracy theorists comments, as they make for dramatic reading. But who are "they" and why would they sink the boat. For a NWO? I like what California woman said about getting our own spiritual house in order. The truth is that there are angelic forces at work who intend evil. Yes, there are evil people, too, but how much can people do? Not much, if not in power. The powers that be (demons) have their Man who is to come and they have their generals in control of nations (Cosmocrats) Human history is headed to a wonderful conclusion, but in the meantime this age is headed for a horrible one, but not for all."

    Friend's, it time for us all to repent our sin's and accept Jesus as our Lord and savior.

    Let's keep our faith, keep praying and I challenge you to spent sometime reading your bible each and everyday. Take a few minutes, start in the book of proverb's.

    Once doing so, ask yourself this question....

    I wonder how many of the Bankster's opened there heart when they or if they read proverb's?

    Let's go hug a loved one and spend time with what really matter's.

    Keep your faith first because it might be all we have until the end.

    God bless us all.......

  33. Ah, sweet hyperinflation! The thought of you brings back fond memories of life in argentina, watching as supermarket employees hustled to change the price tags on everything once a day ..then twice a day ...then three times a day ..then finally they just assigned a number to each item along with an APPROXIMATE price range and you only found out the EXACT price by ringing it up at the cash register.
    Hyperinflation conjures up images of argentinians running to spend their money on commodities and assets ASAP because each moment they tarried represented a substantial devaluation of purchasing power. They flocked to the relevant safety of the U.S. dollar. They bought masssive amounts of gold & silver (a lesson that has personally served me quite well, GRACIAS ARGENTINA!) Some stashed their savings into real estate. Others moved their money offshore. And almost EVERYONE learned how to find & participate in black markets of every sort when necessary.

    But what will AMERICANS do when the fit hits the shan?
    -They CAN'T flee into another currency because there is no other option currently available; the dollar is (was?) the global reserve currency of choice
    -Gold and silver are already at unaffordable levels for the average Joe in America. The time to buy was YEARS ago.
    -Unlike in Argentina's case, RE is the U.S. is parodoxiacally still vastly overvalued yet nonetheless depreciating consistantly on a monthly basis. In other words; a falling jnife. And you know what they say about catching falling knives.
    -The IRS ensures that Americans have as little access as possible to overseas accounts by bullying other nations with so many rules, regulations and requirements for opening accounts for American citizens that most banks don't even WANT TO BOTHER with the hassle.They simply turn Americans down! Thanks Uncle Samuel!
    -Americans have been completely brainwashed into subservient fear of authority. Few would dare risk participating in black markets. Especially considering that the U.S. government would promptly label such a TERRORIST activity and start sending people off to Buchenwald mean Guantanamo.

    America, my friends, is FUBAR!

  34. To all who say there is no way out of hyperinflation, that is not true. There is no way out that would be acceptable to the so-called ruling elite.
    To Gonzolo, I appreciate your insight and always look forward to your next post. The Austrian economists have also pointed to this exported inflation and connected the dots.
    Unfortunately, the majority of Americans do not understand what is happening and blindly support military intervention. As one posted earlier about it not being a choice to allow people their natural right to self determination. I urge that person and others who are so flawed not to look at the bible, but to read the Declaration of Independence. That was and still should be our guiding light.
    What have we come to when we believe its our Right to steal others rights? That means we really are no better than the ruling elites, because we also believe redistribution is okay...

  35. Gonzalo,

    Thank George Ure for getting me back in touch with your column.

    I have been researching the Arabian Peninsula for a year now. The pot was already boiling in Saudi Arabia. Many were politely questioning the way things have been there, such as why women cannot be allowed to drive cars and issues on work permits and visas for foreigners. The mentally healthy in this country do not understand the reason for this conduct.

    Your description of the Saudi royalty and rich regarding everyone else as chattel is accurate. In fact, I would place this nation up there with the United States when it comes to hypocrisy: the law (Sharia or English common) is merely a polite suggestion for those of means. This verifies the Taoists who said 2 500 years ago that more laws breed more lawlessness.

    My market analysis does not support $200 oil. The current runup after the crash to the 30's is not an Elliott Wave impulse. As of now, oil is backing to the 100 level and that completes a 62% retracement of that crash. I look for a dizzying move down.

    That will be more destabilizing in the Mid East. First, American economic hit-men have most likely loaned "money" to these regimes for development and repayments will have to come from somewhere. Second, it would be more difficult to buy supplies.

    If you look at the region, can you honestly believe that it can support 80 million Egyptians, 27 million Saudis and cities approaching New York in size? These are effectively spaceships. You cannot live on fish and dates and the occasional orange you may grow on an oasis. The Nile valley is not the Ukraine. You would need an ice age to reverse the climate and private property to preserve what would be left of the soil.

    What makes you assume that had Americans and others paid a fair price for oil, a royalty system to any landowners or tribes like what occurs in places like Texas, that prices would be much, much higher? Trade is the constructive and civilized way of making up deficiencies. These oil areas are not that good for growing much food and manufacturing. This is why the Middle East has been a land of traders and merchants. Had a tribe tried to gouge Shell or BP, then these companies would locate elsewhere and the tribe would need to go on a diet.

    It is a matter of balance.

  36. "The Day of Rage" turned out being a non-event. Another GL prediction - busted. Hey, Gonzalo, we're still waiting for Europe to fall apart due to the Irish not passing the budget... Oh, wait, the Irish DID pass the budget and Europe didn't fall apart, contrary to your predictions...

  37. In a speech this week Atlanta Fed President Dennis Lockhart, said - "My first inclination is to be very cautious about extending asset purchases after June. Given the emergence of new risks, however, I prefer a posture of flexibility as regards policy options."

    Translation - "The Fed will kick in the afterburners and QE 3 will begin in June."

    The inflation just over the horizon will make the Carter years look like a walk in the park.

  38. Ah, it would be nice if we followed our constitution, I agree completly. Also, I would'nt kick the can down the road to long when it comes to reading the bible.

    The book of proverb's goes deep into seeking wisdom. When wisdom becomes the why view this link on the bankster's.

  39. If revolutions are always about food, not freedom, doesn't your point that the Saudi Middle Class are hacked off about their lack of freedom, rather than food, mean it's unlikely to meet with much success?

  40. A lot of good work here. Overall a good post, presenting a decent overview of the situation. I have some differences in two areas:

    Supporting dictators that siphon off oil profits for their families and/or oligarchy, rather than more democratic or populist governments distributing proceeds to the people tends to raise oil prices; simply because it is cheaper (and needs pump less oil) to satisfy less people. So whatever the motive for supporting these dictators, it was not lower oil prices. Should more representative governments develop from the current revolutionary fervor i suspect them to increase oil production (if the facilities remain) thereby lowering oil prices.

    Bernanke and his bosses (the international bankers) have certianly raised the price of food. You might also hold them responsible for the USA policy of burning corn as fuel, which also raises food prices. However, there are other factors.

    The protests themselves create an ironic vicious cycle: increasing food prices => further protest => increasing oil prices => higher food prices.

    More importantly, increasing floods, drought and volcanic activity are all reducing the available food supply globally. The London/NY/Zurich cabal did not cause the floods in Austrailia, the drought in central Asia, the global increase in volcanic/seismic activity, or the massive increase in weather volitility.

    For those who can process ideas that span multiple scientific "compartments" and do their own verification research; an overview and update of those problems, and a speculative unitary hypothesis that might explain them can be found here:

  41. Can't wait for the FED apologists to declare in a few years' time that ZIRP and QEII brought to the Middle East what the Bush Administration declared their wars in Iraq and Afghanistan would: Democracy.
    And the freedom loving Right will disparage the results of FED policy that were stated and hoped-for results of WAR policy.
    Who me? Cynical?

  42. I WANT to see the U.S. COLLAPSE into a heap of crap. I WANT to see Americans suffering and eating out of trash cans, shooting each other on the streets and dying of various diseases. In short, I want American BASTARDS to suffer EXACTLY THE SAME horrors that THEY impose on others worldwide.


  43. To anonymous @ 3:59 who wrote-

    "I WANT to see Americans suffering and eating out of trash cans, shooting each other on the streets and dying of various diseases."

    All these things are already happening in America and have been happening for a long time. We have plenty of poor and homeless eating out of trash bins, people shooting one another, in fact America is probably the world's capital for shooting crimes. Plenty of dieing, disease and misery here, not everyone in America lives like royalty.

  44. Here is a post I viewed on zh today.

    "Due diligence is like saying your prayers if you're religious, it's like doing pumps or doing one hour's jogging, if you're a fitness addict. It's a routine about a personal mind set. It's the signature tune of a life effort to stay yourself, find yourself. Its your own personal nest.... If you are in business it's the same thing. Only people don't see it that way. Then, it becomes 'they' and 'us', like in a rat race. We lose focus. We are no longer ourselves. We change the rules of fitness, of mind set : we become like them. We sing "do it to them before they do it to you"...It's the road to unfitness. But we kid ourselves it's just business. Being top of the heap. Now its the mantra of the global age...we can see the disease...but we don't see the way out from it."

  45. GL, thank you for this great article. It's a sobering view of the current Arab revolt and the likely consequences on all of us.

  46. Incredible and outstanding article!

    Is it all about food? Do you really see freedom as a small bonus? I believe is much more than that. After all, the biggest human desire is to be heard/listened to and appreciated.

    Love your site!

  47. Saudi Hijackers on 911? Thats pure BS. Everyone by now realizes that the dual Israeli neocons and their agents in the Mossad pulled this off for the international banking zionist cabal.
    Explain how 7 of these so called Saudis turned up alive?
    This article is pure speculation, a diversion.

  48. Solutions 'nuclear' Iran


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