Egypt Protests and United States

Starting a chain reaction via Egypt may backfire on Washington as the dollar and US treasuries are not outcompeting the eurozone and gold. Investor capital and revolutionary fervor may not flow where desired.


In June of 2009, I hypothesized that Obama's speech at Cairo university was an opening shot towards an effort to destabilize the Middle East. Such a move would serve not only to deny the area to Chinese and Russians as US turns inward and spends next 10-20 years economically reorganizing (harder for influence of major players to expand into a region engulfed by chaos) but it would potentially allow such reorganization. That is of course due to chaos supposedly bolstering the image of US as a fortress of investment safety via propping up the worth of US bonds and the dominance of the dollar as reserve currency. In theory, this in turn would allow continuation of funding for US dominated imperial framework. When you owe money in a reserve currency that you print and have the muscle to wage inflationary currency wars, such an insane strategy may even appear sensible at first glance.

Since the Cairo speech, US has also tried to destabilize the Eurozone via informational warfare and by using its best tools for such tasks, the credit rating agency attack dogs. Obviously there is no point in creating chaos along swaths of the globe if capital moves to competing areas of perceived safety. It is no surprise that as thousands of people went into the streets of Cairo, Standard & Poor's downgraded Japan's credit rating from AA to AA-. Today, 01/28/11, we saw a typical reaction of the dollar and US treasuries gaining as investors moved out of a relatively strong regional stock market in Egypt (that sparked sell offs in stock markets around the world) and into US treasuries. The biggest mouthpiece of the American oligarchy, the New York Times, had the timing to chip in about the Eurozone not being a good place to move one's money. American elites saw how the stock market implosions around the world in 2008 had fed the US bond market. Considering the desperate measures of quantitative easing and the federal reserve now being the biggest buyer of US debt, nothing is off the table to allow debt based funding to continue a while longer.

However, there are signs that US is not getting the timing right with its full spectrum chaos stirring. At the same time as the Tunisian revolt occurred (its people greatly helped and inspired by a wiki"leak" of US being against the former Tunisian dictator), the Euro was fighting off an incredible amount of concentrated short positions against it. Those shorting it lost and had to buy back the Euro making it rise against the dollar even quicker just as Egyptians were catching the Tunisian fever. Therefore, today's violence on the streets of Egypt (with corresponding pressure on Mubarak by the White House) occurred when not all of dollar's competitors were suppressed.

Interestingly enough, throughout January, gold and silver backed ETFs experienced a massive sell off (even as physical demand remained at an all time high) thus driving down the price of precious metals in a way that couldn't be done by shorting any longer. It is possible that even with the history of major financial structures shorting and thus suppressing the price of precious metals, the ETF sell off was just innocently due to paper holders moving into physical. Having said that, the timing is very suspicious for dollar dominated Wall Street players to be dumping gold/silver backed paper and lowering the market price just as the euro and 2 fire starter nations were being pressured as well.

Egyptian unrest was a mixed bag with dollar edging higher but gold/silver and other commodities like oil spiking up even faster. Since buying commodities currently works as a de facto bet against the future of the dollar, Washington seems to have lost with both the timing (Euro not being down and out as Cairo was burning) and commodities continuing to be seen as competitors to the dollar as a safety destination.

It is rather hilarious how smug the US political and financial class is, thinking that they can stir social unrest abroad and be immune from it at home. Gorbachev also actually seemed to have thought that he'd manage to remain in control if hardliners in satellite nations were overthrown and perestroika minded leaderships took over in their place. The sheer pathological arrogance and hypocrisy of the Obama administration (note how protesters were dispelled near G20 meeting in Pittsburgh) has no limits. Egyptians and Tunisians are protesting the same exact things that Americans are suffering from. There is little guarantee that in the future, Tunis or Cairo will not dump the dollar completely and move into the orbit of Berlin, Moscow, and Beijing.

The good news is that China and Russia are now acting as stabilizers and firemen. Throughout 2010, every time the US based credit rating agencies attacked the vulnerable Euro states, China seemed to step in and help Europe out. They invested heavily in Greece and recently began to launder their dollars by buying Spanish debt. People's Daily, the official mouthpiece of Chinese communist party, kept reaffirming the importance and health of the E.U. We also had a tit for tat move of a Chinese credit rating agency downgrading US credit rating in November, claiming 'that the U.S. government's solvency is "on the brink of collapse"'. Additionally, Russian Federation's prime minister Putin went as far as saying Russia may adopt the euro in the future.

Next few weeks will definitely be interesting. US propaganda organs are now saturating with Egypt coverage. Maybe they can attach some spiffy color to the unrest as well. I will leave with a quote from the above mentioned Cairo speech article:

"If Obama is able to utilize human rights pressure and universalist respect to destabilize Egypt, the potential chain reaction would keep Muslims busy for a while while US deals with its economic depression. By pressuring Israel and stagnant Arab Republican governments on human rights, it is theoretically possible to cheaply accomplish a chain reaction of liberalization that Bush tried to do by force. The splash damage can conceivably reach Iranian and Syrian middle classes as well."