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."

Obama Cairo Speech to the Muslim World

President's speech to the "Muslim world" was directed at educated middle class Muslim liberals. Universalist respect and focus on human rights destabilizes Egypt the way Iran was during Carter.




Obama's speech in Egypt should be seen through a lens of economic nationalism. Obama's primary focus is domestic and revolves around domestic stabilization through industrial policy to crawl out of the economic depression. Everything he does will have to be sufficiently congruent with that goal. Internationally, we should begin to see Obama trying to save as much money as possible through creating conditions for withdrawing expensive troops and financial support.

Obama chose Cairo University as his venue to give a major speech to the Muslim world. This university was among the earliest modern institutions in the Middle East and its large size created one of the biggest breeding grounds for radical thought. Muslim extremism and pan-Arab nationalism had a lot of its roots among students in Egypt. The historically large campus (presently accommodating 200,000 students) allowed a diverse marketplace of ideas and vast radical social networks to incubate and give rise to organizations like the Muslim Brotherhood. Thousands of the faculty have been there for decades and lived through the consolidation of the Egyptian nation with all the social pressures involved. The previous and current faculty have influenced and been influenced by thought ranging from Ba'ath socialist nationalism, to Leninism, to Nasser's pan-Arabism, to religious revolution, and finally to Anglo-American liberalism. The brief period of Egyptian history as a nation state has seen the country as the van guard of attack against Israel, of briefly lived efforts at confederacy with Syria and Jordan, of leading efforts to reconcile and co-exist with Israel, and of becoming one of the biggest recipients of American military aid.

Obama knew exactly what he was doing by picking one of the biggest audience halls in the Middle East. The educated people who teach and study in Cairo university are used to major swings in national public opinion. These shifts are often the direct result of majority of academic elites being overcome by one particular idea and mood.

Egypt, unlike the monarchist Saudi Arabia and Jordan, has been substantially more influenced by the Western world. It had a longer contact with western infrastructure and institutions (dating back to Napoleon invading in early 19th century), more absorption of British law, and more experience as a non-resource economy with its control of Suez Canal and the Nile river. As such, it is the vanguard of middle class Arab thought as well as the best fertile ground where Muslim Arab liberalism can grow in the region. It isn't a coincidence that Cairo University's focus is law and that Obama is a sharp Ivy League lawyer with a solid understanding of legalistic abuses of power.

Unlike the Arab middle classes and academia in UAE, Saudi Arabia, Qatar, or Jordan, the Egyptian elites are more cosmopolitan and relaxed in regards to multi-ethnic societies, democracy, rights of women, and republican social constructs that separate church and state. Up to 10% of Egyptian population are Coptic Christians whose ancestors have been there since the Roman times. Egypt straddles the key point where Africa and Middle East connects and where endless European shipping passes through (with corresponding cultural influences). Cairo leadership is in control of a state that is as geopolitically important and pivotal as Turkey.

Obama knows that Egyptian elites and middle class are a few years ahead of their Jordanian and Saudi brethren when it comes to political cultural development. Talking to many of them directly was a very calculated move. Creating a sensationalist event and starting major media chatter on Arab talk shows and campuses was a perfect opportunity to plant seeds of a certain train of thought that can then infect middle classes in neighboring states.

That train of thought is simple enough and goes like this: "America is now pragmatic and too poor to be pushy anymore. We will treat you with universalist respect and no different than countries like France (that is also disrespecting universal human rights with pushy state secularism) and leave your societies alone to develop as you wish. Since my administration will adopt a universalist non-preferential approach, you can potentially gain more benefits, money, and influence by becoming more like USA. This can be done at the expense of Israel if it doesn't actively work towards a two state solution."

The president's adoption of a respectful socially libertarian non-imperial message hints at an even colder geopolitical agenda than George Bush's. The venue to reach as many proto, pseudo, and actual Arab liberals as possible has potentially destabilizing consequence for Egyptian leadership. Egyptian military tied government is taking the country on a path towards very gradual secularization and controlled democratization. It is copying Turkey's development and aspects of Putin's managed democracy. Egypt has not been an imperial ethnic core like Turkey or Russia however and is thus less stable since it's still a very young country. The popular dissatisfaction with the pace of progress among elites can trigger a transformative revolution.

Egyptian liberal elites have been uneasy since arrest of their leader, Aymar Nour, in 2005. The worsening economy allows Obama a chance to stir social unrest amongst Egypt's educated public. America's annual multi billion dollar support to Cairo allows Obama to do to Egypt what Carter did in Iran. Social destabilization in a time of an international economic depression is relatively easy. Obama's speech shows a strong intent on weakening support for an already weak authoritarian government presiding over a relatively secular population. Egypt is also not as oil dependent as the regional Arab monarchies. 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.

Obama's speech made a historical gesture of mentioning CIA's coup in Iran but other than that, the tone concerning Iran was relatively cold. Iran's next presidential election will be hotly contested considering the incredible drop in the price of oil and corresponding drop in political patronage. The political infighting in Iran can be exploited against the backdrop of Arab liberals becoming more vocal. A more destabilized Middle East with Muslim extremists, liberals, and authoritarian governments all being centers of force, makes US economy a safer place to invest and for wealthier Arabs to migrate to and study in. A socially stirred Middle East is congruent with Obama's domestic economic restructuring since it can bring additional skilled workers into US, bring more capital, and allow US to begin saving money by withdrawing financial/military support from the region. Obama's speech in Cairo University hints at him being an incredibly cold blooded and pragmatic economic nationalist. Middle Easterners are yet to learn just how disinterested US has become in wasting resources in the region. Obama will try to save billions of dollars and save face internationally at the same time.