FATA MORGANA !

imra Fri Jun 3 2011
Subject: [Even worse] Spengler describes total economic meltdown of Egypt, Syria, Tunisia and other Arab oil-importing countries

Dr. Aaron Lerner - IMRA:

Consider the following for Egypt:

#1. The job loss is related to the tourism industry while the billions will go to other sectors = still a lot of angry and frustrated people.

#2. Even if the billions pouring into Egypt were distributed/invested on a perfectly corruption free basis, the inevitable outcome of a successful program is that the owners and senior managers of the companies that
received the billions will be magnitudes wealthier than they are today and there still will be a lot of unemployed = a lot of very angry and frustrated people convinced that those owners and senior managers gained their wealth
through corruption - stealing the billions in foreign funding that should have gone to the People of Egypt.

And we watch and wait, knowing that we must be prepared for the day that Egyptian leadership may have to choose between dangling from the lamp post and diverting the wrath of the frustrated masses by pointing to Israel. ]

Humpty Obumpty and the Arab Spring
By Spengler 1 June 2011 Asia Times
http://www.atimes.com/atimes/Middle_East/MF01Ak01.html

I've been warning for months that Egypt, Syria, Tunisia and other Arab oil-importing countries face a total economic meltdown (see Food and failed Arab states, Feb 2, and The hunger to come in Egypt, May 10). Now the International Monetary Fund (IMF) has confirmed my warnings.

The leaders of the industrial nations waited until last weekend's Group of Eight (G-8) summit to respond, and at the initiative of United States President Barack Obama proposed what sounds like a massive aid program but probably consists mainly of refurbishing old programs.

The egg has splattered, and all of Obumpty's horses and men can't mend it. Even the G-8's announcement was fumbled; Canada's Prime Minister John Harper refused to commit new money, a dissonant note that routine diplomatic
preparation would have pre-empted.

The numbers thrown out by the IMF are stupefying. "In the current baseline scenario," wrote the IMF on May 27, "the external financing needs of the region's oil importers is projected to exceed $160 billion during 2011-13."
That's almost three years' worth of Egypt's total annual imports as of 2010. As of 2010, the combined current account deficit (that is, external financing needs) of Egypt, Syria, Yemen, Morocco and Tunisia was about $15 billion a year.

What the IMF says, in effect, is that the oil-poor Arab economies - especially Egypt - are not only broke, but dysfunctional, incapable of earning more than a small fraction of their import bill. The disappearance of tourism is an important part of the problem, but shortages of fuel and other essentials have had cascading effects throughout these economies.

"In the next 18 months," the IMF added, "a greater part of these financing needs will need to be met from the international community because of more cautious market sentiments during the uncertain transition."

Translation: private investors aren't stupid enough to throw money down a Middle Eastern rat-hole, and now that the revolutionary government has decided to make a horrible example of deposed president Hosni Mubarak,
anyone who made any money under his regime is cutting and running. At its May 29 auction of treasury bills, Egypt paid about 12% for short-term money, to its own captive banking system. Its budget deficit in the next fiscal year, the government says, will exceed $30 billion.

And the IMF's $160 billion number is only "external financing"; that is, maintaining imports into a busted economy. It doesn't do a thing to repair busted economies that import half their caloric intake, as do the oil-poor Arab nations.

Egypt's economy is in free fall. Its biggest foreign exchange earner was a tourist industry that won't come back for a decade, if ever. The IMF's $160 billion doesn't take into account the costs of teaching two-fifths of the Egyptian population to read, or raising crop yields to more than a fifth of American levels, or training university graduates to do more than stamp identity cards and shuffle papers. As the international organization made clear, this is what Egypt and its neighbors require merely to pay for essential imports.

Of course, the IMF's admission that Egypt, Tunisia, Syria and Yemen can't meet the majority of their import bill without foreign aid does not increase the probability that these countries will obtain financing on that scale. On May 30, the IMF announced that it would lend $3 billion to Egypt - a tenth of its budget deficit - sometime in June. The G-8 offered the grandiose pledge of $20 billion in their own money along with $20 billion from the IMF, World Bank, and so forth, to support the "Arab Spring", with the dissension of the Canadian prime minister. But it is unclear whether that represents new money, or a shuffling of existing aid commitments, or nothing whatever.

Whatever the Group of Eight actually had in mind, the proposed aid package for the misnomered Arab Spring has already become a punching bag for opposition budget-cutters. "Should we be borrowing money from China to turn
around and give it to the Muslim Brotherhood?" Sarah Palin asked on May 27.

"Now, given that Egypt has a history of corruption when it comes to utilizing American aid, it is doubtful that the money will really help needy Egyptian people. Couple that with the fact that the Muslim Brotherhood is organized to have a real shot at taking control of Egypt’s government, and one has to ask why we would send money (that we don't have) into unknown Egyptian hands," the former Republican vice-presidential candidate added.

Whether any amount of foreign aid will stabilize Egypt's economic position is questionable, even if the industrial nations and the Arab Gulf states opened their purses, which is doubtful.

From Arab-language online media, it appears that Egypt's economic troubles have metastasized. Last month, rice disappeared from public storehouses amid press reports that official food distribution organizations were selling the
grain by the container on the overseas market. Last week, diesel fuel was the scarce commodity, with 24-hour queues forming around gasoline stations. Foreign tankers were waiting at Port Said on the Suez Canal to pump diesel oil from storage facilities, as government officials sold the scarce commodity for cash.

This is the sort of general breakdown I observed in 1992 in Russia, following the collapse of the communist government. As an adviser to finance minister Yegor Gaidar, I heard stories of Russian officials selling unregistered trainloads of raw materials on foreign markets and depositing the proceeds in Swiss banking accounts. Anything of value that could find a buyer overseas was sold. I didn't last long as an adviser; looting and pillaging wasn't my area of competence. Russia, it should be recalled, is largely self-sufficient in food and is among the world's largest oil producers, while Egypt imports half its food. Russia had enormous resources on which to draw. Egypt, Syria and Tunisia have nothing.

For 60 years, the Egyptian army and associated crony capitalists ran the economy as a private preserve. Although the army remains in nominal charge, the public humiliation of Mubarak serves notice on the previous masters of Egypt's little universe that they are as vulnerable as their former patron. Everyone who can get out will and will take with them whatever they can.

Syria is also vulnerable to hunger, the UN's Food and Agriculture Organization (FAO) warned May 23. "Continuing unrest in Syria will not only affect economic growth but could disrupt food distribution channels leading to severe localized shortages in main markets," according to the FAO. ''Syria hosts one of the largest urban refugee populations in the world, including nearly one million Iraqis who have become more vulnerable because of rising food and fuel prices."

Nearly 700,000 Libyan refugees have reached Libya and Egypt, fleeing their country's civil war. At least 30,000 Tunisian refugees (and likely many more) have overwhelmed camps in Italy, and perhaps a tenth of that number have drowned in the attempt to reach Europe. A large but unknown number of Syrian refugees have fled to Lebanon and Turkey.

Robert Fisk wrote in the London Independent on May 30 that Turkey fears a mass influx of Syrian Kurdish refugees, so that "Turkish generals have thus prepared an operation that would send several battalions of Turkish troops
into Syria itself to carve out a 'safe area' for Syrian refugees inside Assad's caliphate." The borders of the affected nations have begun to dissolve along with their economies. It will get worse fast.
================
Spengler is channeled by David P Goldman. Comment on this article in Spengler's Expat Bar forum.

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Subject: Cal Thomas: What Arab Spring?

Cal Thomas The Examiner 1 June 2011
http://washingtonexaminer.com/opinion/columnists/2011/06/what-arab-spring#ixzz1O6FmTvkz.

Upheaval in Yemen and the possibility that al Qaeda might take over, turning that country into a stronger terrorist base than it already is, should give pause to American and European policy in the Arab world. At its recently concluded G-8 meeting of industrial economies in Deauville, France, Western governments pledged $40 billion to "newly democratic"
nations in North Africa and the Middle East. One might as well throw money at Chicago and hope for electoral reform so the dead are no longer allowed to vote on Election Day.

In spring, one usually cultivates a lawn so that new vegetation can take root and grow. In the Arab world where this money is targeted, the only roots you'll find are the roots of oppression and terrorism.

If Western nations think what is happening in Tunisia and Egypt will lead to real democracy, where competing political parties, ideologies and faiths have a fair and equal opportunity of being debated, they are seriously deluded. The money would have a better chance of financing a winning streak in a Las Vegas casino.

If these countries were seriously pursuing democracy and needed only money to complete their transformation, there is plenty of money in the region that could be used to help them.

According to the U.S. Department of Energy, OPEC income is expected to rise this year above the $200 billion increase of 2010. That would be around $833 billion, the Energy Information Administration forecasts.

That's money the United States and the rest of the G-8 have paid oil-producing nations at prices ranging from $4 to $7 a gallon, depending on the country.

If money alone could foster democracy in North Africa and the Middle East, there are plenty of Arab countries with loads of it -- chiefly Saudi Arabia. Yet the Saudis have shown very little interest in an "Arab Spring," preferring to remain instead in the doldrums of an Arab winter.

Democracy doesn't spring up of its own accord. It must have a base from which it can blossom. That was a point made by Timur Kuran, a professor of economics and political science at Duke University, in a recent op-ed column for the New York Times entitled "The Weak Foundations of Arab Democracy."

Kuran wrote:

"Democracy requires checks and balances, and it is largely through civil society that citizens protect their rights as individuals, force policymakers to accommodate their interests, and limit abuses of state authority. Civil society also promotes a culture of bargaining and gives future leaders the skills to articulate ideas, form coalitions and govern."

None of this exists in any of the nations to which the G-8 has pledged its support. In Egypt, supposedly the most progressive of the Arab states, fundamentalist Muslims still persecute Coptic Christians.

The radical Muslim Brotherhood, which at the start of the revolution claimed no interest in political power, is now active in its pursuit of victory in the upcoming election and hints that it might revoke Egypt's peace treaty with Israel.

The problems in North Africa and the Middle East can't be solved by money. What's needed is a change in outlook. Radical Islam forces women into second-class status; it is rooted not in optimism, but in pessimism.

Radical Islamists appear to serve an angry god who commands them to kill those who do not believe as they do, but this belief will do little to lift the Arab world out of the religious and political deep freeze that holds it back from true progress.

In C.S. Lewis' "The Lion, the Witch and the Wardrobe," Narnia has been transformed by a white witch into a land where it is "always winter, but never Christmas."

That pretty much describes the lands of North Africa and the Middle East where the "white witch" is radical Islam and spring will never arrive as long as it holds sway over the minds and hearts of the people.
===========
Examiner Columnist Cal Thomas is nationally syndicated by Tribune Media.

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