Tuesday, February 08, 2011

Eqypt Data and EU Warnings

HEY!  I just got my first reader from Eqypt!!!!!  Welcome....   In celebration I thought I would post something about Eqypt.

The incidents in Eqypt are indeed unfortunate.  And setting aside all the political rhetoric going on about Mubarak the US et. al.   Let's look at some data.

  1. Protests in Egypt are being carried out by a very, very tiny percentage of the population. 
  2. Curiously, most signs being carried are written in English. 
  3. 70% of Egyptians work for some level of the Egyptian Government.
  4. The Egyptian Government just gave 70% of the population a 15% raise.
  5. According to The US Government Foreign Aid Website the US Government has $1.2B in annual investment in Egypt meaning most Eqyptians work for the US Government apparently.
  6. If an orderly transition in Eqyptian Government is not realized the most important employer of the Eqyptian people will be lost and rising food prices will be replaced by unemployment on a Biblical scale.
  7. And, US aid will be halted or reduced thus lowering US Government deficit spending.  After all it makes no sense to for the US government to borrow money from the Chinese only to then give it to Eqypt. 
On the Finance & Economics side of things Eqypt is not that relevant and any swings in the market are either short lived or overplayed.  Eqypt is no more important than other recent crises that all made headlines and then disappeared:  Dubai, Greece, Ireland, Spain, ....

Back to politics: A warning for the EU:  Keep an eye on the Balkans.  The path is clear.  First the overthrow of the Pakistani government.  Then Eqypt. Then Jordan. And then it is on to the EU.  Movements no longer require joining land masses, they jump from country to country by means of Twitter, Blogs, and an old style media that still believes, "If it bleeds; it leads" -- hence signs in English -- a more international language.

Back to Finance & Economics:  When the US Federal Reserve floods the world with cheap dollars through Quantitative Easing it makes everything look expensive and devalues the currency.  However, political unrest drives a "flight to safety" for investors which is still considered the US dollar and US Treasury Bonds.  This increases the demand in the dollar making it stronger.   You now know the Ben Bernanke equilibrium strategy... devalue the currency while stumulating demand for the currency.

Back to the Human tragedy:  Everything said above gives a strong feeling that Eqypt and therefore the Eqyptian people are not important.  Nothing could be further from the truth but the mechanics of finance and monetary policy surely send that message that, "While we agree human beings are important; we must also agree they are irrelevant".  My hope is that the people of Eqypt could establish some form of government that allows for periodic orderly transitions of leadership to help keep moving the country forward for the benefit of the people the government is supposed to represent. 

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