A recent article on ZeroHedge is all outraged at the news that the US government is going to act as guarantor for a 1 billion eurodollar bond issuance by Egypt. The article asks,
“Uh, should Congress perhaps have something to say about the fact that America is now somehow the guarantor of recently revolutionary African countries?”
The article quotes from a Bloomberg article which says,
“The five-year bonds will be backed by a U.S. “sovereign guarantee,” Finance Minister Samir Radwan said by telephone from Cairo today…President Barack Obama promised last week $2 billion in loan guarantees and debt forgiveness.”
Basically ZeroHedge wants to know why, as it puts it, The US is,
“…backstopping paper by another government, which will soon be very much insolvent,…”
The answer in a UPI article on May 18th is simple – the price of Wheat. Just as it was for why we had the uprisings in the first place.
Egypt is reported to have only four months’ supply of wheat on hand and only one month’s supply of rice.
Not only that but Egypt is also running out of money with which to buy food.
Egypt’s foreign exchange reserves have fallen by $13 billion, or roughly one-third, in the first quarter of the year amid a flight of capital.
The situation in Egypt was about to, and perhaps still will, get critical. If food prices, shortages and hunger ignites another street uprising it will not be against an aging dictator who can be thrown to the crowd, it will be against the quasi military government which the US backs. What worries the US is the possibility that if there is another wave of unrest, this time blaming the moderate, largely secular uprising itself, then more radical Islamic groups will rise to prominence. That is why the US is giving money it can ill afford given the fact that it has exceeded its own debt ceiling yet again.
And it is not only the US. This week Saudi Arabia has pledged $4 billion in loans and aid to Egypt. After the Saudi stock market lost 6.5% last Saturday.
The price of food in Egypt is partly due to global Wheat harvest shortages. Last Wednesday Wheat futures jumped 7% in a single day. Wheat futures are now up 91% in less than a year. 91%! Such huge price rises are going to make staple foods unaffordable in all the same countries that saw popular uprisings already this year. According to an article in the Wall Street Journal,
“Tunisians eat more wheat than anyone on the planet: 478 pounds per person a year….Unable to grow enough wheat at home, countries like Egypt and Tunisia buy half or more of what they need from other countries, and pass it along at deep discounts to their impoverished populations.
Egypt alone has told donor nations it will need about $10 billion overall in aid in the next 13 months. That is money to keep its poor fed and stop them taking to the streets in all out revolt.
Combine that with reports that,
The business elite who flourished under Mubarak and ran the economy for half a century are hustling their wealth to safer climes.
In the first quarter $13 billion of Egypt’s foreign reserves has left the country.
The Arab spring is going to turn nasty. The nations who were hungry will get hungrier and look to us to help them. If we don’t there is a real chance they will feel betrayed by us and by Democracy. If that happens then there will be the preachers of hate on hand to offer an alternative.
Surely these are the crises we should be bailing out not bankers in their penthouses.
This summer we will have not only European nations on the edge of default due in large part to being forced to pay off private bank debts, but North African and the Middle Eastern Countries on the edge of food riots and revolution due in part to food speculation by global traders armed with hundreds of billions in bail out money and QE dollars printed up to help keep the banks alive.
And what are our leaders doing to prepare for these crises? They are listening to wealthy bankers.
Very good post
Do you think we are going to see this kind of stuff happening in Easter Europe, i keep expecting it but it's almost like that area of the world does not exist in the mainstream media
Looks to me like there might be part of a sentence missing? At the end of this paragraph:
"And it is not only the US. This week Saudi Arabia has pledged $4 billion in loans and aid to Egypt. When the Saudi's give you know it's serious. The Saudi stock market lost"
This is from HAWKEYE.
He was having problems with my stupid sysytem. I can't get the http to work. Sorry Haweye. So there is a link but not a live one. My fault not Haweye's.
The global food supply issues are confirming the predictions made in 1972 by the “Limits to Growth” report.
Charles Hall’s Revisiting the Limits to Growth at http://www.esf/edu/efb/hall/2009-05Hall0327.pdf (see Figure 7 on page 6) shows how accurate the 1972 predictions by the Club of Rome are. The chart shows how their model predicts world food per capita peaking in about 2010. Real world events are bearing this out. The model also predicts peak resource extraction (steepest decline of the blue line) between 2010 and 2020. Many in the “Peak Oil” community share this synopsis.
It is perhaps the most compelling evidence yet of how unscientific and
implausible the standard economic model of growth is. If economics would like to consider itself a “science”, then it should be willing to be subjected to genuine scientific scrutiny. It’s inability to foresee food and resource problems is slowly being exposed.
In stark contrast to economic dogma’s arrogant assumptions of infinite growth, the Club of Rome model (using Systems Dynamics) places the human economy WITHIN the worlds natural resources.
Their predictions are worryingly accurate.
But even more foreboding is that it is just as plausible for many in positions of power and influence to only deny this issue publicly, whilst privately hoarding wealth, influence and access to dwindling resources.
Portentous times, indeed.
magicalsushi,
thanks. The end of the sentence did get lost. Fixed now.
There's a most illuminating story about World Bank senior economist Herman Daly trying to get his superiors to consider environmental limits in a World Bank report in the early 90s. His efforts summarily dismissed by his boss…one Larry Summers (yes him, one of Obama's chosen economic advisers).
Daly told the story in a later paper of his about 'uneconomic growth', and you can read the story here:
http://www.peopleandplace.net/perspectives/2011/2/7/the_preanalytic_vision_of_herman_daly
There is no 'scientific' basis for much of what is peddled as modern 'economic theory' – it's pure ideology & ideological 'capture'.
I may be a little slow off the mark, and posting here because it is as good as anywhere :), but i just watched http://www.bbc.co.uk/iplayer/episode/b011k45f/All_Watched_Over_by_Machines_of_Loving_Grace_Love_and_Power/
which I thought would be all about determinism and lack of free will, but is actually a spot on run down of financial events in the last 50 yrs. Recommended watching for any (UK based) Golem XIV followers.
Thanks Golem for your constant willingness to see the broader picture… however the quotes from Zerohedge are depressing…"outraged" at help to "recently revolutionary African States"
As if America itself was not once itself recently revolutionary? Admittedly over 200 years ago…. but still from which earlier ferment a lot of what democracy now means still comes.
I tend to applaud the fact America will continue to help Egypt post Mubarak.
I realize you do not share the sometimes xenophobic bile of Zerohedge by the way …
Interestingly Paul Mason (of the BBC?) HERE talking of the prospects for Europe is now sounding rather more like yourself a few months back… wouldnt you say? Been some catching up I think in the mainstream media
Mikehall
Herman Daly is the prophet of Ecological Economics and I thoroughly recommend his work to everyone interested in a serious and scientific study of genuine economic principles. This article gives a great introduction:
http://www.adbusters.org/magazine/81/the_crisis.html
I’m in complete agreement with your point about the ideological nature of modern economics. I’m part way through writing a blog piece that covers economic ideology (working title of “The State of Economics”), so will get my backside in gear and finish it!
Hawkeye (the Forensic Statistician)
I'll second Martin's recommend for All Watched Over By Machines Of Loving Grace". Watched it last night and was amazed that it was being broadcast on the BBC. Especially the last section where Curtis made explicit the link between the capture of our political system by a financial elite and the penalties we're paying under austerity. Cracking stuff.
I've been on a Curtis binge recently – prompted by many recommendations on this blog. The Mayfair Set is particularly good.
478lb wheat consumption per person per year – 1.5lbs/day? Must surely include animal feed, nobody can eat that amount.
@ Jamie
Adam Curtis' 'Century of the Self' (4 parts) about originator of the term 'PR', Edward Bernays ("…because the word 'propaganda' has 'connotations'…") should be compulsory viewing. It follows the development of his work, used extensively by Corporations & Politics both right up to recent times.
Century of the Self was available, probably still is at archive.org as a free MP4 download. (Use their search function to find it – 4 episodes.)
There's a tie-in with Nate Hagens work too imo. Pretty much the entire methodology of not just commercial advertising, marketing & politics but also much of mainstream news media is targetting a base, lower brain function response. Also effectvely blocking off higher brain function 'thinking'.
The Nate Hagens link again for those that missed it:
"The psychology of resource over consumption"
http://feasta.org/documents/fleeing_vesuvius/?p=84
Thanks again to David for this blog site & his marvelous posts & those of the commenters – a great resource!
wulfhound said…
478lb wheat consumption per person per year – 1.5lbs/day? Must surely include animal feed, nobody can eat that amount.
1.3lbs/day = c2,020 calories
UK Department of Health Estimated Average Requirements (EAR) are a daily calorie intake of 1940 calories per day for women and 2550 for men.
Depends what else, if anything, they can get to supplement their diet.
mikehall,
I haven't got on to The Century of the Self yet, but it's on the list.
It's interesting that you mention God in your comment on the Nate Hagens article.
It started me thinking that the God impulse – also a base, lower brain function that evolved when we were struggling to survive in a hostile pre-historic world – is almost the opposite trait to our 'innate need for status and novelty'. Perhaps it is even a counterbalance.
(My theory here is based on a recent reading of Desmond Morris's 1967 book The Naked Ape which may well be out dated so please take it with a pinch of salt.)
When early humans came down out of the trees and on to the plains in search of other food sources they became hunters. Lacking the speed, strength and endurance of the other predators with which they were competing, the most efficient way for humans to hunt was in groups, using tools. Their primate ancestry meant they were already a social animal but the primate form of heirarchical organisation was incompatible with co-operative hunting. A single, all powerful male at the head of the group would prevent the kind of adult male co-operation necessary for successful pack hunting. Not only that, but in order to develop the big brains neccessary for advanced communication and tool weilding skills, humans needed to increase the time needed for child development and therefore child rearing. This required a strong male-female mating bond which couldn't happen in an environment where one male had sexual domination over the group. So the alpha male had to go.
The problem with jettisoning the alpha-male though, is that you lose the shared alleigance to a single leader that helps cement the group and make co-operative hunting a possibility in the first place. So, to avoid throwing the baby out with the bath water, so to speak, the alpha-male alleigance became emodied in an entity outside the group – the God figure. This allowed the group to retain their shared goals (appeasement of the figurehead) while ridding themselves of tyrannical rule which would have dampened co-operative activity and stifled brain development. The God 'meme' clearly flourished and groups which had it were selected for leading to its later development into fully fledged religion.
Why were groups that had the God meme so successful? Could it be because it encourages self-sacrifice to the group and the pursuit of longer term goals rather than short-term individualist goals (novelty and status)?
Certainly in modern form religion has these characteristics. Most major religions incorporate the notions of all men being equal before God, tolerance for your fellows, making sacrifices now in order to obtain a reward in the afterlife… All of which seem to have sprung from a need to increase co-operative activity within the group and aid its long-term viability.
(cont…)
These human traits have of course been perverted and manipulated in the past, much like the modern marketing industry has perverted and manipulated our desire for status and novelty. It's not just the traditional religions either – extreme forms of socialism, both national and communist, have preyed on these desires.
Evolution has left us with a lot of genes that can come into conflict with our modern world. I'm not sure we can ever hope to suppress their effect on our behaviour through rational thought alone. Neither do I think it would be desirable – these genes, after all, are the product of millions of years of selecting for traits which have, ultimately, made us the adaptable, co-operative, vibrant and successful species we are. Without our desire for novelty where would our art be? Without our co-operative tendencies would there even be civilization?
I think rather we should be using knowledge of our evolution to plan a society which makes good use of our natural traits and which provides the framework to encourage the beneficial sides of these traits, in order to achieve and maintain sustainability.
As for how we go about this, I'm at a loss.
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Financial Planning
Hi Rebecca – I think we're pretty much on the same page, I probably just didn't explain myself very well. I was just kicking a thought-football around, none of it can I back up in any meaningful way – Friday afternoons at work are really dull.
I'm as suspicious of ideologues as you are – they make me feel queasy. But science is important and applying our scientific know how (our greatest achievement as a species as far as I'm concerned) to how we organise ourselves as societies is, I feel, something we should aim towards. We can't ever hope to eradicate the irrationality of human beings because it's the product of millions of years of evolution. We need to work with it.
But as you rightly point out we must always be wary of those idealogues who, like the Nazis, invoke the guise of science to lend an air of respectability what are, in reality, nothing more than their arbitrary predjudices.