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What’s Next?

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The news from Egypt has been impossible to miss on TV: the despotic ruler desperately trying to hang onto his power, the chanting crowds clashing with riot police, the tanks in the streets, tear gas, and the burning buildings. Much of the coverage is portraying President Mubarak as a ruthless thug and the protesters as patriots seeking democracy. I suppose that’s mostly true, but I don’t think we’ll be seeing a Jeffersonian democracy emerge from the chaos.

Those of us over 50 have seen this movie before, in 1979. It resulted in Iran, currently one of the biggest threats we face as a nation. We can’t afford another Iran in the world today, and Egypt is much more populous than Iran. It also controls the Suez Canal, through which 7% of the world’s goods flow.

Egypt’s turmoil isn’t an isolated incident. Just a few weeks ago, the ruler of Tunisia was ousted. Protesters are taking to the streets in other Arab countries, and the leaders in Yemen, Syria, Sudan, Jordan, Kuwait and Saudi Arabia are very nervous.

If these countries fall and extremists take power, it will likely be very bad for the Western nations in general and the U.S. in particular. Again, going back to the 1970’s, the oil embargo at that time resulted in high oil prices. But even worse, it caused a scarcity of gasoline that was new in most people’s experience. Many gas stations were only open for a couple of hours every other day, and this resulted in lines down the block hours before the gas station even opened. It crippled the economy and made life miserable. Today, these events could make $5.00/gal gasoline look warm and fuzzy.

The suddenness of these recent events appears to have caught the world leaders by surprise. Evidently the mess that the world’s economies have been in the last few years has been enough to occupy their attention. Now everyone is trying to make sense of what is happening, and the emerging picture does not look good.

Most of the countries in trouble are allies with the West or at least cooperated with the U.S. on things like fighting terrorism or trying to broker peace with Israel and the Palestinians. Any new governments in these nations are not likely to be friendly to the U.S.

Besides the political and oil issues, there is another side to these events that is not being reported on very much in this country: food. Ambrose Evans-Pritchard writes in the UK Telegraph on 1/30/2011,

 
 

In other words, that box of cereal that was $4 last summer and is now $7, may be $10 by Memorial Day. This kind of food inflation is tough on American families, who spend about 10% of their income on food. It is infinitely worse on families in third world countries who spend half or more of their income on food. This is a big factor in the unrest in many countries, and the reason for the panic-buying of food by some governments.

The surge in global food prices since the summer – since Ben Bernanke signaled a fresh dollar blitz, as it happens – is not the underlying cause of Arab revolt, any more than bad harvests in 1788 were the cause of the French Revolution.

Yet they are the trigger, and have set off a vicious circle. Vulnerable governments are scrambling to lock up world supplies of grain while they can. Algeria bought 800,000 tonnes of wheat last week, and Indonesia has ordered 800,000 tonnes of rice, both greatly exceeding their normal pace of purchases. Saudi Arabia, Libya, and Bangladesh, are trying to secure extra grain supplies.

The UN’s Food and Agriculture Organization (FAO) said its global food index has surpassed the all-time high of 2008, both in nominal and real terms. The cereals index has risen 39% in the last year, the oil and fats index 55%.

 

Where does all this end? I don’t know. I do believe that the next 20 years are going to be very different from the last 20 years. At least two nations in the Middle East will change governments, and this will only spur on the protests in other Middle Eastern nations. In a few months, the entire region could change.

Imagine Iranian President Mahmoud Ahmadinejad having most or all of the Middle East oil under his control. He would be able to turn off the spigots any time he wants, cranking up the price of oil and keeping the economies of the West in a perpetual state of depression. Does anyone think he wouldn’t enjoy doing this?

The problem is, I can’t think of anything we can really do about it. All we can do is fill up our pantries with food before the prices go up even more, and keep your gas tank full. There is one other thing we can, as a nation, do: Drill, baby drill!

 

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Larry Bertolino

Larry Bertolino

Owner at myLocalPCpro
Larry Bertolino is a 31 year old, U.S Navy Veteran and currently sitting on the board of Directors for the Harrison County Chamber of Commerce, as well as Harrison County Rural Transit.
Larry Bertolino
Larry Bertolino

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Posted by on February 2, 2011, 2:51 pm. Filed under Featured, John Lovejoy. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry