Tuesday, May 1, 2012

Europe, Arabs & Hunger

  Sorry for the delay in posting recently; I was helping a relative a fair distance away from my house and was unable to keep up with the world due to lack of the internet where I was staying. It's a tad disconcerting just how dependent I've actually become on the internet for information, news and entertainment. Watching the CBS evening news and the local news afterwards has given me a whole new perspective on why most of my countrymen are ignorant of what is really happening around them.

  Anywho, it seems that the deterioration in Spain and Italy has stopped as determined by the lowering of the interest rate on their respective ten year bonds. Not that anything has been solved, mind you. Both of these nations' economies are slowly grinding out negative GDP readings and their debt levels continue ever skyward. I'm not too sure why their bond yields have come down in recent weeks; nothing meaningful has been done to remedy their respective situations. I sincerely hope that the situation remedies itself, but I highly doubt it. Ultimately the basics of mathematics will consume these nations as it already has Greece.

  The upcoming election in France this weekend could have large implications. The candidate leading the pack is the Socialist Party's Francois Hollande, who has loudly declared that Germany's insistence on austerity as a cure for the EU's problems is flat out wrong, and he has declared he plans to rewrite the newly rewritten EU treaty to allow greater budget deficits. He's calling this the "Growth Bloc", and ultimately I believe his intention is to begin the monetization of debts, something Germany vehemently opposes. "It is not for Germany to decide for the rest of the Europe" declared Hollande. While I don't believe that over indebted nations should be borrowing more, the current program of austerity is clearly not working either. In the end, those who cannot repay their debts will not repay their debts. If Hollande is able to bring about the treaty changes he believes in, this will leave Germany's Angela Merkel is a most delicate position, in between her own electorate and her high court on one side and the rest of Europe pulling away in the other direction.

  This is not the only election coming up with possibly very bad consequences. In Egypt, there is an upcoming election where there are essentially two candidates backed by the military and two other Islamist candidates. The Islamist candidates have large leads in recent polls. Things in Egypt have not gone well since Mubarak's departure. There are rumors and anecdotal evidence of large scale capital flight, likely by those tied to the last regime who have any money. The Saudi's have withdrawn their ambassador. Egypt has cut Israel off from natural gas. But these things are minor in comparison to what might become a perfect storm that looks like it is approaching. It seems that the Egyptian Central Bank has been rapidly burning through their reserves in an effort to defend the value of their currency. Worse, there seems to be problems with grain production in Latin America and Asia, and this has led to a serious spike in the price of grains-- soybeans in particular. Taken as a whole, the prospect of capital flight, a weakening currency, an Islamist government and possibly a drastic increase in grain prices {exacerbated by the aforementioned weak currency} makes for a dangerous witches brew worth paying attention to.

  In Syria, the regime of Bashar Assad is slaughtering its own people to stay in power. Despite the Assad regime throwing all it has into the fight, the Free Syrian Army is still in the field fighting. It has apparently been reinforced nicely by Al Qaida, which has decided to leave Iraq and is sending the troops to fight Assad. There has been a spate of bombings in Syria lately; most seasoned observers believe these have Al Qaida's signature all over them. One must remember that the most successful American general of the Revolutionary War was one Horatio Gates, who lost each and every battle he fought against the British-- but always kept his army in the field fighting. This constant fighting is indeed wearing down the Assad regime, most especially economically. Tourism has all but dried up, as have loans from foreign bankers. Paying and equipping an army fighting in the field is an expensive thing; by all accounts, Syria's cash reserves are dwindling painfully thin. Now comes the aforementioned rise in grain prices. One report from Debka has Syrian soldiers on the Golan Heights (just opposite Israel)  going up to the Israel fence and asking for food, and Israeli soldiers throwing bread over the fence. Desertions are still happening. Syria a couple of weeks ago "invited" the Russians to purchase around $20 billion in Syrian Gov't Bonds. To my knowledge, the Russians have not taken them up on the "invitation". For this to be public knowledge is a sign of weakness. Today the Obama administration imposed new banking sanctions against both Iran and Syria. At this point, the Syrian Army and security forces have won all the battles. But so did the British. Stay tuned. 


  1. Good to hear from you again, and thanks for sharing you views.