Egypt's Social Crisis: Financial Bonanza for Wall Street Investors and Speculators
Hidden Agenda behind Mubarak's Decision Not to Resign?
by Michel Chossudovsky
Global Research, February 6, 2011
Mubarak's decision not to resign was taken in close consultation with Washington. The US administration including US intelligence had carefully identified the possible scenarios. If Washington had instructed Mubarak to step down, he would have obeyed forthright.
His decision not to resign indelibly serves US interests. It creates a situation of social chaos and political inertia, which in turn generates a vacuum in decision making at the government level.
The continued social crisis has also resulted in a massive outflow of money capital. More concretely, what this signifies is that Egypt's official foreign exchange reserves are being confiscated by major financial institutions.
The ransacking of the country's money wealth is an integral part of the macroeconomic agenda. The newly formed government on instructions from Washington has not taken concrete steps to curtail the massive outward flow of money capital. A prolonged social crisis means that large amounts of money will be appropriated.
According to official sources, Egypt's Central Bank had (prior to the protest movement) 36 billion dollars in foreign exchange reserves as well as an additional $21 billion of deposits with international banking institutions which are said to to constitute its so-called "unofficial reserves." (Reuters, 30 January, 2011).
Egypt's external debt, which has increased by more than fifty percent in the last five years is of the order 34.1 billion (2009). What this means is that these Central Bank reserves are de facto based on borrowed money.
In early 2010, there was a large influx of hot money deposits into Egyptian government debt instruments.
Foreign exchange flows into the country and is exchanged for Egyptian pounds (EgP), which are then used by institutional investors and speculators to purchase high yielding government bonds and treasury bills (denominated in Egyptian pounds) with short term interest rates of the order 10 percent.
The interest rate on long term government bonds shot up to 7.2 percent at the outset of the protest movement. (Egypt Banks to Open Amid Concern Deposit-Run May Weaken Pound, Lift Yields - Bloomberg, January 2, 2011)
At the onset of the crisis, international investors owned about $25bn of Egyptian T-bills and bonds, almost a fifth of the total T-bill market and about 40 per cent of the domestic bond market. Foreign investors also accounted for about 17 per cent of the stock market's turnover, and held about $5bn-$6bn of Egyptian shares. (Ibid)
Under its agreement with the IMF, Egypt is not allowed to implement foreign exchange controls. These hot money deposits are now leaving the country in anticipation of a devaluation of the Egyptian pound. In the days preceding Mubarak's speech, capital flight was running at several hundred million dollars a day.
In a bitter irony, Egypt deposits 21 billion with the commercial banks as "unofficial reserves" on the one hand, while the commercial banks acquire $25bn worth of EgP debt, with a yield of the order of 10 percent. What this suggests is that Egypt is financing its own indebtedness.
The protest movement started on a bank holiday. While the closure of the Cairo stock market and domestic banking system had put a temporary lid on the outflow of money capital, large amounts of capital flight instrumented by major financial institutions had already occurred in the days leading up to the protest movement.
Egypt's banking system reopened on February 5, leading to a renewed process of capital flight resulting in the depletion of central bank reserves and a corresponding increase in Egypt's foreign debt.
A devaluation of at least 20 percent is contemplated. According to UBS' emerging markets currency division, "the pound could "easily" drop by a further 50 per cent or so to E£9 per US dollar". FT.com / Currencies - Banks weigh risk of capital flight, February 1, 2010)
A devaluation of more than ten percent would wreck social havock: Domestic prices of food are dollarized. If there is a devaluation of the Egyptian pound, this would inevitably trigger a renewed increase in the prices of essential food staples, leading to a further process of impoverishment.
A scenario of currency devaluation, rising external debt coupled with a renewed package of IMF sponsored austerity measures would inevitably lead to an accentuation of the social crisis and a new wave of protests.
The newly appointed Finance Minister Samir Radwan is firmly committed to the Washington consensus, which has served to impoverish the Egyptian people. In a contraditory statement on February 3, Radwan confirmed that "the government won't reduce subsidies even if global prices of food and commodities rise. Public spending will be used as a tool to "achieve social justice," he told a news conference in Cairo." (Bloomberg, February 5, 2011)
Radwan is abiding by IMF-World Bank guidelines: no restrictions will be placed on capital flight. The Central Bank will ensure the conversion of hot money deposits into hard currency by major financial institutions. The coffers of the central will be ransacked.
With capital flight, domestic debt is transformed into foreign debt, putting the country into the stranglehold of foreign creditors:
Radwan said Egypt will honor its debt obligations and urged foreign investors to have confidence in the country. "All the bond obligations, everything will be honored on time," Radwan said in a Feb. 4 telephone interview from Cairo. "We are not defaulting on any obligations." (Bloomberg, February 5, 2011)
In a bitter irony, Mubarak's decision to remain as head of State with Washington's approval has served the interests of institutional investors, currency traders and speculators.
Financial dislocation, rising debt and spiralling food prices: Before "democratic" elections are called, Egypt will have been pushed into the straightjacket of a new set of deadly IMF conditionalities.
The important question is how will the various opposition forces tackle the demands of external creditors and financial institutions, not to mention the broader geopolitics of US-NATO influence in the region.
"Let me issue and control a nation's money and I care not who writes the laws. - Mayer Rothschild
"Civil disobedience is not our problem. Our problem is civil obedience! People are obedient in the face of poverty, starvation, stupidity, war, and cruelty. Our problem is that grand thieves are running the country. That's our problem!" - Howard Zinn
"If there is no struggle there is no progress. Power concedes nothing without a demand. It never did and never will" - Frederick Douglass
Hosni Mubarak's control of Egypt's state media, a vital linchpin of his 30-year presidency, has started to slip as the country's largest-circulation newspaper declared its support for the uprising against him.
Hoping to sap the momentum from street protests demanding his overthrow, the president has instructed his deputy to launch potentially protracted negotiations with secular and Islamist opposition parties. The talks continued for a second day on Monday without yielding a significant breakthrough.
But Mr Mubarak was dealt a significant setback as the state-controlled Al-Ahram, Egypt's second oldest newspaper and one of the most famous media publications in the Middle East, abandoned its long-standing position of slavish support for the regime.
In a front-page leader, the newspaper's editor-in-chief, Osama Saraya hailed the "nobility" of what he described as a "revolution" and demanded that the government embark of irreversible constitutional and legislative changes.
"The state and all its denizens, the elder generation, the politicians and all other powers on the political stage must humble themselves and rein themselves in to understand the ambitions of the young and the dreams of this nation," he wrote.
There was no call on the president to resign and while it may yet prove that Al Ahram's editorial shift may be tactical rather than genuine, opposition supporters expressed astonishment at the development.
"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
Make sure you have your malware shields in their upright and locked positions though, because he has been a frequent target of hackers who leave behind little bomblets of nasties. He must be saying something someone doesn't want you to read.
Here are two of his latest:
Torturers R Us: The Continuity Kid Does Cairo
Written by Chris Floyd Monday, 07 February 2011 22:49 Below is a piece that never got posted in all the hackfoonery that was going with the site recently. It was written in the first heat of Egypt's uprising, but in some ways, it is even more pertinent today, as the Obama Administration rallies around the suave and vicious torturer they have installed in Cairo, in a desperate attempt to produce the kind of "continuity" of militarist-elitist corruption in Egypt that Barack Obama has achieved so magnificently at home in his takeover from the Bush Regime.
This is when you know a regime is in on the ropes: when its security apparatchiks start the panicked, wholesale destruction of the evidence of their crimes.
and
Cry Freedom: Cairo Crowds Shred the Lies of the Power Players
Wednesday, 09 February 2011 00:35 "The American power structure has been set reeling by something that is simply outside the boundaries of their mental universe: a non-violent, non-sectarian, non-ideological, leaderless revolution by ordinary people."
"Where is the intersection between the world's deep hunger and your deep gladness?"
Washington Faces the Arab Revolts: Sacrificing Dictators to Save the State
by James Petras / February 8th, 2011
To understand the Obama regime's policy toward Egypt, the Mubarak dictatorship and the popular uprising it is essential to locate it in an historical context. The essential point is that Washington, after several decades of being deeply embedded in the state structures of the Arab dictatorships, from Tunisia through Morocco, Egypt, Yemen, Lebanon, Saudi Arabia and the Palestinian Authority, is attempting to re-orient its policies to incorporate and/or graft liberal-electoral politicians onto the existing power configurations.
While most commentators and journalists spill tons of ink about the "dilemmas" of US power , the novelty of the Egyptian events and Washington's day to day policy pronouncements, there are ample historical precedents which are essential to understand the strategic direction of Obama's policies.
The Division of Egypt: Threats of US, Israeli, and NATO Military Intervention?
by Mahdi Darius Nazemroaya
[minus the photos]
The protests in Tunisia have had a domino effect in the Arab World. Egypt, the largest Arab country, is now electrified with popular uproar to remove the Mubarak regime in Cairo. It must be asked what effects would this event have? Will the U.S., Israel, and NATO simply watch the Egyptian people establish a free government?
The parable of the Arab dictators is like that of the spider's web. Although the spider feels safe in its web, in reality the web is one of the frailest homes. All the Arab dictators and tyrants, from Morocco to Saudi Arabia and the United Arab Emirates, are in fear now. Egypt is on the brink of what could amount to being one of the most important geo-political events in this century.
Pharaohs, ancient or modern, all have their end days. Mubarak's days are numbered, but the powers behind him have not yet been defeated. Egypt is an important part of America's global empire. The U.S. government, Tel Aviv, the E.U., and NATO all have significant interests in maintaining Egypt as a puppet regime.
The U.S. and Israel want to use the Egyptian Military to Police the Egyptian People
When protests started in Egypt, the heads of the Egyptian military all went to the U.S. and consulted with U.S. officials for orders. The Egyptians are well aware that the regime in Cairo is a pawn in the services of the U.S. and Israel. This is why Egyptian slogans are not only directed against the Mubarak regime but are also aimed against the U.S. and Israel, in similarity to some of the slogans of the Iranian Revolution. The U.S. has been involved in every aspect of the Egyptian government's activities. Cairo has not made a single move without consulting both the White House and Tel Aviv. Israel has also permitted the Egyptian military to move into urban areas in the Sinai Peninsula. The reality of the situation is that the U.S. government has worked against freedom in the Arab World and beyond. When President Obama says that there should be a period of "transition" in Egypt, it means that Mubarak and the Egyptian regime should stay intact. The U.S. does not want a people's government in Cairo.
Martin Indyk, a former Clinton Administration official at the U.S. National Security Council with an area of responsible for the Middle East and the Israeli-Palestinian Conflict and an individual closely tied to the Obama Administration, told The New York Times that the U.S. must work towards bringing the Egyptian military into control of Egypt until a "moderate and legitimate political leadership [can] emerge." [1] Not only did Indyk call for a military takeover in Egypt, he also used U.S. State Department double-speak. What U.S. officials mean by "moderate" are dictatorships and regimes like Saudi Arabia, the U.A.E., Jordan, Morocco, and Ben Ali's Tunisia. As for legitimacy, in the eyes of U.S. officials, it means individuals who will serve U.S. interests.
Tel Aviv is far less coy than the U.S. about the situation in Egypt. Out of fear of losing Cairo, Tel Aviv has been encouraging the Mubarak regime to unleash the full force of the Egyptian military on the civilian protesters. It has also been defending Mubarak internationally. In this regard, the Egyptian military's primary role has always been to police the Egyptian people and to keep the Mubarak regime in power. U.S. military aid to Egypt is solely intended for this purpose.
Revolutionary Egypt: A Second Iran in the Middle East?
If the Egyptian people manage to establish a new and truly sovereign government, it would equate to a second Iran in the Middle East. This would cause a major regional and global geo-political shift. It would also deeply upset and cripple the interests of the U.S., Britain, Israel, France, the E.U., and NATO in what would amount to a colossal loss, like that of Iran in 1979.
If a new revolutionary government were to emerge in Cairo the bogus Israeli-Palestinian peace talks would be over, the starvation of the Palestinians of the Gaza Strip would end, the cornerstone of Israeli military security would be gone, and the Iranian-Syrian Awliyaa (Alliance) could possibly gain a significant new member.
Israeli Prime Minister Benjamin Netanyahu expressed Tel Aviv's fears about Egypt allying with Iran and a new gateway of Iranian influence being opened in a speech by saying: "Tehran is waiting for the day in which darkness descends [in Egypt]." [2] Netanyahu is correct about one thing, the Iranian Foreign Ministry has been monitoring the events in Egypt very eagerly and the Iranians are awaiting the establishment of a new revolutionary government that could join Iran and the Resistance Bloc. Tehran has been overjoyed and Iran is abuzz with speeches by its officials about what they believe to be an "Islamic Awakening."
While the Arab members of the Resistance Bloc have made low-key statements about the protests in Egypt, non-Arab Iran has been vocal in its support of the protesters in the Arab World. Syria has made low-key remarks, because of its own fears of revolt at home. Hezbollah and Hamas have also been relatively low-key on their stances about the protests in the Arab World, because they wish to avoid being targeted by the Arab regimes through accusations of meddling.
At every opportunity the so-called "moderate" Arab regimes seek to demonize these Arab players. On the other hand the Turkish government, which maintains close ties to the Arab regimes, has also been virtually silent about the protests in the Arab World.
Israel is preparing itself for the possible reality that an unfriendly government will be taking office in Cairo, which is what will happen if the Egyptian people are successful. Tel Aviv has secret military-security contingency plans for Egypt. In the words of Netanyahu to the Israeli Knesset: "A peace agreement does not guarantee the existence of peace [between Israel and Egypt], so in order to protect it and ourselves, in cases in which the agreement disappears or is violated due to regime change on the other side, we protect it with security arrangements on the ground." [3]
Threats of U.S., Israeli, and NATO Military Intervention in Egypt: Recall the 1956 Invasion of Egypt?
There is also the chance of renewed war with Israel and even American and NATO military intervention in Egypt. The threat of military intervention in Egypt must be considered. In 1956, the British, the French, and the Israelis jointly attacked Egypt when President Gamal Abdel Nasser nationalized the Suez Canal. Recalling 1956, the U.S. and NATO could do the same. General James Mattis, the commander of U.S. Central Command said that the U.S. will deal with Egypt "diplomatically, economically, [and] militarily" should access to the Suez Canal be shut by Egypt to the U.S. and its allies. [4]
In 2008, Norman Podhoretz proposed a unthinkable nightmare scenario. In this nightmare scenario the Israelis would militarily occupy the oil refineries and naval ports of the Persian Gulf to insure "energy security" and they would also launch a so-called pre-emptive nuclear attack against Iran, Syria, and Egypt. [5]
In 2008, the main questions that arose were: "energy security" for whom and why attack Egypt, where the Mubarak government has been a staunch Israeli ally?
Would the Israelis attack Egypt if a revolutionary government emerged in Cairo? This is what essentially happened a few years after Gamal Abdel Nasser took power from Mohammed Naguib in Egypt. Also, is such a military attack on Egypt tied to Israel's secret military-security contingency plans that Netanyahu assured the Israeli Knesset about.
Is such a nightmare scenario, which includes the use of nuclear weapons, a distinct possiblity? Podhoretz has close ties to both Israeli and U.S. officials. It should also be mentioned that Podhoretz is a recipient of the U.S. Presidential Medal of Freedom for his intellectual influence in the U.S. and is one of the original 1997 signatories of the Project for the New American Century (PNAC) along with Elliot Abrams, Richard Cheney, John (Jeb) Bush, Donald Rumsfeld, Steen Forbes Jr., and Paul Wolfowitz. The PNAC has essentially outlined plans for transforming America into a global empire through militarism overseas and domestic militarization.
"Managed Chaos" and the Threats of Balkanization in Egypt: The Yinon Plan at Work?
Egypt cannot be managed by the Mubarak regime, the U.S., Israel, and their allies anymore. Thus, the U.S., Israel, and their allies are now working to divide and destabilize Egypt, as the most powerful Arab state, so that no strategic challenge can emerge from Cairo. The attacks on the peaceful protestors in Cairo's central Tahrir Square by Mubarak's club-wielding thugs riding camels and horses was a stage-managed event to build public support outside of the Arab World for having a dictatorial strongman in Cairo. It epitomized every stereotype and incorrect Orientalist attitude about Arabs and the peoples of the Middle East. It would come as no surprise if the U.S., Israel, and Britain played direct or advisory roles in the event.
In a major departure from reality, the Mubarak regime's state-controlled media is reporting popular support for Mubarak by millions of Egyptians and wide-spread approval of his speech and his "transitional government" plans. In a show of desperation, the same state-controlled media is also trying to blame Iran and its Arab allies for the Egyptian protests. Egyptian state-controlled media has reported that Iranian commandos and special forces, along with the Lebanese Hezbollah and the Palestinian Hamas, have been on destabilization and sabotage missions against Egypt.
These types of accusations by the regime in Cairo are not new. Yemen, Bahrain, Jordan, and Mahmoud Abbas also all do the same. The Mubarak regime has blamed Iran, Hezbollah, the Free Patriotic Movement, Syria, and Hamas for meddling and inciting revolt several times in the past. When the Free Patriotic Movement criticized the Mubarak regime about the treatment of Egyptian Christians, the Mubarak regime accused Michel Aoun of sectarian sedition. On the other hand, Hezbollah was accused of attempting to create chaos in Egypt when Hassan Nasrallah asked the Egyptian people to show solidarity with the Palestinians and demand that their government allow humanitarian aid to go to the people of the Gaza Strip.
Managed Chaos at Work
Although Mubarak's thugs are also creating chaos in Egypt to try to keep his regime in power, the doctrine of "managed chaos" is being used by external actors with the Israeli Yinon Plan in mind. Making Egyptians fight against one another and turning Egypt into a divided and insecure state, just like Anglo-American Iraq, appears to be the objective of the U.S., Israel, and their allies. The building tensions between Egyptian Muslims and Egyptian Christians, which includes the attacks on Coptic churches, is tied to this project. In this context, on the thirteenth day of the protests in Egypt, the Mar Girgis Church in the Egyptian town of Rafah, next to Gaza and Israel, was attacked by armed men on motorcycles. [6]
The White House and Tel Aviv do not want a second Iran in the Middle East. They will do whatever they can to prevent the emergence of a strong and independent Egypt.
A free Egypt could prove to be a much bigger threat than non-Arab Iran within the Arab World to the objectives of the U.S., Israel, and NATO.
The Return of the Egyptian Eagle as the Champion of Arab Independence?
Egypt was once a major strategic challenge to the U.S., Israel, France, and Britain in the Arab World and Africa. Nasserite Egypt aided the Algerian Resistance against the French occupation of Algeria, openly supported the Palestinians against the Israeli occupation of their homes, supported the Yemenite Resistance against the British occupation in South Yemen, challenged the legitimacy of the British-installed Hashemites and the American-supported House of Saud, and offered support to national liberation and anti-imperialist movements. Cairo under a revolutionary government, whether deeply tied to Islam or not, could give the Arab World a new leader that would revive pan-Arabism, make Tel Aviv further nervous about trying to launch wars, and rally the Arabs and other peoples worldwide in revolt against the global confederacy formed by the U.S. and its allies.
Egypt is not free from bondage yet. The Egyptian people must also address the role of global capitalism in supporting the Mubarak regime. At the same time they must remain united. If they are successful, they will make a huge impact on the history of the current century.
Mahdi Darius Nazemroaya is a Research Associate of the Centre for Research on Association (CRG).
NOTES
[1] Elisabeth Bumiller, "Calling for Restraint, Pentagon Faces Test of Influence With Ally," The New York Times, January 29, 2011; Indyk's words are as follows: "What we have to focus on now is getting the military into a position where they can hold the ring for a moderate and legitimate political leadership to emerge."
[2] Attila Somfalvi, "Natanyahu: Democratic Egypt no threat," Yedioth Ahronoth, February 2, 2011.
[3] Ibid.
[4] Adrian Croft, "U.S. sees Suez Canal closure as inconceivable," eds. Peter Griffiths and Elizabeth Fullerton, Reuters, February 1, 2011.
[5] Norman Podhoretz, "Stopping Iran: Why the Case for Military Action Still Stands," Commentary Magazine, vol.125, no. 2, (February, 2008): pp.11-19.
[6] "Church in flames in Egypt's Sinai: witness," Agence France-Presse (AFP), February 6, 2011.
[7] "Senior US envoy presses for democracy in Tunisia," Agence France-Presse (AFP), January 24, 2011.
Sending Pharaoh Mubarak packing Online Journal
Wisner is the son of Frank G. Wisner, Sr., co-founder of the CIA and Operation Gladio, which left stand-behind armies post WW II to combat socialist or ...
Omar Suleiman: a dark man haunted by lights Islam Online
The CIA asked him to wrest confessions from him that he was a senior members ... dating back to February 2006 Suleiman also said to the FBI Director Robert ...
