Millions of Egyptians likely to die of hunger
Economist David Goldman has been channeling through his "Spengler" column in Asia Times Online dire predictions for the Middle East. The "problem" is that he's been right on almost every count, most notably in connection with the Arab Spring and linking it to economic and food problems across the Middle East.
The latest red flag is the news that investors yesterday bought less than a third of the 3.5 billion Egyptian pounds (US$580 million) worth of Treasury bills offered to the market on January 22, a gigantic warning that Egypt's foreign exchange position is close to the brink. Yields on Egyptian government debt maturing in nine months jumped to nearly 16%, "but the government could not place its local-currency debt to Egyptian investors, even at that exorbitant rate."
Spengler has been predicting since last May that "Egypt is running out of food, and, more gradually, running out of the money with which to buy it." How fast this may occur he can't specify, "but the government's inability to borrow on money markets suggests that the crunch is not far off."
According to Spengler, "Egypt faces a disaster of biblical proportions, and the world will do nothing about it…The rush out of the Egyptian pound is so rapid that Egyptian investors refuse to hold debt in their own national currency, even at a 16% yield. After Islamist parties won more three-quarters of the seats in recent parliamentary elections - 47% for the Muslim Brotherhood and 25% for the even more extreme al-Nour Party - the business elite that prospered under military rule is counting the days before exile."
In the meantime, he notes the first reports of actual hunger in provincial Egyptian towns that are starting to trickle in through Arab-language press and blog reports. For example in Luxor in Upper Egypt, the disappearance of diesel fuel shut down bakeries, exacerbating the spot shortages of bread.
"It seems unlikely that Egypt's central bank will be able to prevent a banana-republic devaluation of the Egyptian pound, and a sharp rise in prices for a population of whom half barely consumes enough to prevent starvation. The difference between Egypt and a banana republic, though, is the bananas: unlike the bankrupt Latin Americans, who exported food, Egypt imports half its caloric consumption."
The very near future for Egypt is dire: "The middle class will leave and tourism, down by a third over the past year, will virtually disappear in response to Salafist restrictions. The Barack Obama administration in Washington will try to appease the new Islamist government whenever it takes power, but will succeed no better than the Jimmy Carter administration did when the Ayatollah Ruhollah Khomeini took power in Iran in 1979."
Spengler's prognostication is dire indeed: "What passes for optimism - the notion that Americans can teach their political system to everyone else as if it were simply another technology - too often turns into adoration of our own cleverness. Millions of Egyptians will die before this is through. It would be a shame if this great sacrifice taught us nothing."