ut what of the broader implications of whats happening in Egypt?

For that, Id like to share some relevant quotes from an article on Egypt written in the March !!" issue of our International #peculator by my dear partner and resident seer, $oug %asey& 'ou(ve got to ask yourself about any place, but especially about a country like this) how do the *! million people survive? +hat do they produce? ,uesstimates are that in ancient times Egypt supported a population of about " million, and rather comfortably for the era- In those days almost everyone was a farmer, and the annual flooding of the .ile insured both water and nutrients for crops that made Egypt the breadbasket of the ancient world/here are still plenty of farmers in Egypt, but since the 0swan 1igh $am was built by the 2ussians in the ("!s, the .ile doesn(t flood anymore- /oday the dam generates about 3 4 of the country(s electricity, but it(s silting up with the estimated four million tons per year of alluvial fertili5er that flows down from the highlands of Ethiopia and 6ganda- .ow Egyptians have to buy a million tons of chemical fertili5er per year- 7f course, a gigantic river that floods everything annually doesn(t fit well with an industrial society- +hen 894 of the country(s people live within 3 miles of the river, it(s one thing for them all to get wet if they(re dirt farmers walking behind o:en, but something else if most of them are living in apartments#o, the 0swan $am is a mi:ed blessing in many ways- 0lthough philosophically I(m of the ;pave the planet; school, since I believe mankind(s ultimate destiny is in the stars and that the Earth is an insignificant mote in the cosmic scheme of things, I(m naturally suspicious of mega<pro=ects built by economically illiterate socialist governments- /hey may wind up destroying enough capital to keep people trapped on this planet, like serfs in a medieval village- Militarily, the dam is a boon for Israel7ne small nuke and the entire country will be washed into the Mediterranean- >iterally?ut farming and the dam, while important, don(t bring money into the country- /here are basically five things that keep the place going) 3-/ourism, roughly 94 of ,$@- In Egypt, this means foreigners taking pictures of monuments built largely between A,!!! and B,9!! years ago, capital provided by the locals( distant ancestors- 0nd it means other foreigners lying on 2ed #ea beaches, provided by nature- /hey keep coming, but every few years they(re scared away when a tour bus is bombed or machine<gunned-2emittances- Egypt(s most reliable e:port is workers, who send money home to their familiesA-7il- .et e:ports ran at roughly A!!,!!! bpd during the last couple of decades, but now the fields are in steep decline, and net e:ports are down to only 3!!,!!! bpd, on the way to 5ero by the end of the decadeB-/he #ue5 %anal, built in the 3*"!(s courtesy of Europeans- It is becoming less important as ships get larger Ctoo large to use the %analD and air transport grows9-Foreign aid-

6nfortunately, none of these things are a sound foundation for prosperity- /hey(re not economic pillars, they(re reeds& .o one with any sense has much confidence in government figures, certainly not those from struggling /hird +orld countries- ?ut, to use an old saw from this part of the world, it(s not hard to read the writing on the wall, and it(s scary- /he population is growing at something like A-94 per year0nd unemployment is about 94, which means that the ranks of young, unemployed, unmarried males<unquestionably the most dangerous creatures ever to have walked the Earth, including /<2e:< are swelling- Meanwhile, when you look at the five income sources listed above, you can see that Egypt is relying on nothing but accidents of history and nature, and on the kindness of strangersMy view, from a strictly economic perspective, is that Egypt is a disaster in waiting- ?ut the same is more or less true of all the Islamic countries Cwith the minor e:ceptions of the Emirates and MalaysiaD0ll of them, like Egypt, produce little that can be traded- Economically, all are saddled with gigantic, entrenched, concrete<bound bureaucracies that serve no useful purpose whatsoever, but do stop anything productive from happening- @olitically, they(re all basically authoritarian, one<party states#ociologically, they(re all highly traditional, conservative and, outside ma=or cities, tribal/echnologically, there(s 5ero innovationE practically everything more recent than 3*th<century products either is imported or made under license and with foreign capital$oug then goes on to a wonderful dissertation on the fundamental reasons why these Middle Eastern countries have remained stuck in the $ark 0ges F blaming it on the entrenched roots of religion1owever, as I am trying to avoid the usual onslaught of outraged emails, Ill leave it thereCFor those of you who are paid subscribers to the International #peculator and are not offended by philosophical musings about the nature of monotheistic religions, you can read $ougs article on Egypt in full in the archives for March !!"-D +hile one can, as $oug did, look at a trend in motion and ascertain a very probable outcome F in the case of Egypt and the other stultified countries of the Middle East, the outcome being the proverbial top blowing off the pressure cooker of the tightly controlled, corrupt and inefficient economies F it is not so easy to predict the knock<on consequences- For e:ample, if El?aradei and his allies succeed, as have the pro<democracy protesters in /unisia, it could light the fuse on regional unrest that quickly flows into the big oil producers, including #audi 0rabia, Iraq and even Iran- 0t the flare<up point in a ma=or oil producer, especially #audi 0rabia, one has to imagine both oil and the precious metals moving much higher in a hurry?ut then& =ust maybe& moderate new governments could emerge that know that their political fortunes rest largely on promoting a more broadly based and successful economy, which can only happen by lightening the hand of government/hough the trend of the past half<century has certainly been for more government at the e:pense of individual freedoms, it is not set in stone that the trend must continue to the point of widespread collapse- If the oppressed of the Middle East can muster the will to finally rise up and throw the bums out F mullahs and moochers alike F then maybe theres hope for the rest of us-

7f course, if there were actually an unleashing of free markets around the world, given that it must come at the e:pense of out<of<control governments, then owning precious metals might not be quite so important and prices would fall- ?ut theres a long way to go between here and there, and it is highly unlikely that the ruling elites will go so quietly into the nightIn any event, unlike most of what people spend time paying attention to these days, this is certainly a drama worth watchingIs there an investment opportunity in this? 0s you can see in the chart here of the Market Gectors Egypt Inde: E/F CE,@/D, the unrest has caused the Egyptian stock market to sell off sharply0 small speculation that things will be resolved in favor of the democratic opposition, or even by Mubarak agreeing to some sort of compromise, could make for a quick rebound and a tidy profit- 0nd the returns could keep piling up as the blossoms of the free market begin cropping up in Egypt/hats the upside- /he downside is that if either the Muslim ?rotherhood or the military end up with the pri5e, the bottom could be a long way off- /he E,@/ E/F is currently selling for H3"- B a share#o, maybe set a stink bid at !4 below that, to see if you cant pick up shares even cheaper as the situation reaches a crescendo- Mind you, that is not an investment recommendation, =ust an idle thought for the adventurous among you-