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Riots in Egypt over Food Prices and Unemployment, Blood on Bernanke's Hands

Politics / Social Issues Jan 28, 2011 - 03:45 AM GMT

By: Mike_Shedlock

Politics

Best Financial Markets Analysis ArticleViolence in Egypt continues unabated in spite of President Hosni Mubarak's plea for calm. Demonstrators threw firebombs and chanted "Down with Hosni Mubarak, down with the tyrant." Police responded with teargas and bullets.

Protesters are angry over poverty, rising food prices, state food subsidies, unemployment, and social conditions.


Social media outlets, especially Twitter have played a leading role in organizing protests. The Obama administration and the US state department have also resorted to Twitter and Facebook.

Here are a number of stories I have been following, with references to Twitter and Facebook highlighted.

Thousands defy Egypt's leader in fresh protests

MSNBC reports Thousands defy Egypt's leader in fresh protests
Egyptian anti-government activists pelted police with firebombs and rocks in a second day of clashes Wednesday that left two dead. Beefed up police forces on the streets quickly moved in and used tear gas, beatings and live ammunition fired in the air to disperse any demonstrations.

There were signs that the crackdown on protesters was taking a toll on Egypt's international standing. In Washington, White House Spokesman Robert Gibbs would not say whether President Hosni Mubarak, the target of demonstrators' anger and a close U.S. ally, still has the Obama administration's support. Secretary of State Hillary Clinton said the government should allow peaceful protests instead of cracking down.

Tens of thousands turned out for the largest protests in Egypt in years — inspired by the uprising in Tunisia. They demanded Mubarak's ouster and a solution to grinding poverty, rising prices and high unemployment.

"What happened yesterday was a red light to the regime. This is a warning," businessman Said Abdel- Motalib said on Wednesday.

Many in Egypt see these events as signs of the authoritarian president's vulnerability in an election year. There is speculation that 82-year-old Mubarak, who has been in power for nearly 30 years and recently experienced serious health problems, may be setting his son Gamal up for hereditary succession. But there is considerable public opposition and, according to leaked U.S. diplomatic memos, it does not meet with the approval of the powerful military. And the regime's tight hold on power has made it virtually impossible for any serious alternative to Mubarak to emerge.

Egypt and the Internet

Activists used social networking sites to call for fresh demonstrations Wednesday. But Facebook, a key tool used to organize protests, appeared to be at least partially blocked in the afternoon. On Tuesday, Twitter and cell phones appeared to be sporadically blocked as well.

The Interior Ministry warned Wednesday that police would not tolerate any gatherings, and thousands were out on the streets poised to crack down quickly on any new signs of unrest after clashes on Tuesday that killed three demonstrators and one police officer.


Protesters Burn Tires, Throw Molotov Cocktails

The New York Post reports US demands reform amid Egypt riots

Thousands of protesters burned tires, threw Molotov cocktails at a government building and fought riot police in Egypt yesterday in the worst unrest in President Hosni Mubarak's 30-year-old rule.

Police retaliated with tear gas, beatings and by firing live ammunition in the air in street clashes that mirrored those that drove Tunisia's dictator from power two weeks ago.

The unprecedented street fury against Mubarak -- a close US ally -- prompted the Obama administration to deliver a rare public demand for change in Cairo.

"We believe strongly that the Egyptian government has an important opportunity at this moment in time to implement political, economic and social reforms to respond to the legitimate needs and interests of the Egyptian people," Secretary of State Hillary Rodham Clinton said.

The 82-year-old Mubarak, who came to power in 1981 after President Anwar Sadat was assassinated, has been the target of growing anger over the country's poverty, corruption and repression.

New elections are scheduled for September, but critics believe Mubarak, who has recently experienced serious health problems, is setting his son Gamal up for hereditary succession.

Yesterday's protests extended well outside the capital. In the city of Suez, an angry crowd of about 1,000 people gathered outside the city's morgue demanding to take possession and bury the body of one of three protesters who died in clashes on Tuesday.

Current protests in Egypt recall "Bread Riots" of 1977

The International Business Times reports Current protests in Egypt recall "Bread Riots" of 1977

The ongoing anti-government protests on the streets of Cairo and other Egyptian cities represent the biggest public demonstration in the country since the famous ‘bread riots’ which occurred exactly 34 years ago. The current riots, while more dedicated to the overthrow of President Hosni Mubarak, are also partially incited by rising food prices.

Ammar Ali Hassan, director of the Middle East Studies and Research Centre, told the paper: “The atmosphere that prevailed before and during the 1977 bread riots is similar to now, especially in that there is no confidence in the government. The desire to protest has overwhelmed a large sector of society."

Egyptians denounce Mubarak, clash with riot police

Yahoo!News reports Egyptians denounce Mubarak, clash with riot police

Egyptian police fired tear gas and rubber bullets and beat protesters to clear thousands of people from a central Cairo square Wednesday after the biggest demonstrations in years against President Hosni Mubarak's authoritarian rule.

Mobilized largely on the Internet, the waves of protesters filled Cairo's central Tahrir — or Liberation — Square on Tuesday, some hurling rocks and climbing atop armored police trucks.

"Down with Hosni Mubarak, down with the tyrant," chanted the crowds. "We don't want you!" they screamed as thousands of riot police deployed in a massive security operation that failed to quell the protests.

The sound of what appeared to be automatic weapons fire could be heard as riot police and plainclothes officers chased several hundred protesters who scrambled onto the main road along the Nile in downtown Cairo. Some 20 officers were seen brutally beating one protester with truncheons.

Discontent with life in Egypt's authoritarian police state has simmered under the surface for years. However, it is Tunisia's popular uprising, which forced that nation's autocratic ruler from power, that appears to have pushed young Egyptians into the streets, many for the first time.

"This is the first time I am protesting, but we have been a cowardly nation. We have to finally say no," said Ismail Syed, a hotel worker who struggles to live on a salary of $50 a month.

"We want to see change, just like in Tunisia," said 24-year-old Lamia Rayan.

Dubbed a "day of revolution against torture, poverty, corruption and unemployment," Tuesday's protests in cities across Egypt began peacefully, with police at first showing unusual restraint in what appeared to be a calculated strategy to avoid further sullying the image of a security apparatus widely criticized as corrupt and violent.

Protests Spread to Algeria, Morocco, Jordan, Yemen

Bloomberg reports North African Unrest May Spread on Record Food Prices

Record food prices may fan social unrest and fuel inflation beyond North Africa as thousands of people take to the streets of Cairo to denounce President Hosni Mubarak, delegates at the World Economic Forum said.

“This protest won’t end in North Africa; it will spread in many countries because of high unemployment and increasing food prices,” Hamza Alkholi, chairman and chief executive of Saudi Alkholi Group, a holding company investing in industrials and real estate, said in an interview in Davos, Switzerland.

Risks of global instability are rising as governments facing budget crunches cut subsidies that help the poor cope with surging food and fuel costs, the head of the United Nations’ World Food Program said two days ago. World food costs rose to a record in December on higher costs for sugar, grain and oilseeds, the UN reported Jan. 4, contributing to the uprising that ousted Tunisia’s Zine El Abidine Ben Ali on Jan. 14. Protests have spread to Egypt, Algeria, Morocco and Yemen.

Higher commodity prices are “leading to riots, demonstrations and political instability,” Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said on a Davos panel. “It’s really something that can topple regimes, as we have seen in the Middle East.”

In Algeria, three were killed and 420 injured at rallies against high food prices and a lack of public housing. Jordanian opposition groups have held peaceful protests against the government, and in Yemen today thousands gathered outside the main university in the capital, Sana’a, demanding that President Ali Abdullah Saleh step down.

“If you don’t improve people’s lives, you will have social unrest,” Sheikh Mohammed bin EssaAl Khalifa, chief executive officer of the Economic Development Board in Bahrain, said in an interview. “Each country is different, each country is unique. It could spurt up in Latin America. It’s not an Arab thing.”

Obama Tells Egyptian President to "Embrace Change"

In the US, Obama Poised to Intensify U.S. Criticism of Egypt’s Mubarak

The White House is prepared to step up its criticism of Egyptian President Hosni Mubarak, a key Middle East ally, if his government intensifies its crackdown on protesters, said an administration official.

President Barack Obama privately pressed Mubarak in a telephone call last week to embrace democratic changes, said the official, who requested anonymity. Secretary of State Hillary Clinton yesterday said Mubarak, in power since 1981, has an “important opportunity” to enact economic, political and social reforms.

‘Potentially Dangerous’

The Obama administration needs to move cautiously, said Anthony Cordesman, a senior defense analyst at the Center for Strategic and International Studies, a nonpartisan research group in Washington.

“There isn’t just the morning after to think about, there is the decade after,” he said in a telephone interview. “For the U.S. to get out in front now would be premature and potentially dangerous.”

Shadi Hamid, an expert on Islamist politics and democratic reform in the Middle East at the Brookings Institution, said the large pro-democracy protests may have broken the “psychological barrier of fear” among Egyptians.

"The U.S. does not want to see the Egyptian regime fall any time soon,’’ Hamid said in a telephone interview. “But people who are protesting, the tens of thousands, do want to see the regime fall some time soon. They are diametrically opposed interests."

The White House Press Secretary Robert Gibbs created some ambiguity yesterday when asked whether the administration still supports Mubarak. In his response that ‘‘Egypt is a strong ally,’’ he avoided repeating Mubarak’s name.

The Obama administration also has been communicating through the same social media sites that the Egyptian protesters have used to organize themselves. The State Department issued statements yesterday on Twitter, including one supporting the ‘‘universal rights of the Egyptian people including freedom of expression.’’

Social Media

Twitter Inc. of San Francisco, which was used to help coordinate the Tunisian protests, yesterday said access to its services was blocked in Egypt. Facebook Inc., the Palo Alto, California-based owner of the world’s most popular social- networking service, hasn’t seen any major changes in user traffic in Egypt, though it is aware of reports of service disruption in the country. Earlier, some Facebook users reported the site was inaccessible in Egypt, according to Herdict.org, which monitors web access.

Clinton Defends Facebook, Twitter Amid Egypt Protests

Note: The entitre article that follows is on social networking including, Tritter, Facebook, Google, and Blackberry.

Bloomberg reports Clinton Defends Facebook, Twitter Amid Egypt Protests

As Egyptian authorities struggled to quash anti-government uprisings yesterday, Secretary of State Hillary Clinton called on the longtime U.S. ally to unblock social networking sites that have been used to organize protests, such as those operated by Facebook Inc. and Twitter Inc.

By urging Egypt’s government “not to prevent peaceful protests or block communications, including on social media,” Clinton in Washington renewed her call for freedom of expression and assembly online, and fueled debate over how to promote those goals without undermining other U.S. interests.

Clinton’s defense of social networking is “a very delicate balancing act,” because of the longstanding U.S. relationship with Egyptian President Hosni Mubarak, said Ethan Zuckerman, a senior researcher at Harvard University’s Berkman Center for Internet and Society. “At the same time, we’re starting to see evidence of an anti-authoritarian revolution in the region, and she doesn’t want to be on the wrong side of that either. The safe stance is to be pro-free speech,” he said.

Google, Microsoft Corp., and Yahoo! Inc., are the only technology corporations that have joined the Global Network Initiative, a group of financial services firms, rights groups and communications companies committed to resisting government censorship and demands for private user information.

Blackberry Monitoring

The UAE, Saudi Arabia and India last year threatened to shut down BlackBerry service unless authorities were allowed to monitor messaging, citing concerns about illegal activities. The Saudi and UAE governments eventually backed down; India’s talks with RIM are ongoing.

As with other private talks, it’s hard to determine if the intervention of U.S. officials made a difference. RIM declined to comment.

Egypt Debt Riskier Than Iraq

Bloomberg reports Egypt Riskier Than Iraq in Swaps as Protests Spread

Egypt is riskier than Iraq in the market for credit default swaps for the first time in at least a year after protests denouncing President Hosni Mubarak.

The cost of protecting Egyptian debt against default for five years with the contracts jumped 69 basis points, or 0.69 percentage points, this week to 375 today, compared with 328 for Iraq, according to prices from CMA, a data provider in London. Just last week, Iraqi swaps cost 19 basis points more than Egypt’s, and in June, an average 240 basis points more, as Iraq recovered from the U.S.-led invasion in 2003.

The unrest, inspired by the revolt that toppled Tunisia’s leader, “does raise political risks,” said Eric Fine, a portfolio manager in New York who helps Van Eck Associates Corp. oversee $3 billion in emerging-market assets. “If this is a revolution, the price of risk for Egypt could go much higher, and if it’s a failed one” the cost will drop to 300 basis points and probably 250, Fine said in a phone interview.

Higher borrowing costs may crimp Egypt’s ability to meet its target of cutting the budget deficit to 3 percent of gross domestic product by 2015 from the current 8 percent. Yields at the government’s debt auction climbed this week. The average rate on 91-day bills rose 30 basis points from the previous sale to 9.5 percent, while the yield on 182-day bills advanced 20 basis points to 10.2 percent, data compiled by Bloomberg show.

The yield on Egypt’s 2040 dollar-denominated bonds jumped 50 basis points since Tunisian President Zine El Abidine Ben Ali was ousted on Jan. 14 to 7.10 percent, the highest level on record, according to data compiled by Bloomberg. Mubarak, 82, has been in power since 1981 and hasn’t said whether he will run in the September elections.

Egypt is rated BB+ at Fitch Ratings and Ba1 at Moody’s Investors Service, the highest non-investment grade levels. Iraq’s 2028 dollar bond isn’t rated and rose for the first time in six days yesterday, pushing the yield down less than 1 basis point to 6.4 percent, according to data compiled by Bloomberg.

The assessment of U.S. President Barack Obama’s administration is that “the Egyptian government is stable,” Secretary of State Hillary Clinton said.

The U.S. relies on Mubarak as a mediator in the Palestinian-Israeli conflict, and Egypt is the second-biggest recipient of American foreign aid after Israel. Relations were strained during the administration of President George W. Bush, who repeatedly called on Mubarak to allow more freedoms.

Mubarak will probably survive the protests as strong ties between the ruling National Democratic Party and the military means that a repeat of Tunisia’s uprising is unlikely, Richard Fox, Fitch’s London-based head of Middle East and North Africa Sovereign Ratings, said in a conference call today.

“The military has long been the lynchpin of stability in Egypt and our base case at this stage would be that stability will be restored in due course,” Fox said.

“One thing that we can all take from the Tunisian situation is that the unexpected can sometimes happen rather quickly,” Fox said. “It would be a brave man who would try to expect what would happen in Egypt between now and the election.”

 

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Reflections on Social Media

A tip of the hat to Twitter and Facebook.

Information is power and Twitter and Facebook do help spread information. While I do not condone riots, I certainly understand them. Nonetheless, people have a right to the news, and the same thing applies to the US.

Unfortunately, the US is headed down the path of more news suppression more control over media.

North Africa proves it will not work and cannot be done.

Blood on Bernanke's Hands

Most of the increases in food prices are due to droughts in South America, floods in Australia, and poor growing conditions in many places.

However, Bernanke's "Quantitative Easing" policies combined with rampant credit growth in China and India have led to increased speculation in commodities. That speculation has forced up food prices.

If you are tweeting, please tweet this "Bernanke has blood on his hands".

Please note that speculation in commodities is not a cause of anything. Rather commodity speculation is a result of piss poor monetary policies not only the Fed, but central bankers worldwide.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2011 Mike Shedlock, All Rights Reserved.


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