Once Mubarak was removed, the military was to rule the country for 6 months until democratic elections could be set up. I warned back then that the military was unlikely to cede power to a democratically elected president, which at this point, may very well have been an unfriendly (to the west) member of the Muslim Brotherhood, which received unprecedented support from countries such as Syria, Iran and Lebanon as extremist slipped across the border during the confusion and helped the Muslim Brotherhood get organized. This is very reminiscent of the second Iraq war in which US troop rolled in to cities expecting to set up local governments only to find they were already in place and running smoothly, this was because Iran had slipped in to the country and set up these governments in anticipation of the fall of Saddam. This gave the majority Shiite population considerable influence, as they were once treated as second class citizens under Saddam's rule.
A year later Egyptian's are rising up again seeing that the military did not keep its promise and has no intention of doing so. This was predictable before Mubarak had even been disposed. I further pointed out that even in countries like Iraq and Afghanistan, whose leaders recieve unprecedented support from the US, can barely project power outside of their capitals and this is nearly a decade later. Tearing down a government is the east part, creating a western friendly government with real credentials is next to impossible and it's not just Egypt, but Tunisia, Libya, soon to be Syria, maybe Iran. The fact is after the the conquest of the middle east by the British, arbitrary borders were created which pitted deeply divided religious factions against each other, such as in Iraq. It is reminiscent of the Rwanda, when the Belgians had created a colony there with the ruling minority, the Tutsis being deeply hated by the Hutus. Once Belgium left Rwanda and abandoned it as a colony, the majority Hutus who had been treated badly by the minority Tutsis, had taken their revenge and over 750,000 (some say up to a million) Tutsis were murdered, mostly by machete in 100 days.
An excellent book on the subject is called,
"We Wish to Inform You that Tomorrow We Will Be Killed with Our Families"
Unfortunately the Middle East shares many of the same cultural problems and divides that were rooted in colonialism. It's Interesting that the US has killed or deposed so many former friends, take Saddam for example, for 40 years he was the CIA's top asset and during the Iran/Iraq war, Iraq received unprecedented support from the US, not to mention Osama Bin Laden who was once "friend" to the US during the Soviet occupation attempt in Afghanistan. It's amazing to see how many government's have been targeted by the neo-cons and then also see Rumsfeld in decade old photographs, politely shaking hands with our former friends.
Mubarak, another former close friend of the U.S.
Even Gaddafi had managed to rehabilitate his reputation and became friends of the West under George W. Bush, Stratfor ran a column story about this called, "Killing old friends" and of course there is the book, "Confessions of an Economic Hit Man" in which these governments were approached by people like the author, if they didn't do what the West wanted, then the, "Jackals" were sent in.
The point being, western democracy is has little in common with the power structures of the middle east, we can even see divides in Western Democracy between the US and Europe. Inevitably, Western Democracy in the MENA region is ultimately set up to fail.
The point being, while we are all very focused on Greece and the EU more broadly, there is a storm brewing in the Middle East that will re-shape the middle east and the world. The consequences of which will be more dramatic then a sovereign default.
I was reminded of what I had said about Egypt when I looked at today's Drudge headlines and saw this story, confirming everything I had said BEFORE Mubarak was deposed of power.
Again, this isn't an immediate problem for the market, but in formulating your views of the market, whether they be short term or long term, you cannot ignore what is happening in MENA and what history has taught us, which essentially boils down to. 'this WILL NOT end well" and the next crisis outside of the EU is taking shape right now in Africa and the Middle East, two of the most explosive areas in the world. There will be consequences and the market will react to them. While I don't recommend trying to be a political or history major, I do support understanding the fundamentals of what is going on in the world, often they are quite predictable, however the outcomes can be far from predictable and it only takes a brief misunderstanding, a single assassination to change the world forever. Lets not forget how World War 1 started with an assignation in Sarajevo during June of 1914.
World War 2 had its origins in the Great Depression as well as nationalistic tensions in Europe. Ironically we have the same set of circumstances unfolding now, economic recession as well as nationalism as the Greeks are humiliated by what they see as their German oppressors.
This is just one of many scenes in Greece in the last 24 hours as sentiment toward Germany has hit all time lows. The burning of the German flag and Nazi flags are a regular occurrence in Greece right now.
Even more shockingly, the Greek Police who have faced rioters for over a year now, just released a statement yesterday which seems to threaten IMF representatives with arrest:
Greek Police have accused EU/IMF officials, in a formal letter, of "...blackmail, covertly abolishing or eroding democracy and national sovereignty"
You never know what the spark will be and often most will not see the spark as being of consequence, history tells us differently.
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