Volatility Up on the Downside
The Middle East ruckus means more to rich Westerners than a rising oil price...
"BUCKLE UP. You're watching history in the making," a journalist cautioned yesterday, writes Eric Fry in The Daily Reckoning from Laguna Beach, California.
Was this particular journalist referring to:
- The apparent "Tea Party Revolt" in Wisconsin;
- Ben Bernanke's history-book play at Dollar debasement;
- The suspension of Two and a Half Men, the US sitcom, due to Charlie Sheen's very public dispute with producer, Chuck Lorre;
- The bizarre rift between child superstar, Miley Cyrus and her dependant father, Billy Ray Cyrus;
- Or that ruckus going on in the Middle East...?
The journalist's quote could apply to any of the items cited above. But the topic in question was not the long-standing hostility between Sheen and Lorre, but rather the long-standing hostility between the oppressed peoples of the Middle East and their oppressors.
The revolutions sweeping across the Middle East are not merely one-off attempts to overthrow unresponsive autocrats or crazed tyrants, CNN journalist Fareed Zakaria asserts. These revolutions are a reaction to 1,000 years of subjugation by foreign powers and their hand-picked, domestic lieutenants.
"[F]or the first time in 1,000 years, Arabs are taking control of their own affairs," Zakaria explains. "Since the 11th century, Arab lands have been conquered and controlled by foreigners...In fact, most of the Arab world was ruled by the Ottoman Empire for centuries. Then came the Europeans, who carved up the region after World War I – creating most of the states we know today...[These states were] all creations of the colonial powers.
"Throughout this 1,000 years of foreign domination," Zakaria continues, "the Arabs always had local rulers. But these sheiks and kings and generals were appointed or supported by the outside imperial powers. Most of the Middle East monarchies, for example, were created out of 'whole cloth' by the British.
"These local rulers were more skilled at negotiating up to the imperial rulers, than they were at negotiating down to their own people. They ruled their own people, not by negotiation, but by force and bribery...That game is in trouble..."
Finally, says Zakaria, the winds of change are blowing across North Africa and regions to the East. As these winds gather intensity, socio-economic conditions in the region will shift as unpredictably as sand dunes in the Sahara. Volatility is probably the only near-certainty.
"The Middle East is witnessing a revolt against the Old Order everywhere," Zakaria concludes. "Where it will lead, where it will fail, where it will succeed, all of this is totally unclear. But this is a big, system-wide and historic shift. So buckle your seatbelts. You're watching history in the making."
If volatility is the likeliest course of the Mid-East revolutions, what would be the likeliest course of the oil price? Volatility, with a bias to the upside, would be our guess.
And if the oil price is likely to spike higher, what would be the likeliest course of the global financial markets? Volatility, with a downward bias, would be our guess.
We are not so certain that the contagious revolutionary virus spreading throughout the region is bullish for anything other than the oil price.
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