(Interviewed by Louis James, Editor, International Speculator)
L: Doug, there are flames going up in the Middle East, something you've long said was in the cards, but it's not between Israel and its neighbors (click here to read Doug's last article on Egypt, in which he predicted social unrest). The revolutionary spirit sparked in Tunisia seems to have spread to Egypt, the largest Arab nation and a major U.S. ally, greatly destabilizing an already shaky region. The whole world suddenly seems in greater peril. What do you make of this?
Doug: Well, I think it's about time – in fact, way past time. Revolution in the Middle East is long overdue.
L: [Chokes on tea, starts mopping keyboard with napkin.] Care to elaborate?
Doug: I'm not saying I favor the unpleasantness and inconvenience for so many people that comes with such events, but this upheaval is long overdue. These Arab countries have long been the most repressive places in the world, with the possible exception of the despotisms in Africa, to their south. It's very good to see these regimes being overthrown. And the revolution – hopefully that's what it is – is internally generated. It's not the product of an invasion by foreign troops from an alien culture, which is what happened in Iraq and Afghanistan. Regime change in that whole part of the world is inevitable, necessary, and salubrious. The problematic question is: what are the old regimes going to be replaced with?
L: Fair enough. Let's take this one piece at a time… I think I know what you'll say, but do you think this is a fire that's going to spread, or were Tunisia and Egypt just particularly rickety?
Doug: I think it is going to spread, and I'll tell you why.
First, these regimes are not the only highly repressive ones. Every regime in the Arab world – in fact every regime in the Muslim world – is corrupt, backward, and repressive.
Second, with the communications and travel revolutions of the last few decades, the people in these places know they've been getting a raw deal and suffering a lower standard of living than much of the rest of the world. It was one thing, in the old days, to live from hand to mouth and get beaten by the police if you stepped out of line. People thought that was the natural order. But now they can see people in the west live vastly better, and they aren't going to take it any more.
Third, with Facebook, Twitter, cell phones, text messaging, and so forth, people can actually organize action on a massive scale far easier than ever before.
So a broad revolution in the Muslim world has been inevitable for a couple of decades. I suspect it's now imminent.
L: I remember reading that a major factor in the Soviets losing control was the fax machine, which enabled a primitive form of what you're talking about. It's interesting that the Egyptian authorities tried to prevent losing control by shutting down Twitter and other social networks. It didn't work. I just heard a news story saying that some two billion people across the planet are now on the Internet in one form or another. I don't think one third of the planet's population has even been literate at any past point in history, let alone actively participating in a language-driven system of information exchange. We've said before that the Internet is the most revolutionary thing to come along since the printing press – now we're seeing that this is literally true.
Doug: Yes – you can download the "Flash-Mobs for Dummies" app right now. And there's no way to stuff the genie back in the bottle. Technology is everywhere the friend of the common man, starting with fire and the wheel. But political and religious elites – the Atillas and the witch doctors of the world – always try to keep the genie in the bottle. The printing press, gunpowder, the automobile, the computer – the elites have always hated these things, and don't want the common man to have them. Radical new technologies always work to overturn the status quo.
L: So, where do you think the next place will be where the people decide they've had enough?
Doug: Could be anywhere. Of course we can't be sure this revolution will succeed – maybe it will be a false start, like the aborted insurrections in Europe in 1848. But I think it's more likely to catch fire, like the wars of liberation in South America in the 1820s.
The trouble is that there are all kinds of revolutions – as different as the Russian revolution of 1917 was from the one of 1989. I think this one is likely to be more like the latter: pro-freedom. We're watching chaos theory in action. It could appear in Pakistan, a perennial candidate, partly because it isn't even a real country – just a hodge-podge put together by an imperial power. Algeria and Libya are two more highly repressive regimes that deserve to go. Saudi Arabia is probably the biggest risk. This is not a Middle Eastern problem, but could quickly become a worldwide conflagration, especially if a keystone like Saudi Arabia falls.
L: I could see Saudi Arabia going next – it's hardly a bastion of freedom and respect for human rights.
Doug: Far from it; it's a medieval theocracy/kleptocracy. And yet, the "talking heads" on TV are not praising the people for throwing off their chains. The reason is that most of these horrible, repressive governments are all U.S. puppets. They are stooges, getting anywhere from tens of millions of dollars to billions of dollars per year, in the case of Egypt, in direct support from the U.S.
L: Rape and pillage all you want, we'll support you as long as you're a good ally.
Doug: Right. But aside from being grossly unethical, this is a short-sighted policy. In the minds of millions of people all around the world, it associates the U.S. with repression, rather than freedom, which is what the U.S. should – and once did stand for – back when it was America. And unfortunately, people conflate America with the U.S. government, even though they're totally different things – antithetical things, actually. I remember years ago walking down the street in Cairo, and a kid of about 15 yells at me "Damned American." I'd never done anything to him. But the U.S. government had obviously done something to make him feel that way. If I'd thought of it, I would have said, "Hey kid, I've got nothing to do with your secret police – I'm on your side." But it wasn't the place for a philosophical discussion.
L: It's Orwellian; the "land of the free and the home of the brave" is the supporter of tin-plated despots around the world.
Doug: I know – it's totally perverse. We supply their arms. When a protestor picks up a can of teargas, its label reads: "Made in USA." They see U.S. military equipment being used against them. The U.S. government is supporting all these disgusting despots, making enemies of billions of people, turning the U.S. into a police state, and bankrupting the American economy. They're truly multi-talented. But, the average American sees the government as a friend and protector. It's funny – the average Arab may actually be much more politically hip and realistic, and desirous of liberty, than the average American. Maybe some day they'll send their CIA and military over here to bring us freedom.
L: "Underprivileged dictators of the world – apply here for financial aid!"
Doug: [Chuckles] That's what it amounts to. And it's all free. The Federal Reserve can create as many trillions of dollars as anyone needs.
L: The amazing thing is that all these Bright Boys in Washington never seem to get a clue. They supported murderous dictators in Latin America until they got thrown out. They supported the Shah of Iran until he got thrown out. They supported Saddam Hussein, and then ended up turning on him themselves. And they still support some of the most brutal regimes in the world today, sowing the seeds of even more suspicion and hatred – how can they be so blind?
Doug: They never learn at all. And the worst part of it is that there's no need to – nor benefit in – having any involvement whatsoever in any of these places. It's both unnecessary and counterproductive to American interests; it only benefits the people who live within the D.C. beltway, and those who slop at the same trough. You can't impose a new social order on a people from the outside. And even if you could – whoever you put in office, there's going to be some group or another that's going to object, dig in, and hate you for it to boot. You create more future conflict and enemies for yourself. All these idiots blathering on about what "we" should do should just mind their own business.
L: If only the would-be "nation builders" would remember Jefferson's mandate: "Peace, commerce and honest friendship with all nations; entangling alliances with none."
Doug: Better watch out – quoting Jefferson can get you on the terrorist watch list these days. But you know I'm an optimist, and the good news is that all of this is coming to an end. Whatever happens is going to happen, and there won't be much the U.S. can do about it, because all this nation-building nonsense is horrifically expensive and the U.S. is already tapped out trying to rebuild Iraq and Afghanistan – not to mention Detroit and New Orleans. It's "game over" for Mubarak, and close to "game over" for the U.S. empire.
The U.S. government is bankrupt, and will be increasingly immobilized. In a few years, they'll be completely unable to meddle anywhere, because there simply won't be any money to pay for it. The Fed's own projections say the entire budget will be consumed by Social Security, Medicare, Medicaid, and interest on the debt, with no money even for the military, unless something is done soon. There is no politically feasible way to cut spending on those programs. Does that mean the U.S. Navy will wind up rotting at the dock, like the Soviet Navy? It will be interesting to see. Either the roughly $1.5 trillion for "defense" goes, or the $1.5 trillion for Social Security, Medicare, and such goes, or interest on the national debt goes, or the scores of federal agencies go…
At this point, the U.S. budget is like Wile E. Coyote after he's run off the edge of a cliff. His legs are still windmilling in the air, but he doesn't realize it yet.
Sometimes things need to get worse before they can get better. It almost certainly means that in the not-too-distant future, U.S. foreign interventions are going to be scaled way back, or stop entirely, because they simply won't be possible anymore. That will be a good thing for backward countries all over the world.
L: Okay, back to the Middle East, which is looking more and more like the Muddled East, do you think there's any chance this could blow over and die down?
Doug: These things are chaotic over the short run, but I'd say no. I think the cat's out of the bag, for the reasons we discussed earlier. I have not been spending much time there lately, so all I know is all anyone knows – if you can say they know anything at all from watching TV and reading the papers. One interesting thing about Egypt, in particular, is that no one really knows that much about the "Muslim Brotherhood" – what they actually believe, how powerful they are, and what they'd actually do if they take over.
I think back to the French Revolution. It was, initially, an excellent thing; they got rid of a tyrant and the entire old regime – a big plus. But what replaced it? First they got Robespierre and his Committee of Public Safety, the Jacobins and La Terreur – then they got Napoleon, who was another kind of disaster. The same thing could happen in the Middle East.
Nobody appreciates a busybody. Especially one who's consistently backed repressive criminals for decades. The best thing the U.S. could do at this point would be to butt out completely.
L: I'm not going to hold my breath for that.
Doug: I'm glad, because good analysts are hard to find. I've said for years that the way to defuse and start unwinding the war with Islam is to listen to what Bin Laden said was upsetting those people so much. We should get our troops out of their holy land, stop setting up brutal puppet regimes, and stop supporting Israel. If we did that, and sincerely apologized for our destructive actions and the criminal actions our tax dollars have paid for, a lot of those people would cool off and go back to herding goats, looking for oil, making shish kebabs, or some other pursuit of happiness.
L: We should not have to say this – and I know you won't try to justify your remarks – but some people are so touchy on this subject, so let me stress that you are not singling Israel out for harsh treatment. You would have the U.S. government stop supporting all government overseas, including Israel's Arab neighbors, as well as Israel itself. The point is not to take the Arab world's side against Israel, but to let the Israelis and the Arabs work out their own problems.
Doug: Of course. Israel and all countries should be treated the same – free trade and no military involvement, as you and Mr. Jefferson said. It's really that simple. I went into a lot of detail on Israel in the April, 2002 issue of International Speculator. And I wrote an analysis of Islam in the July, 2001 issue of IS. Never let it be said that I shy from controversy.
L: Perish the thought. Hm. You're saying there's no reason for this fire to be contained in the Middle East – I wonder if there's any reason for this fire to be contained by religion or culture. I'm remembering the mass protests I got caught up in Belarus, just a few weeks ago, which is about as far from the Muslim world as you can get. I have to wonder if Lukashenko, the Belarusian dictator, is watching what's happening in Tunisia and Egypt and wondering how close he came to being forced to flee the country – if the military had switched sides on December 19, as they appear to have just done in Cairo, he'd be toast. I have to wonder if people suffering under other highly repressive regimes around the world are watching and wondering if their time has come to reach for freedom. Could it be that we're seeing another "shot heard ‘round the world" today?
Doug: I think the chances are excellent. Whatever happens, I'm convinced that the next five years are going to be among the most interesting in history, from about every point of view. At some point it should get interesting enough for me to jump in to the Egyptian, Tunisian, Pakistani, and Iraqi stock markets with both feet.
L: Interesting in the Chinese sense of the word.
Doug: Yes. Particularly interesting is the risk of 21st century Robespierres. The problem is that all these people still think in terms of government by nation-state. In that regard, unfortunately, what's happening is not really revolutionary – changing one ruler for another doesn't get to the root problem of the rule of some people by others.
Egypt is a perfect example. The government there serves absolutely no useful purpose whatsoever. It has done nothing but repress the people, act as a vehicle for theft by those in power, and hold the place back for decades. It's likely that whoever replaces Mubarak is just going to have his own goofy ideas of what the government should do, instead of just getting the government out of the way.
You know how it is: it's the most cunning, ruthless, and polished liars – the ones who can persuade the most people to support them by promising to take from others – who get elected. Dictatorship is no answer, but absolutely neither is democracy.
Over the long term – the entire span of history – humanity has gone from a state of 100% plunder by rulers to now only about 50% plunder. The long-term trend is, therefore, good – but I don't see any reason why we should take a cosmic leap forward just now, as nice as that would be.
L: Sounds like you've been listening to that song by The Who, Won't Get Fooled Again: "There's nothing in the street, looks any different to me, and the slogans are replaced, by-the-bye… Meet the new boss, same as the old boss."
Doug: Does seem appropriate. Behind the scenes, the U.S. is certainly going to be agitating for another repressive stooge, such as it always picks. Since World War II – or really, since the days of Teddy Roosevelt – when has the U.S. not picked the most repressive toady? And while the U.S. won't have much power around the world in a few years, because of the economic problems it's going to have, it's pretty powerful now, and it will be pushing in that direction.
L: Well, instead of a freer world, would you say this new revolutionary fervor is going to end up a big step backwards, setting the stage for worse repression and more war?
Doug: It's entirely possible, but I'm not going to make that prediction. Remember the French Revolution. Remember Rome: they assassinated Caligula, but then got Claudius; they killed him and ended up with Nero. And after Nero, they had a bloody civil war, in the Year of Four Emperors.
L: Well, Nero, I've read, at least had the grace to kill himself. Okay – investment implications seem pretty clear; oil just shot up over $100/bbl.
Doug: Yes indeed. I think the commodity bull market is likely to stay intact, and this instability is bullish for energy prices – good news for companies not operating in the Middle East or other areas at high risk. Sustained higher oil prices are also very bullish for alternative energies, especially alternatives to light sweet crude, including heavy oil, oil sands, and shale oil. All of these are abundant in the Americas, and some even in Europe. These are the kinds of opportunities we specialize in, in our energy newsletters.
On the other hand, this is very bearish for the economies directly affected. The top revenue industry in Egypt, for example, is tourism, and tourism there has dropped to zero. That's going to be devastating and make it all the harder for the place to get better.
L: So, bearish on the region, but bullish on commodities.
Doug: Yes, but looking ahead for the bright side, once places like Egypt bottom out, there could be some real bargains to be had there. There could be fantastic deals on prime real estate in Cairo and Tunis, and the local stock exchanges could become a gold mine, for those daring enough to buy when no one else will. Too early now, but the time could be coming.
L: One more question. A lot of people are probably wondering what you think of the changing odds for open warfare in the Middle East? If pro-Israel stooges get replaced by people whose sentiments more closely reflect those of the Arab masses – who are no fans of Israel – doesn't that bring the area that much closer to a shooting match?
Doug: Well, it's anyone's bet, but these people have been having wars with each other for the last 5000 years – I see no reason for them to stop now. And as close to the edge as the poor people in these repressive Arabic countries live, and with the economic outlook looking so grim, anything could happen. Even with Israel's nuclear deterrent, anything could happen.
L: That's a very sobering thought. If the oil fields of the Middle East turn into large glass bowls, that will have obvious and dramatic consequences for energy prices – but what if this all blows over instead of blowing up? Could oil prices retreat, hurting those who buy in now?
Doug: I think oil prices will go up anyway. There are new technologies on the horizon that could all but eliminate the use of oil as an energy source, but that's years away. Based on the fundamentals that underlie the commodity, I expect steadily rising prices for years to come, with fluctuations along the way, of course. Everything we see says that trend is very solid, so on top of that, political turmoil is just a bonus.
L: Okay then. Not exactly pleasant thoughts, but important ones. Thanks for your insight.
Doug: You're welcome. I feel insulated from the turmoil, here in Argentina. But only a plane ride away if I want to smell tear gas in the morning. ‘Til next week.
L: Hasta la proxima.
[A crisis in the Middle East could not only make oil go up, but also alternative energies that benefit from high oil prices. There's one "green" energy in particular that, though little known, is more efficient than solar and wind – and heavily subsidized by the Obama administration. To learn more about this energy source that the smart money has already taken big positions in, click here.]
By submitting this order or request, you agree to our Terms & Conditions of Use