美國的階級鬥爭和中東的茉莉花革命

The world seems to be changing overnight these days, and in ways that may not seem clear for some time.  For example, I did an informal survey this past weekend of many of my best-informed friends and colleagues, asking them what they thought was the most consequential event taking place these days.  To my surprise, the number one answer was the political struggle taking place in Wisconsin over the bill to end collective bargaining rights for public employees.

Of course, it's an important issue – a showdown between two diametrically opposed approaches to dealing with America's economic weakness.  Governor Walker and his allies believe the solution is to increase tax cuts for corporations and wealthy individuals while cutting social programs for the poor and the wages of the middle class.  On the other hand, the traditional left-wing approach would be to maintain or even increase wages and programs for the poor and middle class and pay for it by raising taxes on the wealthy.  Both sides argue that their approach is the best way to create growth. 

Without taking sides, we can safely say this is the closest America has come to open class warfare in a very long time.  It's a battle over who should bear the cost of our prolonged economic malaise. 

What's more, this war may be fought in other states in the near future.  The outcome could have a major effect on the future of this country.  Nonetheless, this showdown pales in comparison to the events taking place in the Middle East and North Africa.

Like the spark that ignites the oily rag, the Jasmine Revolution looked fairly non-threatening initially.  First came the ousting of President Zine El Abidine Ben Ali in Tunisia, one of the most progressive nations in Africa.  The trigger was high food prices, unemployment, and poor living conditions – which matter far more to the poor than other rights and freedoms.  Tunisia is a resource-poor nation, vulnerable to scarcities.

Not surprisingly, the next government to fall was also a resource-poor nation.  Egypt's President, Hosni Mubarak, took a little longer to eject from office, and we're not sure yet whether he has simply been replaced by a military dictatorship.  But it shocked the world because Mubarak had been in power for nearly 30 years.

Meanwhile, even though protests continued to spread to other parts of the region, the stock market hardly blinked at all.  In fact, it even made gains.

The reason is that the market really doesn't care about things like democracy vs. dictatorship.  It only looks at economics.  As long as political change does not interfere with business, the market couldn't care less.  Oil rose a few dollars, but it was nothing to get alarmed about.

Even now that the revolutionary fever has spread to Libya, an oil-producing nation, and Brent crude has touched on a 2½ year high, the market still has not reacted very much. Until the oil charts show a dramatic move which might signal a real economic crisis, we doubt the market will experience more than a minor retracement – perhaps 5%-10%, which it is certainly due for.

In fact, the one event you should be watching for, because it would be a major economic crisis that severely affects the markets, is if the political unrest spreads to Saudi Arabia.  As a friend of ours pointed out, the city in Saudi Arabia we must keep our eye on is Dharhan.

Located in the Eastern Province, Dharhan is the administrative center of the Saudi oil industry.  The population is largely Shiite, with cultural ties to nearby Bahrain – a country where protests have also been occurring over the past week or so.  So far, the unrest has not spread from Bahrain to Dharhan.  If it does, and if it disrupts the Saudi oil industry, there will certainly be economic fallout that would likely hits the stock markets hard.  Oil prices could jump to $140-150 or higher very quickly.  The global economy could recede, causing oil demand to fall and oil prices to plummet once again.  Even China's economy could undergo recession (depending on how much oil it has stockpiled).

We hope the market is right and worst won't come to worst, but we must be vigilant.  The market has missed the start of economic crises before.  In 1973, despite the Yom Kippur war that was turning Arab sentiment against the West, the market rallied between August and October and did not break the August lows until after the war ended.

Today, the market has rallied in the face of Middle East unrest and oil has remained one of the weakest performing commodities since 2008.  Nonetheless, we cannot take anything for granted.

（from Dr. Stephen Leeb's e-mail）