Meltdown in the Desert

When America sneezes, the rest of the world catches a cold...well, this cold has reached the hot desert of Arabia. The demise of Wall Street has reached the Arabian Sahara and is threatening to put an end to its construction boom, which has flourished from several years of petro-bonanza.

Shortly after Eid al- Fitr, the Holiday marking the end of Ramadan, stock markets across the Arab world experienced unprecedented sharp losses when trading began. The seven stock markets in the oil rich Gulf states shed around $150 billion of their value in less than a week, while oil prices fell five percent to a fresh one-year low just above $82 a barrel on Friday. This prompted OPEC to announce that it will hold an emergency meeting in November; Arabs are in for a crude awakening. This is the first time in three years that oil has not been able to shelter them from the weakness of a global economy.

The first and most obvious reason why the Arab world is particularly vulnerable to the financial crisis is that a disproportionately large amount of Arab wealth is invested in global stock markets, especially on Wall Street. To give you an example, last year the Kuwait Investment Authority invested $2 billion in Merrill Lynch. Of course, Merrill Lynch no longer exists as an independent company!

Just like in the United States and Europe, banks in the Middle East have been cutting their lending rates to avoid an even more catastrophic outcome. But this has not alleviated investors' fears, who continue to flock to the banks and withdraw funds mainly due to rumors of liquidity problems, something that has been denied by the Saudi Arabian Monetary Agency (SAMA).

What worries me though is a backlash of political upheaval engulfing the region. Let's face it, rich sheikhs and their families will not abandon their palaces, but countries like Egypt, the most populous in the Arab world, one which is already struggling with poverty and unemployment, will be severely affected. Many Egyptians depend on monies sent to them by family members working in oil-rich Gulf states. Unfortunately, instead of investing in education, technology, and industry, these countries have preferred to use their wealth to build glittering real-estate projects and will soon be laying off thousands of foreign workers should the economic situation continue to deteriorate. This past spring, rising prices and alleged corruption have sparked clashes at bakeries in poor neighborhoods in Egypt, resulting in several deaths.

Another thing that worries me is the fact that in these dire financial times, extremists in the Middle East will be able to recruit desperate young unemployed Arab youths to target government and Western interests. Al-Qaeda network has already released a statement, contending that "the enemies of Islam are facing a crushing defeat, which is beginning to manifest itself in the expanding crisis their economy is experiencing." Several commentators on Arab television networks have been blaming the U.S. and the Jewish lobby for the world's financial troubles.

One commentator decried, "you think that 160,000 U.S troops in Iraq is bad...wait until the U.S. sends us 160 of its Wall Street crooks."

Jamal Dajani produces the Mosaic Intelligence Report on Link TV.

Follow Jamal Dajani on Twitter: www.twitter.com/jamaldajani

Comments

[lighthearted1]

This report speaks to increasing unrest in the world and the violence that follows.very serious. While various factions are pointing fingers, there's plenty of blame to go around. The old paradigm is dying, but rather than look to build a world economy based on our supposed democratic values, it's still the individual over all instead of "one for all and all for one." The realization that the US "sneezes and the world catches a cold" should be that we are all in this together. Scientifically, ecologically, spiritually, economically all of us are in this together and fall together, we must stand up together, work together for an equitable world in which everyone can live reasonably. World poverty supports and incites wars and violence/terrorism. This world wide economic crises is another wake up call -- will we? Each one of us has the responsibility. Will we be responsible or do we want to keep on indulging a dysfunctional lifestyle and call it the American Dream? Will we continue to climb ahead at the expense of others, the environment for more, bigger, better or will we realize less is more, simpler is better, and change the way we live. But the rest of us have power, by working together realizing our neighbors live in every corner of the world, and meeting those in our communities, rich and poor alike with friendly cooperative outreach ... we have to be without partisanship, and our leaders will follow.

[newsjunkie5]

You know what...I'm glad this is happening. I think everyone is looking at the negative aspect of this financial crisis, but overlooking the positive side. I think the world's economy needs to completely tumbled so that we can start anew. As the saying goes, "hit them where it hurts the most." Which for most of the world, is their pocketbooks. If we look at this as a chance to completely overhaul our world economy and even possibly our political structures maybe the human race has a chance. Otherwise, if we don't learn from our dire mistakes we will continue to repeat them and make more of them, and then it won't matter what happens to the economy because we won't even have a planet left to spend all of our money!

[leonardox1]

You must not have any retirement account to worry about! Also remember this economical crisis will cause companies and factories to shut down.Many innocent bystanders are gonna lose their jobs.

[newsjunkie5]

I actually do and I have thought about the innocent bystanders...but remember friend...these so-called "innocent" bystanders also had an opportunity to vote in the last 8 years and both times many of them chose our current town idiot who has helped us to get into this mess in the first place! He is so busy worrying about other countires and dictating how they run their countries rather than focusing on our domestic crisis which has been spiraling down since his first term in office.

[jad114]

Talking about crooks...a Kuwaiti lawyer representing a Kuwaiti trader filed suit to compel the government to temporarily close the plummeting stock market due to illegal trade activities.

[justice2008]

They have their crooks too! In the US it is George Bush and Wall Street. In the Middle East it is the oil-rich fat Sheiks who have been robbing their countries treasuries for years. Maybe now they'll go on a diet.