Will Color Revolutions Remove Central Banks?
By Staff News & Analysis - February 15, 2011

Ashraf Abdel-Wanis had plenty of reasons to join tens of thousands of fellow Egyptians in their successful push to oust President Hosni Mubarak. At 39, he last worked five years ago in a sugar factory and now gets by mainly on his wife's $50 monthly salary and his mother's pension. "The Egyptian family's nutrition consists of beans, lentils and beans," he said in an interview in Cairo's Tahrir Square, the plaza at the heart of almost three weeks of protests. "If they're lucky, they cook vegetables once a week." Now with Mubarak gone, the plight of Abdel-Wanis and the 40 percent of his countrymen near the poverty line is prompting Finance Minister Samir Radwan to develop a stimulus plan aimed at creating the jobs needed to avoid further social unrest … Radwan said any new fiscal plan should include a "massive and realistic employment program" that would use "funds and wealth at the command of the state to attract the private sector." – Bloomberg

Dominant Social Theme: Financiers and other wise men to the rescue.

Free-Market Analysis: In watching various color revolutions now and in the 1990s in Eastern Europe, it has occurred to us that they are specifically designed to keep money power in place. Hosni Mubarak has been removed from power along with some of his cronies, but the STRUCTURE of Egypt (the monetary structure, which is what matters) remains intact. This has nothing to do with politics or with the military – all areas that have received a great deal of attention. But as this article excerpted above shows us clearly, financial instrumentalities remain untouched.

In fact, this Bloomberg article shows us that with all the turmoil around Egyptian politics, the monetary system itself can be considered a force for good, steadying the ship of state during a rough passage. It is an amazing presentation given that up to 50 percent of all able-bodied men in Egypt are either unemployed or radically unemployed. What kind of financial system is this that generates an unemployment rate of nearly 50 percent – and yet remains virtually unmentioned?

We searched Google for news about Egypt's central bank but found few stories. One was reported by the Chinese news agency Xinhua, about an intervention by the Central Bank of Egypt to halt a drop of the Egyptian currency against the U.S. dollar. Apparently the bank used dollars to buy pounds, thus propping up the price. "Egypt's Central Bank Deputy Governor Hisham Ramez told the state-run agency MENA that the bank's intervention strengthened the Egyptian pound against the dollars."

We finally found some commentary on Egypt's monetary system via Steve Forbes of Forbes Media. He told Fox News that what Egypt had to do was set up a currency board to prevent a collapse of the Egyptian pound. This would be a fairly significant step as currency boards – as we understand it – are often a substitute for central-banking. What Forbes is suggesting is a direct linkage between the pound and the dollar to ensure that Egyptian leaders are not tempted to inflate their way out of any potential financial crisis. For Forbes, such a monetary structure is important because instability "opens the door to extremists. We saw that in China, Russia and Iran."

The Forbes statement helps prove the point, we think. Track media commentary and there is little or nothing being reported about Egyptian money power, yet for Forbes swapping a currency board for a central bank is a critical step. Central banking is an enormously powerful factor in the success or failure of countries like Egypt and for developing countries generally. Around the world, the central banking model of the Anglo-American elite is ubiquitous. Supported by the IMF and the World Bank and part of a pyramid of power at whose apex resides the secretive Bank for International Settlements, central banks generate the world's wealth and configure the world's prosperity.

But the structure is pernicious and ultimately destructive. Central banks print money from nothing, creating terrible booms and busts. The United States can prints lots of dollars because countries have to hold dollars to buy oil. But in other countries, even printing a little bit too much money injects currency directly into the system with resultant price inflation. In fact, in developing countries, the really destructive effect of central banking has to do with bifurcation of the economy. Once a central bank is installed, the elites of the country basically control money issuance and this gives these elites the opportunity to acquire the rest of an economy's major assets as well.

In many African and South American countries, tiny groups of elites control all the major financial enterprises – banks, industries and government enterprises – while 99.9 percent of the populace scrambles to find a livable wage. Central banks, in other words, radically increase social schizophrenia. It is central banking that has primacy of place within the world's tragic dysfunctional economic systems. The banking elites tout central banking as a force for good but this is merely one more elite dominant social theme (and a basic one). When one closely examines the system, there is no positive argument to be made for it. Human beings cannot substitute their judgment for the marketplace; the results are always the same – monetary inflation, price inflation and ruinous boom-bust cycles. Central banks demand that bankers arbitrarily set the price of the volume and quantity of money and this is a form of price fixing, which over time tremendously distorts economies.

It is not coincidence that Egypt is in such bad shape. All over the world, the central banking economies of developing countries are in disarray. One can see it in America as well, where unemployment is probably well over 20 percent; Japan, too, suffers from high unemployment and a declining standard of living, and Europe as well. These countries have experienced the down-side of central banking money creation.

At one time, the palace of the emperor of Japan was said to be worth nearly as much as the entire state of California. Not anymore. What central banking can do well is lift a country from abject poverty into something resembling prosperity in a fairly short period of time (a few decades). But the very money surges that create the faux-prosperity eventually hollow out the economy, leaving it distorted and dysfunctional. The jobs will go away. The wealth effect will be damped. This will be the inexorable fate of China as well.

What the elites count on is the resurgent effect of monetary production. So long as the bust is not too terrible, the elites can reinflate. In the interim, various spending packages are put into play. Keynesian pump-priming is a variant of this. What economist John Maynard Keynes provided was a fancy theory that justified the spending; but in fact the spending during "busts" is nothing but a kind of placebo, a way of palliating angry workers and families until in some fashion – somehow – the economy can be restarted via the circulation of yet more fiat money. We can see this in the maneuvering of the Obama administration, which is putting together an emergency financial package for Egypt. The package is said to be worth some several hundred million dollars, and the aim is to support fledging political parties and "democracy" in general.

We have presented ample evidence in these pages (in our opinion) that Western elites are actively involved in these color revolutions. No matter what the ultimate goals are, it is obvious that at a basic level the Anglosphere is seeking to maintain its control over the developing world. There is very clearly a recognition within elite circles that youth demographics combined with sociopolitical information available on the Internet is bound to create destabilization.

After Thoughts

The more that the elite can ensure the process emphasizes political change (versus change aimed at central banking systems), the more successful the evolution of these processes will be from an elite standpoint. It is also the reason that regime change never brings the hoped-for result. Without making fundamental structural changes in the economies themselves, the color revolutions in the Middle East, Africa and elsewhere are bound to fail. It is money power that drives politics not the other way round. Freedom needs to be buttressed by free-market economies. Regime change is a first step. But the removal of central banking fiat-money regimes is equally critical.