"It was vintage Muammar Qaddafi. After a blood-soaked week of unrest, Libya's leader delivered a rambling, hectoring, fist-pounding speech on February 22nd. He blasted the popular uprising that has left hundreds dead and torn much of the vast north African nation from his grasp as the work of drug addicts and agents of al-Qaeda and America. He shouted that he would never surrender and ordered his men to hunt these "greasy rats" from house to house, without mercy, and take what they wanted. Then he drove off in an electric golf buggy."
- The Economist magazine, 24th February 2011.
Events in North Africa and in other Arab states are evidently unsettling not just for their own people but for investors globally. But compared to the other elephants in the room, even the likes of Libya is ultimately a distraction. (Awkward questions will undoubtedly be asked about the support of western governments for those autocrats now being messily if democratically removed from office by their own people.) Peak oil deniers will doubtless point to the anticipated post-crisis abatement in Brent and WTI prices; provided there is something approaching resolution to these local uprisings, equity markets may regain a sense of poise. But there are huge and unresolved problems out there that haven't gone away, even if they may have been temporarily blown off the front pages – or the business sections – by rising tensions in the Maghreb and elsewhere. The banking sector is still sick, as evinced by the hypothetical that Lloyds, one of the UK market's bigger basket cases, at the current level of statutory profits, would not be paying tax for more than 50 years. And largely unreconstructed banks still look suspiciously too big to save, as opposed to fail. Fears (or hopes) of further quantitative easing continue to buoy multiple asset markets behind an explicitly inflationary magic veil. The biggest problem of all is that the supposedly developed world is drowning in debt, and in many western democracies the problem is getting worse, not better. With governments and central banks busily engaging in currency depreciation masquerading as putative export competitiveness, fiat currencies are engaging in a race to the bottom. No surprise to see gold and silver testing new highs. But to return to the current flashpoints – North Africa and the Gulf – how are the current uprisings affecting the prices of debt there, given…
