My Comments: This article comes from Stratfor, a reliable source of information about global politics and economics. The conclusion is not a good one. And if you happen to wonder why a financial planner is Florida gives a tinker’s damn about what is happening in Egypt, it’s because it will influence how life plays out over the next few decades for my children and grandchildren. And yours too!

The facts on the ground in Egypt are dominating the news and with good reason. And there’s very little we can do about it.

But an understanding of what is happening and why will go a long way to help you make better investment decisions over the next several years. The dynamics of what is happening in Egypt make it clear that while such a crisis will not happen in the US, demographics and financial opportunities for our children and grandchildren will greatly influence the lives they live in coming years.

Summary
Egypt’s crisis goes much deeper than the recent political chaos. With the leader of the Supreme Constitutional Court taking over the presidency at the behest of the military, the new government will likely represent a coalition of interests facing many of the same challenges that brought about Mohammed Morsi’s downfall. Egypt’s population has grown well beyond the means of the state to support its needs, and even a strong state will struggle to ensure sufficient supplies of basic staples, particularly fuel and wheat.

Analysis
Underlying the question of what political structure will emerge from this week’s crisis, the fundamental fact is that Egypt is running out of money. Dwindling foreign reserves point to a negative balance of payments that is sapping central bank resources. At the same time, Egypt’s reliance on foreign supplies of fuel and wheat is only growing. Egyptian petroleum production peaked in 1996 and the country first became a net importer in 2007. Government fuel subsidies are an enormous burden on state finances and, throughout the past year, failures to pay suppliers and a shortage of foreign exchange available to importers have caused supply shortfalls and price spikes throughout the country.

The government has a few options, including backing off subsidies in hopes that higher prices will help reduce consumption and therefore cut down on the net drain on state finances. That route carries a high risk of a major political backlash, so it is more likely that the government will continue, if not increase, its commitment to using state funds to guarantee sufficient supply and low prices.