Nouriel Roubini's Global EconoMonitor

The Economic Consequences of the Arab Revolt

From Project Syndicate:

Political turmoil in the Middle East has powerful economic and financial implications, particularly as it increases the risk of stagflation, a lethal combination of slowing growth and sharply rising inflation. Indeed, should stagflation emerge, there is a serious risk of a double-dip recession for a global economy that has barely emerged from its worst crisis in decades.

Severe unrest in the Middle East has historically been a source of oil-price spikes, which in turn have triggered three of the last five global recessions. The Yom Kippur War in 1973 caused a sharp increase in oil prices, leading to the global stagflation of 1974-1975. The Iranian revolution in 1979 led to a similar stagflationary increase in oil prices, which culminated in the recession of 1980-1981. And Iraq’s invasion of Kuwait in August 1990 led to a spike in oil prices at a time when a US banking crisis was already tipping America into recession.

Oil prices also played a role in the recent finance-driven global recession. By the summer of 2008, just before the collapse of Lehman Brothers, oil prices had doubled over the previous 12 months, reaching a peak of $148 a barrel – and delivering the coup de grâce to an already frail and struggling global economy buffeted by financial shocks.

We don’t know yet whether political contagion in the Middle East will spread to other countries. The turmoil may yet be contained and recede, sending oil prices back to lower levels. But there is a serious chance that the uprisings will spread, destabilizing Bahrain, Algeria, Oman, Jordan, Yemen, and eventually even Saudi Arabia.

Even before the recent Middle East political shocks, oil prices had risen above $80-$90 a barrel, an increase driven not only by energy-thirsty emerging-market economies, but also by non-fundamental factors: a wall of liquidity chasing assets and commodities in emerging markets, owing to near-zero interest rates and quantitative easing in advanced economies; momentum and herding behavior; and limited and inelastic oil supplies. If the threat of supply disruptions spreads beyond Libya, even the mere risk of lower output may sharply increase the “fear premium” via precautionary stockpiling of oil by investors and final users.

The latest increases in oil prices – and the related increases in other commodity prices, especially food – imply several unfortunate consequences (even leaving aside the risk of severe civil unrest).

First, inflationary pressure will grow in already-overheating emerging market economies, where oil and food prices represent up to two-thirds of the consumption basket. Given weak demand in slow-growing advanced economies, rising commodity prices may lead only to a small first-round effect on headline inflation there, with little second-round impact on core inflation. But advanced countries will not emerge unscathed.

Indeed, the second risk posed by higher oil prices – a terms-of-trade and disposable income shock to all energy and commodity importers – will hit advanced economies especially hard, as they have barely emerged from recession and are still experiencing an anemic recovery.

The third risk is that rising oil prices reduce investor confidence and increase risk aversion, leading to stock-market corrections that have negative wealth effects on consumption and capital spending. Business and consumer confidence are also likely to take a hit, further undermining demand.

If oil prices rise much further – towards the peaks of 2008 – the advanced economies will slow sharply; many might even slip back into recession. And, even if prices remain at current levels for most of the year, global growth will slow and inflation will rise.

What policy responses are available to dampen the risk of stagflation? In the short run, there are very few: Saudi Arabia – the only OPEC producer with excess capacity – could increase its output, and the US could use its Strategic Petroleum Reserve to increase the supply of oil.

Over time – but this could take years – consumers could invest in alternative energy sources and reduce demand for fossil fuels via carbon taxes and new technologies. Because energy and food security are matters of economic as well as social and political stability, policies that reduce commodity-price volatility should be in the interest of producers and consumers.

But the time to act is now. The transition from autocracy to democracy in the Middle East is likely to be bumpy and unstable, at best. In countries with pent-up demand for higher income and welfare, democratic fervor could lead to large budget deficits, excessive wage demands, and high inflation, ultimately resulting in severe economic crises.

So a bold new assistance program should be designed for the region, modeled on the Marshall Plan in Western Europe after WWII, or on the support offered to Eastern Europe after the collapse of the Berlin Wall. Financing should come from the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, as well as from bilateral support provided by the US, the European Union, China, and the Gulf states. The goal should be to stabilize these countries’ economies as they undertake their delicate political transitions.

The stakes are high. Unstable political transitions could lead to high levels of social disorder, organized violence, and/or civil war, fueling further economic and political turmoil. Given the current risk-sensitivity of oil prices, the pain would not be confined to the Middle East.

111 Responses to “The Economic Consequences of the Arab Revolt”

Wade MckearneyMay 31st, 2011 at 8:41 am

Nice post. I was checking constantly this blog and I am quite impressed! Very useful information specifically the last part. I care for such info a lot. I was seeking this certain info for a very long time. Thank you and best of luck.

dividing perennialsMay 31st, 2011 at 10:25 am

Together with every little thing that seems to be building inside this specific subject matter, all your viewpoints happen to be relatively stimulating. Nonetheless, I beg your pardon, because I do not give credence to your entire idea, all be it refreshing none the less. It appears to everyone that your opinions are not completely rationalized and in actuality you are generally your self not really completely convinced of the point. In any event I did enjoy looking at it.

zox pro reviewMay 31st, 2011 at 11:05 am

My expertise with Zox Pro’s mental photography course was nothing at all quick of wonderful. Since it sounded sort of just like the specific memory development item I was searching for, I just had to give it a attempt. This Zox Pro review will make clear what Zox Pro is focused on – and it will highlight the features I liked, likewise as disliked, about this. On the other hand, my Zox Pro review is supposed to give you only my particular expertise. Searching for a simple brain teaching and memory development course, I took place across the Zox Pro product sales web page.

asshole drinking gameMay 31st, 2011 at 12:35 pm

I and my buddies have been looking through the good information and facts from your web page and then all of a sudden I got a horrible suspicion I never thanked the web blog owner for those tips. All of the young boys became happy to learn all of them and now have pretty much been loving them. Appreciation for being really thoughtful and for opting for variety of amazing useful guides most people are really eager to know about. My personal honest regret for not expressing gratitude to sooner.

health benefitsMay 31st, 2011 at 1:25 pm

Hello there, You’ve done a great job. I’ll definitely digg it and personally suggest to my friends. I’m confident they’ll be benefited from this site.

x files drinking gameMay 31st, 2011 at 2:49 pm

I wanted to put you this little bit of observation to finally say thanks the moment again for these gorgeous techniques you have contributed on this site. This is certainly remarkably generous with you to allow without restraint all that many of us would’ve made available for an e-book to help make some profit on their own, principally considering that you might have done it if you considered necessary. Those guidelines likewise acted like a fantastic way to be aware that other individuals have similar interest just like mine to find out good deal more with regards to this issue. I’m sure there are millions of more fun occasions in the future for individuals that check out your site.

frescaMay 31st, 2011 at 3:01 pm

Extremely rated post. I learn one thing completely new on different blogs everyday. Deciding on one . stimulating to read the paper content from different writers and be taught a bit something from their website. I’d like to use sure of this content on my blog you’re mind. Natually I’ll give a hyperlink right here we are at your internet-site. Recognize your sharing.

frescaMay 31st, 2011 at 3:01 pm

I’ve recently began a blog, the knowledge you present on this site has helped me tremendously. Thanks for all of your time & work.

Carmelo SpeyrerMay 31st, 2011 at 4:12 pm

You can find certainly a great deal of details like that to take into consideration. Which is a fantastic point to bring up. I offer the thoughts above as general inspiration but clearly you’ll find questions like the 1 you bring up where probably the most essential thing will likely be working in honest very good faith. I don?t know if greatest practices have emerged around issues like that, but I’m certain that your job is clearly identified as a fair game. Both boys and girls feel the impact of just a moment’s pleasure, for the rest of their lives.

first date questionsMay 31st, 2011 at 6:19 pm

You are owning situations in your to begin with dates with girls. You simply cannot seem to acquire every thing most suitable around the number one date. Whether you’ve been in tons of relationships or are just commencing your dating everyday life, it’s probably that at one particular position you’ve professional some problems going via it all. If you’re obtaining any situations with your initial dates with women, then perhaps you’re just possessing trouble in communicating using your date. I’ve listed on this blog site an array of only the best and most remarkable field-tested very first date issues that you just can use to get to learn your date superior.

pagerankJune 3rd, 2011 at 1:52 am

היי רציתי ךהודיע על וובסיט על קידום אתרים בגוגל. באתר ניתןלקרא בטיפים העוסק קידום אתרים בגוגל.

garmin 305June 3rd, 2011 at 2:57 am

Howdy, I honestly similar to this journal as being the writings put up newest and genuinely fascinating tales..The internet site design and style is quite uncomplicated, appealing and simple and easy for customers..hold up the great function !

CortaflexJune 3rd, 2011 at 4:55 pm

Your writing is good and gives food for thought. I really hope that I’ll get more time and energy to go through your content. Regards.

high sierraJune 4th, 2011 at 3:08 am

That is a superb tips specially to these new to blogosphere, short and precise information… Thank you for sharing this a single. A should examine document.

Low Cost Educations NowJune 4th, 2011 at 11:42 am

I have noticed that online education is getting common because obtaining your college degree online has developed into popular solution for many people. A large number of people have not necessarily had a possible opportunity to attend an established college or university nonetheless seek the raised earning possibilities and career advancement that a Bachelors Degree affords. Still other people might have a college degree in one course but wish to pursue one thing they now have an interest in.

PrestonJune 5th, 2011 at 4:44 pm

I like the valuable info you provide in your articles. I will bookmark your weblog and check again here frequently. I am quite sure I will learn plenty of new stuff right here! Best of luck for the next!

Mario BassoJune 6th, 2011 at 6:39 am

I’m not that much of a online reader to be honest but your sites really nice, keep it up! I’ll go ahead and bookmark your website to come back in the future. Cheers

home cleaningJune 6th, 2011 at 11:14 pm

What are you stating, man? I know everyones got their own view, but really? Listen, your blog is interesting. I like the energy you put into it, especially with the vids and the pics. But, come on. Theres gotta be a better way to say this, a way that doesnt make it seem like everybody here is stupid!

Demetrius AllaireJune 7th, 2011 at 1:51 am

Seashore houses are extremely common in the region, so even while the persons earlier mentioned are usually not specifically saying yes with precisely what I presume, they still do provide about very excellent factors related to real estate investment right here.

free love tarot readingJune 7th, 2011 at 8:29 am

After examine a number of of the blog posts on your website now, and I really like your approach of blogging. I bookmarked it to my bookmark web site checklist and will be checking again soon. Pls try my web page as properly and let me know what you think.

Ned NitzschkeJune 8th, 2011 at 9:42 am

Everyone loves what you guys are up too. This sort of clever work and reporting! Keep up the awesome works guys I’ve included you guys to blogroll.

vacation rentals Bethany beachJune 9th, 2011 at 3:12 am

Just want to say your article is as surprising. The clearness in your post is just spectacular and i can assume youre an expert on this subject. Well with your permission allow me to grab your RSS feed to keep updated with forthcoming post. Thanks a million and please carry on the gratifying work

verifone vx670June 9th, 2011 at 5:55 pm

The information you provided here i will discuss extremely precious. It proved such a pleasurable surprise to obtain that expecting me when I woke up today. These are constantly concise as well as simple to know. Thanks quite a bit for that valuable ideas you’ve got shared below.

We know a placeJune 9th, 2011 at 7:38 pm

It’s not that I want to copy your web page, but I really like the style and design. Could you tell me which theme are you using? Or was it especially designed?

EvelyneJune 9th, 2011 at 11:56 pm

I found your site thanks a Google search. You have done a fine work. And it’s really nice to read you. I’ll definitely be back! 🙂

how to pick up girlsJune 10th, 2011 at 2:20 am

Extremely rated post. I be taught one thing completely new on different blogs everyday. Deciding on one . stimulating to learn the paper content material from different writers and learn a bit something from their website. I’d like to use certain of this content on my blog you’re mind. Natually I’ll give a hyperlink here we’re at your web-site. Appreciate your sharing.

dummyJune 10th, 2011 at 8:40 am

Your current positions continually have got alot of really up to date info. Where do you come up with this? Just stating you are very imaginative. Thanks again

Philips LED light bulbsJune 10th, 2011 at 11:21 am

Hi there would you mind letting me know which hosting company you’re using? I’ve loaded your blog in 3 completely different internet browsers and I must say this blog loads a lot faster then most. Can you recommend a good hosting provider at a honest price? Thank you, I appreciate it!

radar detector reviewsJune 11th, 2011 at 12:05 am

I’m really enjoying the design and layout of your website. It’s a very easy on the eyes which makes it much more pleasant for me to come here and visit more often. Did you hire out a designer to create your theme? Exceptional work!

Outlook WizardJune 11th, 2011 at 4:43 am

Pretty nice post, I was doing a google search and your site came up for real estate in Winter Park, FL, Orlando, FL but anyway, I have had a pleasant time reading it, keep it up!

online movies freeJune 11th, 2011 at 9:54 am

I simply wished to create a quick comment so as to express gratitude to your account for all wonderful pointers you might be posting here. My time consuming internet investigation has at the end of the day been rewarded with good quality means to present to my guests. I would state that a lot of us guests can be extremely endowed to happen in an excellent network with biggest reason so many marvellous individuals with useful hints. Personally i think quite privileged to acquire used your webpages and look toward really more fabulous minutes reading here. Many thanks for a number of things.

pro flight simJune 13th, 2011 at 4:30 am

I just couldn’t go away your site prior to suggesting that I actually loved the usual information an individual supply in your visitors? Is gonna be again often in order to check up on new posts.

Rift Automation BotJune 13th, 2011 at 7:01 am

Heya, I am here for the first time . I found your website and i’ve found it very useful & it helped me out a lot. I hope to give something back and inform others like you helped me.

green iphoneJune 13th, 2011 at 8:08 am

Thanks for your article. I would love to remark that the first thing you will need to do is to see if you really need credit repair. To do that you will need to get your hands on a replica of your credit file. That should never be difficult, considering that the government necessitates that you are allowed to have one free of charge copy of the credit report annually. You just have to consult the right men and women. You can either browse the website owned by the Federal Trade Commission or maybe contact one of the main credit agencies immediately.

porn collectionJune 13th, 2011 at 8:38 am

The information you provided here i will discuss extremely precious. It turned out a really pleasurable surprise to get that waiting for me after i awoke today. These are constantly to the stage and simple to know. Thanks a lot for any valuable ideas you’ve got shared right here.

Philips LED light bulbsJune 13th, 2011 at 7:55 pm

Admiring the persistence you put into your blog and detailed information you provide. It’s great to come across a blog every once in a while that isn’t the same out of date rehashed information. Excellent read! I’ve saved your site and I’m adding your RSS feeds to my Google account.

cheap juicy couture bikiniJune 14th, 2011 at 6:03 am

After examine just a few of the weblog posts on your website now, and I really like your manner of blogging. I bookmarked it to my bookmark website checklist and can be checking back soon. Pls check out my website as well and let me know what you think.

Non Cam iPhoneJune 14th, 2011 at 6:32 am

My spouse and I absolutely love your blog and find almost all of your post’s to be what precisely I’m looking for. Do you offer guest writers to write content for you personally? I wouldn’t mind writing a post or elaborating on most of the subjects you write with regards to here. Again, awesome web log!

Francine BookhardtJune 14th, 2011 at 9:31 pm

Thanks , I’ve recently been searching for info about this subject for the although and yours is the best I have came upon so significantly. However, what about the conclusion? Are you certain in regards towards the supply?

Troy BigbeeJune 15th, 2011 at 1:13 am

This web page is really a stroll-via for all of the data you needed about this and didn’t know who to ask. Glimpse here, and also you’ll definitely discover it.

Florida Equity LoansJune 15th, 2011 at 1:22 am

Good work, I just ran across your blog and wanted to say that I’ve truly enjoyed browsing your blog posts. After all I’ll be subscribing to your feed and I hope you write again very soon!

hostingJune 15th, 2011 at 6:45 am

The ideas you provided here’s extremely precious. It turned out a really pleasurable surprise to get that watching for me whenever i awakened today. They can be constantly to the issue and to be aware of. Thanks a large amount for your valuable ideas you’ve got shared listed here.

Latrisha PircJune 15th, 2011 at 12:02 pm

Interesting post here. One thing I’d like to say is that most professional fields consider the Bachelor Degree like thejust like the entry level standard for an online diploma. Although Associate Certification are a great way to start out, completing your own Bachelors reveals many good opportunities to various occupations, there are numerous online Bachelor Course Programs available through institutions like The University of Phoenix, Intercontinental University Online and Kaplan. Another concern is that many brick and mortar institutions make available Online types of their qualifications but commonly for a considerably higher price than the corporations that specialize in online course programs.

Shirley LoretoJune 15th, 2011 at 2:07 pm

Just article, I loved its content and style. I discovered this blog on Google and also have right now additional it to my personal book marks. I’ll be sure to go to once again soon.

EvelyneJune 15th, 2011 at 2:37 pm

It’s a great pleasure to visit your website and to enjoy your excellent work! You have fine ideas. Really looking forward to read more! 🙂

Vernetta HigbieJune 15th, 2011 at 9:46 pm

Once I initially commented I clicked the -Notify me when new feedback are added- checkbox and now every time a comment is added I get 4 emails with the same comment. Is there any method you can remove me from that service? Thanks!

Webmarket ProtocolsJune 16th, 2011 at 12:15 am

I noticed your web site a couple weeks ago we have most certainly been checking which it generally. It is easy to great number of information in the following we enjoy your thing to the site way too. Sustain beneficial financial career!

Ezequiel VoltzJune 16th, 2011 at 4:27 am

Hello I wish to to share the remark here regarding you to definitely have the ability to inform you simply how much i actually Liked this particular study. I must elope to aTurkey Day Dinner but wanted to depart you a simple comment. I saved you So will end up being coming back subsequent work to see much more of yer quality articles. Continue the quality function.

Blanca GermaineJune 16th, 2011 at 7:44 am

Excellent web page, exactly where did you come up with the knowledge in this write-up? Im pleased I established it though, ill be checking back quickly to find out what other posts you possess.

gout cureJune 16th, 2011 at 3:31 pm

Amazing blog! Is your theme custom made or did you download it from somewhere? A theme like yours with a few simple tweeks would really make my blog stand out. Please let me know where you got your theme. Many thanks

www.mycarstudio.comJune 16th, 2011 at 6:55 pm

You lost me, buddy. I mean, I assume I get what youre expressing. I understand what you’re saying, but you just appear to have forgotten that you’ll find some other folks in the world who look at this matter for what it really is and may not agree with you. You may perhaps be turning away many of people who may have been lovers of your website.

sports bettingJune 16th, 2011 at 9:06 pm

I am speechless. It is a superb blog and very engaging too. Great work! That’s no longer actually much coming from an novice writer like me, however it’s all I could say after diving into your posts. Great grammar and vocabulary. No longer like other blogs. You truly realize what you?re talking approximately too. So much that you just made me wish to explore more. Your blog has turn into a stepping stone for me, my friend.

binaural beats chakra tuningJune 17th, 2011 at 2:19 am

Many thanks for making the effort to discuss this, I feel strongly about this and like studying a great deal more on this topic. If feasible, as you gain knowledge, would you mind updating your webpage with a great deal more details? It’s really useful for me.

air maxJune 17th, 2011 at 2:45 am

I prefer the particular beneficial details an individual offer within your posts. Iâll take a note of the web site and also verify once more the following regularly. I will be really specific Iâll understand plenty of fresh products below! All the best . for your subsequent!

Pantech Crossover AccessoriesJune 17th, 2011 at 2:49 am

Thanks a lot for your time and effort to have had these things together on this site. John and that i very much loved your suggestions through your own writings about certain things. I recognize that you have a number of demands in your program and so the fact that a person like you took the maximum amount of time like you did to help visitors like us by this blog is even extremely liked.

Bari HeppelJune 17th, 2011 at 12:11 pm

A formidable share, I simply given this onto a colleague who was doing a little analysis on this. And he in actual fact bought me breakfast as a result of I found it for him.. smile. So let me reword that: Thnx for the treat! But yeah Thnkx for spending the time to debate this, I really feel strongly about it and love studying more on this topic. If doable, as you become experience, would you thoughts updating your blog with more details? It is extremely useful for me. Huge thumb up for this weblog post!

חוות שרתיםJune 17th, 2011 at 5:05 pm

היי אני רוצה לעדכן על דף אינטרנט העוסק קידום אתרים בגוגל. בוובסיט ניתןלצפות במידע בתחום קידום אתרים בגוגל.