Hosni Mubarak

Thirty years ago this week, Hosni Mubarak became the president of Egypt.  Specifically, he assumed the office on October 14, 1981, after the assassination of Anwar el Sadat.

Of course, Mubarak didn't quite make it this year to his 30th anniversary in office. He is on trial on charges of the murder of peaceful protestors during the "Arab spring."

Further, the new government of Egypt is looking into an accusation that Mubarak was complicit in Sadat's death. I don't know what to think about that accusation.  It might be akin to the various horrible crimes that were attributed to Richard III during the Tudor era. The worse Richard III came to look, hump-backed and all, the better were the Tudors for having delivered England from such a misfigured tyrant.

Cairo and Dow Jones

These propositions seem very plausible to me:

1. If Egypt becomes an Islamic Republic, in the manner of Iran, that fact will be disastrous to world trade, especially disastrous to any industries that rely on getting crude oil from the eastern to the western side of the Suez canal, and this impending disaster would show up in devastated stock prices on, say, the DJIA and the S&P.

2. Highly liquid stock markets tend to discount reasonably foreseeable future events -- so that what is now likely to happen next year should show up in this year's stock prices.

Putting (1) and (2) together, it seems natural to draw the following conclusion:

3. If Egypt's likelihood of turning into an Islamic Republic has markedly increased in recent days, then one should have seen a sharp drop in the DJIA and the S&P.

So, let us add another fact to the mix:

4. The situation in Cairo has been getting, from all appearances at this distance, ever hairier and scarier since at least January 26:

So ... has there been a sharp drop in the indexes in NYC?

If you look at a chart of the DJIA covering the period from then until now, you'll see that there has been only one not-especially-sharp drop since the turmoil began. But that might have been a chartist's drop, caused by the approach of the psychologically important 12,000 number. The market subsequently recovered, broke through 12,000, and then went to 12,100. All as talk of whether Mubarak would leave was turning into talk of how quickly it could be arranged.

If this is a disaster in the making, why hasn't Wall Street reacted accordingly?

Oh, and what can we say of the chart of the S&P for the same period?

Again, there was a gentle swoop early-on in the period of the Cairo demonstrations. Again, this could be interpreted in chartist terms (the S&P fell just as it hit a round number, this time 1300.) Again, even if you don't interpret it in chartist terms, the fall didn't last long, and the rebound has since gotten us well above that 1300.

My only conclusion here is that one of my four propositions above must be incomplete or just wrong, because taken together they would lead to the conclusion that what is happening ... could not be happening.

The most likely conclusion, then, is that "Wall Street" as a collective entity knows something that I don't, and that to this collective entity there is no grave concern about Egypt going the way of 1970s Iran.

What about the market in crude oil? Surely if there were a good chance of a radical Islamicist takeover of Egypt, and speculators had figured this out, there would have been a sharp spike in the price of the stuff: right? Go to the light-crude price link I entered in this blog Thursday. Follow that, and then adjust the chart to show three months. You'll see that the recent high came before there was any trouble in Egypt. Thereafter, crude prices fell to as low as $85 a barrel. At that point, news from Cairo did cause a rise (but a modest one). After those first few days, crude oil prices have headed downward again.

All of which means ... what? Call me a mummy and wrap me in toilet paper if I know.

Egypt: A random bit of history

From an article entitled "Arab Government Responses to Islamic Finance: The Cases of Egypt and Saudi Arabia," by Rodney Wilson, published in Autumn 2002 in the journal Mediterranean Politics.

Ali Sabri became Vice President of Egypt under Sadat, but he was dismissed from his post in May 1971, as Sadat alleged that he had been planning a coup. With the demise of Ali Sabri, al Najjar wasted no time in making a second attempt to start an Islamic bank in Egypt. This time the government was more receptive to his ideas, and the Nasser Social Bank was established under a special statute, Law 66 of 1971, which meant that it did not have to register with the Central Bank or be regulated by it....The first general manager of the bank was Dr Abd al-Aziz Hijazi, a former Egyptian Prime Minister who knew little about Islamic banking, but who was a trusted establishment figure.

Question: why was the government, prior to Ali Sabri's dismissal, hostile to the idea of an Islamic Bank?

My personal view is that Sadat was at first riding the post-Nasser wave of Arab nationalism. Arab nationalist ideology is a very different thing from Islamicist ideology, of course (as the generally secular orientation of leaders such as Nasser and Sadat serves to illustrate. The creation of a bank with specifically Islamic features may have seemed a dangerous concession to Sadat in his first year in office. After the abortive coup (real or imagined) of Ali Sabri, though, Sadat may have been more interested in finding domestic allies, and might have thought this a necessary concession, after all.

Notice that the creation of an institutioin for Islamic finance came with a symbolically important caveat -- a name that included Nassar's, and that gave no indication that there was anything specifically Islamic about this institution. That, and the leadership of Abd al-Aziz Hijazi, whom Sadat clearly considered safe.

I'm just guessing, though. If you know beter, feel free to correct me.