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Egypt & the Middle East Domino Theory

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
March 1, 2011

IN THIS ISSUE:

1.  Egypt Was Just the First Domino to Fall

2.  Just What is the “Muslim Brotherhood”?

3.  The Caliphate – Islamists’ Ultimate Goal

4.  About the Looming Debt Ceiling Showdown

Introduction

Political uprisings have spread across the Middle East and North Africa.  Mass demonstrations in Tunisia resulted in the ouster of its president in January, leaving a power vacuum. In February, we saw the removal of Egypt’s leader Hosni Mubarak, and the country is now under military rule with a very uncertain future.  In oil-rich Libya, Colonel Muammar Gadhafi is under siege.  Demonstrations are also occurring in Bahrain, Yemen, Morocco, Algeria and even Iran, to some extent.

In all of these countries, the so-called “Muslim Brotherhood” is involved and, in some cases, is trying to position itself to take control.  The Muslim Brotherhood is vehemently anti-America.  If the Brotherhood were to gain control of Egypt, the second largest country in the region, it is feared that they would join forces with Iran and dominate the entire Middle East over time.

This unrest in the region explains in large part why oil prices have spiked from $85 to $100 over the last few weeks.  Libya is a large oil exporter, and its ability to produce and export crude is now very uncertain.  Crude oil could continue to soar depending on what happens.

Today I will reprint an article which delves into the very troubling implications if the Muslim Brotherhood should take control of Egypt and align itself with Iran.  Certainly, there are some who believe this will not happen, but it is a real possibility.  The Obama Administration needs to ensure that the Egyptian military, to which the US provides $1.3 billion in foreign aid each year, does not allow the Muslim Brotherhood to take power.  It remains to be seen if President Obama is prepared to take these critical steps.

Please read the following article by Dick Morris very carefully.  Morris has become a leading conservative spokesman, which is a far cry from his days as President Clinton’s senior political adviser.  I read his columns regularly.

QUOTE:

EGYPT: THE DOMINO THEORY

By DICK MORRIS & EILEEN MCGANN

Published on
DickMorris.com on February 11, 2011

Egypt is fated to be the first domino.  The revolution there will inevitably spread to all of the Middle East and North Africa.  The question is: Will it be an Islamic fundamentalist revolution or a democratic one?
   
In the fifties, anti-communists latched onto the "domino theory" to elaborate their worries about the spread of global Marxism.  President Dwight D. Eisenhower explained it at a press conference on April 7, 1954:
   
"Finally, you have broader considerations that might follow what you would call the 'falling domino' principle.  You have a row of dominoes set up, you knock over the first one, and what will happen to the last one is the certainty that it will go over very quickly.  So you could have a beginning of a disintegration that would have the most profound influences."
   
While it was foolish to believe that the fall of a small country like Vietnam would affect larger and more stable nations like Thailand, Burma, Indonesia, or Malaya, the domino theory has a very direct relevance to what is transpiring now in Egypt.
   
There is a major danger that the Muslim Brotherhood will find its way into a successor coalition government.  And, from there, it is indeed possible that the Brotherhood takes over, bringing an Iranian style fundamentalist Islamic regime to Egypt. The chances of even a popularly elected government embracing the Muslim Brotherhood would be very great.  And a domino theory could eventuate.
   
Working in tandem with Iran, these two nations would then cast a giant shadow over the entire region.  From Morocco to Iraq, there would be the threat of a genuine caliphate, realizing the most central goal of the Islamic fundamentalists.
   
Remember the populations involved.  Egypt has 81 million people.  Iran has 66 million. The next most populous nation in the region is Algeria at 35 million.  The combined population of Tunisia, Morocco, Algeria, Libya, Lebanon, Syria, Iraq, Saudi Arabia, Aden, Oman, the UAE, Kuwait, Qatar, and Yemen is 185 million.  So Egypt and Iran have a population almost equal to that of these other nations combined.  A fundamentalist Egypt allied with Iran would sweep the region.
   
Jordan, Syria, Algeria, Libya, and perhaps even Saudi Arabia would fall to Islamic extremists.  Iraq, even with a US military presence, may not be far behind.

But this prospect is not inevitable. It can still be avoided by bold action from the Administration.  President Obama must reach out to the Egyptian military and declare his support of their transitional efforts and demand that the Muslim Brotherhood play no role in the government.
   
Turkey is the precedent.  There, the secular tradition of independence from Islamic theocracy was first set in place by the great early twentieth century leader Kemal Ataturk.  It has been enforced since by the Turkish military which always looms over the civilian government lest it move to close to a theocratic domination.  Even when an Islamic Party won the past two elections, the military cautioned that it not become a theocracy and it has not done so.
   
Obama must use our leverage of $1.3 billion of military aid to get the Army in Egypt to play a similar role.  And, most important, he must draw a line in the Egyptian sand:  That he will withdraw the military aid if the Muslim Brotherhood is included in any government or coalition.
   
If Obama fails to do so, he will be responsible for the loss of Egypt and perhaps of the entire region - with all its oil - to forces directly hostile to the United States.  Some doubt that Obama is sufficiently strong in defense of America's interests.  Some wonder if he has not divided loyalties.  Some question if he has the strength to stand up to Muslim extremists.  Now we will see.
END QUOTE

Just What is the “Muslim Brotherhood”?

Dick Morris refers to the “Muslim Brotherhood” and the so-called Islamist “Caliphate” in the article above.  Yet many if not most Americans had never heard of the Muslim Brotherhood until the last several weeks, much less the word caliphate.  What follows is a brief description of both that we all need to understand.  

While the Muslim Brotherhood (MB) has been getting a lot of press lately in relation to the turmoil in Egypt, they are far from a new organization.  Since its founding in 1928, the MB has been a major influence in Middle Eastern politics off and on for a very long time.  Though the MB organization has officially been banned in Egypt since 1954, recent events have shown that they have maintained a strong underground movement there nonetheless.

While apologists seek to characterize the MB in Egypt as a secular organization that doesn’t push any particular ideology, this doesn’t jibe with the stated MB motto, which has long been “Allah is our objective.  The Prophet is our leader.  The Qur’an is our law.  Jihad is our way.  Dying in the way of Allah is our highest hope.”  Doesn’t sound much like your run-of-the-mill Sunday school class, does it?

From the brief research I did on this organization, it appears that the MB has been most active in trying to influence politics through indirect means such as preaching, charitable work and the like.  However, many experts believe that the ideals promoted by the MB have influenced Osama Bin Laden and others who rely on violence and terrorism to get their point across.

As such, the Muslim Brotherhood is seen by realists as a potential catalyst of radical terrorism.  In a recent hearing of the House Permanent Select Committee on Intelligence, Representative Sue Myrick (R-NC) stated that I’m concerned that the Muslim Brotherhood is using peaceful protests in Egypt for a power grab, and our government doesn’t seem to grasp their threat.  The Muslim Brotherhood isn’t a danger because they are terrorists, but because they push an extremist ideology that causes others to commit acts of terrorism.”

Yet in the same hearing, Obama’s Director of National Intelligence, James Clapper, sounded as if there was little to fear from the MB in Egypt since it is a largely secular organization that has “eschewed violence and…have pursued social ends, a betterment of the political order in Egypt, et cetera.”  After igniting a firestorm of criticism on Capitol Hill, the Obama administration rushed to “clarify” that Clapper didn’t really mean that the MB was secular rather than religious based.

Perhaps Clapper was trying to provide some cover for Secretary of State Hillary Clinton’s welcoming the MB to participate in talks with the Egyptian government a few weeks ago.  The Obama administration, with a foreign policy foundation equivalent to Jell-O, simply has a hard time coming out and condemning organizations committed to doing the West harm. 

The bottom line is, most media pundits dismiss claims that the MB is a group of radical Muslims hoping to take control of Egypt and perhaps the entire region.  Even if they were, most pundits challenge that argument by noting that the MB reportedly represents only about 30% of Egypt’s population.  While they may represent only 30%, they are hands-down the most highly organized group in the country.

And I fully agree with Dick Morris and others who warn that if the MB takes control of Egypt, they would quickly align themselves with Iran and threaten the entire region over time.  We’re talking about over half of the world’s oil here!  This is precisely why we all need to keep a close eye on Egypt, and Libya as well should the Gadhafi regime be toppled just ahead.

The Caliphate – Islamists’ Ultimate Goal

Though James Clapper tried to make the Muslim Brotherhood sound like an Egyptian Lions Club, we should all be concerned about the ultimate aims of this group.  Specifically, one of the stated goals of the MB is to establish global Shari’a law under a structure called the “Caliphate.”

The caliphate has roots in an ancient Islamic religious rule that was ultimately abolished by the Turkish Grand National Assembly in 1924at the urging of Mustafa Kemal Atatürk, the first President of the Republic of Turkey.  Over time, there have been multiple and even competing caliphates in existence.  However, the current vision for the caliphate goes beyond any regional Muslim rule.

Instead, today’s idea of the caliphate as espoused by the MB and other assorted Islamists and terrorists is the idea of a global domination by Muslims and Shari’a law.  In other words, the goal of the MB and others is to establish a one world government based on Islamic law and ruled by a single Caliph (leader).

Some dismiss the idea of the Muslim desire for a caliphate by noting that it is designed to bring all Muslims under a single theocracy of sorts, not everyone else.  But here’s where they miss the point – the goal of the Islamist jihadists is also to convert the world over to the Muslim faith by whatever means necessary.

Before you dismiss the idea of global domination by Muslims, take a look at what is already going on in Europe.  The following are excerpts from a 2005 article from the Middle East Forum website, but the ideas expressed are just as applicable today as they were back then, if not more so:

“Europe has become an incubator for Islamist thought and political development. Since the early 1960s, Muslim Brotherhood members and sympathizers have moved to Europe and slowly but steadily established a wide and well-organized network of mosques, charities, and Islamic organizations. Unlike the larger Islamic community, the Muslim Brotherhood's ultimate goal may not be simply ‘to help Muslims be the best citizens they can be,’ but rather to extend Islamic law throughout Europe and the United States.

These organizations represent themselves as mainstream, even as they continue to embrace the Brotherhood's radical views and maintain links to terrorists. With moderate rhetoric and well-spoken German, Dutch, and French, they have gained acceptance among European governments and media alike. Politicians across the political spectrum rush to engage them whenever an issue involving Muslims arises or, more parochially, when they seek the vote of the burgeoning Muslim community.

But, speaking Arabic or Turkish before their fellow Muslims, they drop their facade and embrace radicalism. While their representatives speak about interfaith dialogue and integration on television, their mosques preach hate and warn worshippers about the evils of Western society. While they publicly condemn the murder of commuters in Madrid and school children in Russia, they continue to raise money for Hamas and other terrorist organizations. Europeans, eager to create a dialogue with their increasingly disaffected Muslim minority, overlook this duplicity.”

Perhaps most troubling is that the MB is also already well represented right here in the US.  They are active on virtually all major college campuses.  In a recent speech before the Conservative Political Action Conference (C-PAC), former federal prosecutor Andrew McCarthy said that the MB has been active in the United States for three generations, beginning in the 1960s with the Muslim Students Association.

And what are the goals of the MB and its affiliated groups here in the US?  The same as those in Europe. Consider the following statement from a report from the NEFA Foundation discussing exhibits taken from actual MB materials confiscated in the US and presented as evidence in the 2007 court case United States v. Holy Land Foundation:

“The most compelling evidence of the Brotherhood’s true aims is contained in an internal memorandum written in 1991 by a senior Brotherhood leader and titled: “On the General Strategic Goal for the Group in North America.” In the document, the author is strikingly clear about the ultimate goal of the Muslim Brotherhood in the United States:

“The Ikhwan [Muslim Brotherhood] must understand that their work in America is a kind of grand Jihad in eliminating and destroying the Western civilization from within and ‘sabotaging’ its miserable house by their hands and the hands of the believers so that it is eliminated and God’s [Allah’s] religion is made victorious over all other religions.”

Could the same thing happen in the US?  My sense is that the MB or any other Islamist organization would have a very hard time pulling this off, but it doesn’t mean that they won’t stop trying; thus, we cannot let our guard down. 

Conclusions

Pundit Glenn Beck recently received harsh criticism and more than a little ridicule from the left for suggesting that the unrest in Egypt could be the starting point for an Islamic caliphate.  Even some conservatives sought to distance themselves from Beck’s statements, fearing that they may be labeled as giving in to “conspiracy theories.”

However, the article by Dick Morris quoted above also subscribes to a possible domino theory for the Middle East in which a Muslim central government might be the ultimate goal.  Beck was derided for suggesting that Egypt’s possibly falling under Islamist control could eventually threaten the Western way of life, which is likely unrealistic in the short term.  This doesn’t mean, however, that it’s not the long-term goal of the radical Muslims.

Critics of the caliphate idea point to the fact that there are rivalries between different Muslim sects such as the Shiites and Sunnis, so a unified government would likely never work.  They also point to nationalists who would resist any attempt to superimpose an Islamist government over their own.  All of this is quite true, to an extent.

Even so, I recently spoke to someone who lived in the Middle East for many years during his career as a petroleum engineer.  He said that the idea of the caliphate is very real in the minds of Muslim Arabs, despite assurances by our government and the mainstream press to the contrary.  It doesn’t really matter whether Westerners believe that many Muslims dream of a government unified under Shari’a law, they believe it enough for all of us.

Thus, it really doesn’t matter if a caliphate is workable or not.  Religious zealotry does not stop to think about the rational roadblocks to its vision of the future.  As long as the vision of a worldwide Muslim rule drives Islamists to engage in terrorism, it’s a real concern for those of us in the Western world.

The Debt Ceiling Showdown & the GDP Report

Before I hit the send button, there are two other issues I wish to touch on.  First, a decision to raise the national debt ceiling should be decided by this Friday when the current continuing budget resolution passed back in December expires.  Failure to agree on a debt ceiling increase will cause the government to shut down certain services after this week, much like we saw during the Clinton administration, and possibly worse. 

Everyone knows the debt ceiling will be increased at some point, but the Republicans in Congress are insisting on some meaningful spending cuts in the federal budget for FY2011 before they will vote to raise the debt ceiling.  Democrats don’t want to go along.  Fed Chairman Ben Bernanke warned House Republicans that failing to increase the debt ceiling could result in “catastrophic” consequences, such as the US having to default on its debt. 

The Democrat-controlled Senate and President Obama stand in the way of any passage of the House budget and the spending cuts therein, which has set up the current showdown.  It will be interesting to see how it plays out in the next few days, and whether or not there will be a government shutdown.  Most political observers feel there will be some kind of temporary increase in the debt ceiling agreed to by Friday to avoid a shutdown, but it remains to be seen.

There are those who believe that Obama and the Democrats might be willing to see the government shut down temporarily so that they can blame the Republicans for it.  But that is a very risky gamble, given that a majority of Americans want to see government spending cut.   Again, it will be very interesting to see how the debt ceiling chess game unfolds over the next few days or weeks.

Second, last Friday the Commerce Department reported that 4Q GDP rose only 2.8% (annual rate), well below its first estimate of 3.2% in late January.  The latest number was also well below the pre-report consensus for a rise to 3.4%.  The lower than expected GDP number was primarily due to a sharp decline in imports and a downturn in state and local government spending.

For the last couple of months, I have noted that some economists had increased their forecasts for 2011 GDP growth to as high as 4%, but I also emphasized that I thought those estimates were too optimistic.  Last Friday’s disappointing GDP report confirms that, and with the spike in oil prices, I expect to see most economists dial back their GDP forecasts for the rest of this year.

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES

Iran Poised to Dominate New Middle East
http://www.realclearworld.com/articles/2011/02/26/an_iranian_shadow_on_the_arab_spring.html

Meet the Man Battling Gaddafi
http://www.time.com/time/world/article/0,8599,2055638,00.html

No help for Libya from President Obama
http://www.washingtonpost.com/wp-dyn/content/article/2011/02/25/AR2011022507161.html?nav=rss_opinions

GDP Report Disappoints
http://www.thestreet.com/story/11022805/1/gdp-report-disappoints.html


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Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc. Gary D. Halbert is the president and CEO of Halbert Wealth Management, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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