Egypt's Warning: Are You Listening?

One day, a fruit and vegetable seller was arrested in Tunisia, sparking social unrest, and a few weeks later the government of Egypt was set to topple. 

Such is the nature of complex, chaotic, and unpredictable systems. The stresses build for years and years, and nothing really seems to be happening, but then everything suddenly changes. Egypt is therefore emblematic of what we might expect in any complex system in which pressures are building, such as the US Treasury market.  

Can events in complex systems ever be predicted? No...and yes. No, because the precise timing and details can never be predicted. Yes, because we can be certain that anything that is unsustainable will someday cease to continue and things that are horribly imbalanced will someday topple. We can also be certain that the change, when it comes, will be rather sudden and abrupt, rather than gentle and linear.

That is, we can easily predict that a complex system will shift, and that it will probably do so rapidly, but not exactly when or by how much.

How unbalanced was Egypt? Very.

Here are a few quite relevant statistics about Egypt (hat tip to an email from reader Mark O., with credit to Dr. John Coulter) to which I have added a few items:

The relentless math:

Population 1960:  27.8 million
Population 2008:  81.7 million
Current population growth rate: 2% per annum (a 35-year doubling rate)
Population in 2046 after another doubling:  164 million

Rainfall average over whole country:  ~ 2 inches per year
Highest rainfall region:  Alexandria, 7.9 inches per year
Arable land (almost entirely in the Nile Valley):  3%
Arable land per capita:  0.04 Ha (400 m2)
Arable land per capita in 2043: 0.02 Ha
Food imports: 40% of requirements
Grain imports: 60% of requirements

Net oil exports: Began falling in 1997, went negative in 2007
Oil production peaked in 1996
Cost of oil rising steeply
Cost of oil and food tightly linked

The future of Egypt will be shaped by these few biophysical facts -- a relentless form of math that is hardly unique to Egypt, by the way -- and it matters very little who is in power. Given the choice, I would not want to live there, nor in any other country that has fostered or permitted such reckless population growth beyond what the country itself can sustain. 

The interesting part is that these facts have been in plain view for decades, building into economic and social pressures that were suddenly unleashed in a wave of social and political unrest. How was it that such obvious things escaped notice for so long before they suddenly reared up into plain view? Instead of being a surprising exception to the rule, we should instead brace ourselves against the idea that this is just the way things tend to work. 

Back to the main story. Without persistent (and rising) food imports, Egypt cannot feed itself. It has managed to cover up the shortfall by having enough oil to export, but, like every country, their oil reserves are finite and eventually they'll face a day of reckoning.  

The oil situation in Egypt has only very recently become an enormous and unavoidable issue.

The monthly peak occurred in December 1996 (the yearly peak was also 1996), and oil production is now down some 30 percent since then. 

While it's good to have plenty of production, what really matters to a nation that imports so much of its basic living items are exports

Of course, there are two things that typically chew on a nation's oil exports: falling production and rising internal consumption. With both of these dynamics in play, Egypt's exports have been getting mauled, not by one, but by two exponential functions: 

(Source - EIA) 

The green circle marks the date when Egypt hit its peak of petroleum production in 1996, and the blue circle and arrow marks when exports had fallen by 50%, just six years after peak production. 

The gap between those two events, six years, is a very short amount of time to adjust to the new reality -- too short, as it turns out. Such is the nature of a double exponential working against you. 

[Note:  For the energy purists, this chart from the Energy Information Agency (EIA) misrepresents things somewhat. Egypt's domestic oil consumption and production are virtually identical right now, but Egypt has the largest oil refining sector in Africa, which skews their petroleum imports to the negative side. But whether Egypt became a new petroleum importer this year or in 2007 is essentially a historical blink, and the story told by the trajectory of the chart is little changed by small matters of timing.]

Any country that has to import both oil and food is living on borrowed time. It was only a matter of time before something gave way, and apparently that time is now.

Hillary Clinton actually spoke something approximating the truth about this fact recently, although she was referring to the entire region, but nonetheless, it was an unusual moment of clarity for the US political structure:

Hillary Clinton: Middle East facing 'perfect storm'

US Secretary of State Hillary Clinton has said the Middle East is facing a "perfect storm" of unrest and nations must embrace democratic change.

Speaking in Munich, Mrs Clinton said the status quo in the region was "simply not sustainable". "The region is being battered by a perfect storm of powerful trends.

"This is what has driven demonstrators into the streets of Tunis, Cairo, and cities throughout the region. The status quo is simply not sustainable."

She said that with water shortages and oil running out, governments may be able to hold back the tide of change for a short while but not for long.

Water shortages and oil running out? I'd decode those ideas for you, but they speak for themselves. Food and fuel are running out. The irony here is that she may as well have been speaking about the United States, Japan, or any number of countries across the globe, but any admission of biophysical limits is a good start, I suppose.

Editorially, it's not at all clear to me how the poorly defined concept of 'democratic change' will really change the equation much, as limits are immune to which 'ism' you happen to be running, but I am sure there are some in Washington DC who think ideology can trump reality. Regardless, I am somewhat surprised to see such obvious truths about water and oil being spoken by a senior US representative; it was unclear to me that anyone at that level had any awareness of these subjects at all.

My intent here is not to point out the future difficulties that Egypt faces, no matter who is charge, but to use the change that happened there as emblematic of what we might expect elsewhere, especially in the financial markets.

Egypt simply reminds us that anything that is unsustainable will someday change. It is an emblem for the world.

With abundant energy and food, we are treated to expansive and stable economies in which everyone stands a chance of gaining. Not that everyone will, mind you, but the possibility is there  In an energy-constrained world, what was formerly possible is no longer do-able, things don't work right, and there seem to be persistent shortages of everything from growth, to money, to food, to goodwill. What used to work doesn't. It is at these points that the prior stresses and imbalances are most likely to snap and suddenly change the world. 

These are the very sorts of changes that are coming to the rest of the world. Perhaps to a country or financial market near you. Are you ready?

In Part II of this report, our just-released Guide to Navigating the Coming Crisis, we analyze how the same systemic breakages in Egypt will likely manifest in the United States (and other countries). Also, for the first time ever, we have summarized the entire 'method' by which we make sense of the world. This method has allowed us to both grow our wealth and sleep better at night. Yes, there are troubling events afoot in the world, but an accurate diagnosis goes a very long way towards relieving the stresses that can cloud good decision-making and narrow one's field of view. We not only give you the information you need; we give you our best tools so that you can fashion them into the right actions that make sense for you.

Click here to read the Guide to Navigating the Coming Crisis (free executive summary; enrollment required for full access).

This is a companion discussion topic for the original entry at

“Any country that has to import both oil and food is living on borrowed time.”
This is nonsense. Instead the rule is that if a country has to import both oil and food, it has to export something the rest of the world wants. Consider China and Japan, two other countries which fail both these tests. So while I (and most of you) have high technology products from Japan  and a lot of low technology stuff from China in my house, off hand I can’t think of anything Egyptian I have ever owned. That is Egypt’s problem–its failure to produce other stuff the rest of the world wants.

It’s not nonsense, it is science, logic, and reason.  Yes, Japan is living on borrowed time.  So is China unless it can change the dynamic.  So is the entire globe’s worth of humanity.  Living within a naturally defined energy budget is just, well, unassailably true for all organisms.
But to limit this to nation-states, I guess I suppose it all depends on your time-frame.  The time-frame is shorter if a nation doesn’t produce anything else of export value, slightly longer if they do. But ultimately the energy-food balance will win out.

These past 200 years have been so unusual in human history, with excessive surplus energy flows spanning several generations,  that it has eroded the perspective for most.  

To presuppose that a very recent imbalance can continue in perpetuity is not a bet I would be willing to take, or make.  Or rather, I suppose I would, but I’d be taking the ‘under’ side of that bet.


I think any country that has to import it’s food is in big trouble. Very soon (as oil production declines) I suspect exporting  countries will only able to supply themselves.

What I think is happening in the US is a slow crash turning into a fast crash. When they can no longer just print more money to hide their problems suddenly everywhere we will see violent protests.

PastTense downside on you being wrong is pretty bad, downside on CM being wrong is minimal. Make your bets and live with the consequences.  

PastTense;You are missing the larger point…if other countries face food or oil shortages themselves, what Egypt or anyone else exports is irrelevant in that context. The one exception might be food for oil.
And this is the point Chris is trying to make, EVERY country has experienced exponential population growth built on cheap energy. When cheap energy (and by proxy) cheap food ends, you are going to have excesses of hungry and angry people. And that’s not factoring climate “change” impacts to food production. I believe it was Machiavelli who once observed that “all history is the interplay of men and land, as land is the means of wealth production”. On such basis, wars are fought over resources.

Makes perfect sense to me. The idea of enough food and energy being necessary ingrediants to a stable political environment is right on. It took both of these conditions (the lacking thereof) to foment the current gatherings in Egypt, but in this spoiled rich country (USA) (of whiners), it will only take a shortage of one of them to get 'er going.
Nice article.


I coughed up the red pill…

Then, I heard about Tunisia and now Egypt…

IEA admits to peak oil…

The Fed prints money with Zimbabwe type presses…

I no longer need the red pill - I can see plainly that the emperor has no clothes.

Lets get busy!

If you haven’t enrolled, today’s the day.  The second part of this report is worth a lot more than it will cost you. If you are still surfing around financial websites trying to piece this thing together you can stop. . .


I may have seen the future this winter, though I hope not. It definitely reminds me of Egypt. We have had an incredibly snowy winter. It’s caught everyone off guard. One of the consequences has been roof collapses due to the amount and weight of the snow. There was a mad rush for roof rakes. Stores couldn’t get them fast enough before selling out. People were scalping them. The hardware stores were selling out of snow blowers, snow shovels, calcium chloride, you name it. As soon as it came in, out they went. If that is the future, I want no part of it.
I’m in full preparation mode. If you haven’t heeded the warnings by now to prepare, now is a good time to start. Better late than never.

Peak Oil = Peak Food = Peak PeopleHow many people will a post fossil fuel world support?

[quote=Nate]Peak Oil = Peak Food = Peak People
How many people will a post fossil fuel world support?
You obviously ask the correct question!!!  My answer is " somewhat less than what the pre fossil fuel world supported due to resource depletion, especially of our soils and water supplies. The transition could very easily contain an overshoot is the direction of population reduction.
Our only option to a different outcome lies in developing a prepared and resilient community that is aware of the truth of our predicament. And that does not provide a guarantee. All of course is only my .02 cents worth!

Doug Casey’s piece on a soft default and how it might be done by changing the rules:

The U.S. imposes withholding at a rate of 30% on dividends and other types of investment income paid to non-U.S. investors. But there is a very broad exemption for interest payments. So under current rules, foreigners can invest in most types of bonds issued in the U.S. without losing anything to withholding.

A simple way to stick foreigners with the pain of a default would be to extend the withholding system to cover corporate bonds but not Treasury bonds. Non-U.S. investors would then have a compelling motive to replace their holdings of U.S. corporate bonds with Treasury bonds. T-bonds would flow out of the U.S. and corporate bonds would flow in. Most of the portfolio adjusting would be done within a year or so. Then the government would change the rules again. Withholding would be extended to Treasury bonds, at 30%, or at some higher rate, say 40%.


(bold added)

In the future, more than half of the work force will be FARMERS. period, end of story. trying to find some cool “new technology” job is a pipe dream. I really believe that “new technology” is a RELIGION here in America.

MRW,Welcome(first post) I agree, most will be involved in their day to day well being. Isn’t that what we’ve been up to most of our existence?
robie, Husband,Father,Farmer,optometrist 

One of the issues not addressed in the article that is prevelant throughout the Middle East and othe regions is the large percentage of the population under 30 and the high unemployment rates.  They may have rioted over food and fuel, but I believe these were trigger points with the root cause centered around the Egyptian government and it’s failure to address the problems facing so many young people living in a hopeless situation…

 Pimco CEO Mohamed El-Erian shared his commentary on Egypt and the challenges that country faces restarting its economy as its future remains uncertain.

mohamed el-erian

El-Erian laid out these factors: "Three factors stand out in a process that is critical for the longer-term well-being of the country, including the millions of Egyptians that are protesting for greater freedoms. First, Egypt’s banking system must resume normal operations in an orderly fashion. A very good start was made on Sunday to bring part of the system back on line, and important challenges remain. The central bank has no choice but to flood the financial system with both domestic and dollar liquidity. And both the central bank and the commercial banks must continue to avoid the temptation to overly curtail deposit withdrawals lest that, in itself, fuel a deposit run. Second, the Finance Ministry must deal properly with the unanticipated collapse in tax revenues. It must make sure that this temporary interruption in government receipts does not lead to even more destabilizing spending disruptions. Salaries must be paid promptly, and all supplier bills must be met. Third, particular emphasis must be placed on targeted social spending, particularly when it comes to health, food subsidies, and shelter. Remember, Egypt’s poor are extremely vulnerable to the current economic and financial dislocations."

[quote=joemanc]I may have seen the future this winter, though I hope not. It definitely reminds me of Egypt. We have had an incredibly snowy winter. It’s caught everyone off guard. One of the consequences has been roof collapses due to the amount and weight of the snow. There was a mad rush for roof rakes. Stores couldn’t get them fast enough before selling out. People were scalping them. The hardware stores were selling out of snow blowers, snow shovels, calcium chloride, you name it. As soon as it came in, out they went. If that is the future, I want no part of it.
I’m in full preparation mode. If you haven’t heeded the warnings by now to prepare, now is a good time to start. Better late than never.
I believe the future for us is EXACTLY as you have experienced. When? Who knows. In what specific manner? Again, who knows. However, your lesson in herd mentality of this culture when “they” can’t get what they want when they want it will apply.
We are so accustomed to having everything and more at our fingertips that any hardship of unavailability results in chaos.
Are we listening? We better be.

Hello Chris…
We have similar outlooks.  I personally feel like our politicians are in for a rude awakening if they don’t come into “ownership” of our situation.  I don’t see anything like Egypt, since we are way to well fed, and I believe we have the means to coordinate quickly even if supply lines dried up (due to whatever chaotic thing comes our way…  ex.  oil embargo) 

Unfortunately, their will be bad eggs, and those in control will learn what “accountability” means quickly through major disruptions. 

Here’s my piece from Zero Hedge.  (you’ll have to excuse my grammar then/than, as a reader pointed out…)


All the best, RH

Chris,Thank you for this wonderful article as well as the comments about China & Japan living on borrowed time. I am in full agreement with it. Having spent 5 months in China last year, I could clearly see the writing on the wall.
On this subject, there is one wonderful book that all of you should try to read (Not available in most libraries). It’s a book called A prosperous Way Down by Howard Odum. (Amazon link: )
Howard Odum was a renowned Ecologist who saw this coming in the 80’s and created the first draft of the book. The publishers felt that it was too unpleasant a topic. He updated the draft just before his death in 2002. The book was finally published in 2008. He draws out on the commonalities of the current economic system and other ecological / different systems from beginning to collapse. He has provided very good recommendation on future paths to adopt.
Content of the book : Crash course(Most of it) + Way forward (With excellent definitions of primary, secondary & teritiary wealth)