Saudi Arabia

What the US wants in Egypt is what it failed to attain in Iraq - stability of the kind that assumes US control over the situation. In Iraq’s case, this meant control over one of the world’s biggest oil resources. In Egypt’s case it means a smooth ride for American foreign investment, a wide reach over one of the busiest shipping zones in the world and an assurance of peace with Israel. But now Washington finds itself in a tricky position. It needs to make sure that any new Egypt is friendly with Israel, but it also needs to make sure that it caters to Saudi Arabia’s vision of a new Egypt. So far, so good--minus the stability factor.

If there was any doubt that the taper would take place shortly, it can be wiped out following the just released June international trade data, which showed a surge in exports to a record high $191.2 billion, an increase of $4.1 billion compared to May, even as imports declined by $5.8 billion to $225.4 billion, resulting in a trade deficit of just $34.2 billion, or 22.5% lower compared to the $44.1 billion in May, which is the lowest trade deficit since October 2009.  It is also the biggest beat to expectations of -$43.5 billion since March 2005. Whether this plunge in the deficit was the result of the new GDP methodology is unknown, however the resulting surge in revised Q2 GDP following this bean-counting addition to the last month of Q2, means that the economy grew even more than expected and that the Fed's tapering course is now assured. It also means Q3 GDP based on July trade data will be dragged down as there is no way this surge in the collapsing deficit can be sustained.

In order to maximize their long-term profit, the Saudi`s will be watching the shale-boom in the US for an optimal oil price. This will prove a challenge for an oil dependent nation as the natural gas price implies a far lower oil price than the political elite is comfortable with.

Those long the Kiwi (NZDUSD) woke up to an unpleasant shock this morning when the pair opened nearly 100 pips lower following news that China and Russia, and likely other countries soon, have halted imports of New Zealand milk powders after Fonterra announced that three batches of whey protein "may have been" contaminated with botulism-causing bacteria: a situation that is a tad more problematic than the diplomatic haggling over genetically modified crops. Since milk powders accounted for a whopping 15% of total New Zealand exports in 2012, it becomes obvious that unless Fonterra, and the NZ government, engage in some prompt damage control, the Kiwi may have much more room to drop as the country's 2013 GDP forecast may be the next thing to go toxic.

When one examines the impending disaster in Egypt, it is important to avoid using a narrow lens and take into account the bigger picture. An Egyptian civil war will not ultimately be about Egypt. Rather, it will be about catalyzing the whole of the Middle East towards breakdown and drawing in larger nations in the process, including the United States. It will also be about triggering energy price increases designed to give cover to the collapse of the dollar's world reserve status. If globalists within our government and within central banks allow the dollar to die today, THEY will be blamed for the collapse that follows. THEY will be painted as the villains. But, if they can create a crisis large enough, that crisis becomes the scapegoat for all other tragedies, including dollar debasement. Egypt is just one of many regions in the world where such a crisis can be fabricated. Right now, it seems to be the most opportune choice for the elites.

With US leaks about Israeli air strike on Syria, John Kerry stirring the civil war pot in Egypt, and the closure of US embassies across the Muslim world (Iraq, Afghanistan, Qatar, Bahrain, Oman, Kuwait, Bangladesh, Saudi Arabia, Libya, Yemen, UAE, Algeria, Mauritania, Sudan, Israel (Tel Aviv) and Jordan), it appears something is afoot. To add to the intrigue, the US State Department just issued a worldwide travel alert for US citizens.

*STATE DEPARTMENT WORLDWIDE TRAVEL ALERT EXPIRES AUGUST 31, 2013
*STATE DEPT ISSUES WORLDWIDE TRAVEL ALERT FOR U.S. CITIZENS

An Al-Qaeda threat has been posited but with no follow-up but we can't help but fear what we wondered about previously - the need for deficits to re-awaken (via some external event that no-one can 'un-patriotically' demur) providing more room for Bernanke to avoid his need for Taper.

The world supply of crude oil isn’t going to run out any time soon, and we will be producing oil for decades to come. However, what we won’t be doing is producing crude oil – petroleum – at the present rate of around 30 billion barrels per year. For a global civilization that is based almost entirely on a plentiful supply of cheap, crude oil, this is going to present some considerable challenges.

Former House Speaker and presidential hopeful Newt Gingrich said a then-struggling U.S. economy can't afford to spend billions of dollars overseas to buy foreign oil when there was plenty of that Texas tea at home in the United States. Gasoline prices, he said, could drop to $2.00 per gallon if drilling activity increased dramatically in the United States. A year later, nearly 90 million barrels of oil was produced worldwide and almost half of that came from new drilling operations in the United States. Gasoline is still nowhere near $2.00 per gallon even though the United States is mentioned in the same breath as Saudi Arabia...

The last two weeks oil inventories fell by a record 20 million barrels, this event has never happened in 30 years of historical data.  Something just doesn`t add up here...

The overthrow of President Mohamad Morsi by popular demand and supported by the army inaugurates yet another volatile episode in Egypt’s long and turbulent transition. Macro stabilisation in Egypt hinges on a swift and cohesive transition, and given the current bloodshed, that appears unlikely - which leaves Barclays 'muddle-through scenario' - where political/religious divides delay formation of civilian government - as the most likely; postponing fiscal reforms indefinitely, and undermining further the fiscal and debt sustainability of the already-troubled nation. This is a major problem, since, after all; among the main reasons behind the mass protests of 30 June were the continued deterioration in most socioeconomic indicators, faltering public services (notably provisions of fuel and electricity), rising risks of macroeconomic instability and slow progress in implementing socioeconomic and fiscal reforms over the past year.

As the mainstream media shows endless scenes of celebration in Tahrir Square following last night's military ouster of democratically-elected President Morsi, the tensions with his supporters grows more widespread. Perhaps, what is more worrisome for the future of Egypt, which we noted last night was definitely on a path on instability, is the reaction of world governments - from "deeply concerned" America to Turkey's "unacceptable" perspective to Saudi Arabia's "congratulations" and Russia's "democracy is not a panacea"- it seems not everyone is behind the second coup in 3 years (but everyone is calling for calm as the middle-eastern turmoil ripples into their markets) but is a "setback for democracy."

In an apparent effort to "facilitate peace talks," Al Jazeera reports that the Taliban - the armed Islamic fundamentalist group - will open a political office Doha, Qatar tomorrow.

• *AFGHANISTAN'S TALIBAN TO OPEN OFFICE IN QATAR TOMORROW: JAZEERA
• *JAZEERA CITES UNIDENTIFIED SOURCES ON TALIBAN POLITICAL OFFICE

Until earlier this year, Afghan President Karzai was strongly opposed to the Taliban having a meeting venue outside Afghanistan, but the US has pushed for the Taliban to be present at the negotiating table as Washington prepares to withdraw its troops from Afghanistan in the next two years. This opening comes on the heels of accusations (here and as we discussed here) that Qatar (and Saudi Arabia) is reviving al-Qaeda in Iraq and now Syria.

"Information about the usage of chemical weapons by Assad is fabricated in the same way as the lie about Hussein's weapons of mass destruction.” Alexei Pushkov, head of the Russian lower house of parliament’s international affairs committee, said on Twitter.

The short but profitable tale of how 483,000 private individual have "top secret" access to the nation's most non-public information begins in 2001. "After 9/11, intelligence budgets were increased, new people needed to be hired, it was a lot easier to go to the private sector and get people off the shelf," and sure enough firms like Booz Allen Hamilton - still two-thirds owned by the deeply-tied-to-international-governments investment firm The Carlyle Group - took full advantage of Congress' desire to shrink federal agencies and their budgets by enabling outside consultants (already primed with their $4,000 cost 'security clearances') to fulfill the needs of an ever-more-encroaching-on-privacy administration.

Technology, technology, and more technology—this is what has driven the American oil and gas boom starting in the Bakken and now being played out in the Gulf of Mexico revival, and new advances are coming online constantly. It’s enough to rival the Saudis, if the Kingdom allows it to happen. Along with this boom come both promise and fear and a fast-paced regulatory environment that still needs to find the proper balance. In an exclusive interview with Oilprice.com, Chris Faulkner, CEO of Breitling Energy Companies - a key player in Bakken with a penchant for leading the new technology charge—discusses: How Bakken has turned the US into an economic powerhouse; What the next milestone is for Three Forks; What Wall Street thinks of the key Bakken companies; Where the next Bakken could be; What to expect from the next Gulf of Mexico lease auction; What the intriguing new 4D seismic possibilities will unleash; What the linchpin new technology is for explorers; How the US can compete with Saudi Arabia; Why fossil fuel subsidies aren’t subsidies; How natural gas is the bridge to US energy independence; Why fossil fuels shouldn’t foot the bill for renewable energy; Why Keystone XL is important; Why the US WILL become a net natural gas exporter