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Government | Save The US Economy

Save the U.S. Economy Blog

The Cairo, Egypt Effects On The US Economy

The financial markets are volatile and can react unpredictably to world events.  Investors were given a sharp reminder of this following the recent turbulent events in Cairo, Egypt.

Although Egypt is a relatively small presence in the world economy there are a number of important political and financial implications to the upheaval there.   Many of these implications have particular relevance to the US economy which is still struggling to recover following the last few years of downturn.

Oil Prices

Egypt is not one of the biggest exporters of oil but it does have a key influence on the supply chain coming out of the Middle East.  The current government in Egypt under Mubarak is sympathetic to the US and other western countries.  A new government could have serious implications to the supply of oil and in turn prices.  Whenever there is conflict in the Middle East oil prices soar and this is likely to happen if the situation in Egypt is not calmed soon.

Auto Industry

Fluctuating oil prices in turn has a serious impact on the US auto industry.  This industry is one of the backbones of the US economy and is still fragile following the recent deprivations of global recession.  If oil prices rise again following the upheaval in Egypt this could damage all the headway made in the last few years to build up the auto industry again.

World Trade

As well as the supply of oil Egypt also occupies a prominent position in the trade route of a wide range of goods coming out of Asia.  The Suez Canal is a major link in the global trade chain of many key Asian products including electronic equipment, computers, cars and more.  This could push up prices of basic goods which would have to be passed on to consumers.  This could be another blow to fragile recovering economies.

It is important to remember that these days all countries are connected through the world economy.  No single government can protect their assets against upheaval in other parts of the world as everything has a knock on effect.  If a peaceful solution cannot be found soon in Egypt the US and other key economies could be negatively affected.

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