As Reuters reports, in the ongoing underreported counterrevolution against the Muslim Brotherhood's US-backed regime, the local population is increasingly scrambling to preserve their local-denominated paper wealth by converting it into the same currency that Bernanke is hell bent to crush some by some $85 billion per month. Problem is - Egypt is out of dollars.
A run on Egypt's pound has left foreign currency in short supply and driven some dealers into the streets in search of people with U.S. dollars to sell, spawning a new black market.
The currency's decline was triggered by a political uprising that swept Hosni Mubarak from power in 2011 and it has officially lost 8 percent of its value since Dec. 30.
Black market rates are even weaker, a sign that although the central bank managed to stem the slide in official trade last week, Egyptians are nervous about holding on to pounds.
"There are no dollars. Everyone that walks in asks for dollars but supply is scarce," said one of the dealers.
The central bank took steps last week to manage the rate including narrowing the pound's trading band. It was last bid at 6.71 to the dollar on Sunday in interbank trade.
That is 13.4 percent weaker than its level on the eve of the uprising that led to Mubarak's downfall, pitching Egypt into two years of turmoil that has scared off tourists and investors.
It is the fear that the weakness in the EGP will only get much worse, that has citizens rushing to hit any USD bids, even if it means black market rates that are drastically higher than the official exchange rate: "On Cairo's streets, one dealer offered to sell dollars at a rate of 6.95 on Thursday - 3.5 percent weaker than the official price. Another asked for 6.89 pounds to the dollar."
Yet where it may get much worse, is that the nation itself may soon run out of dollars. As we reported last week, Egypt's foreign currency reserves have plunged to just $13.6 billion, some 60% less than the $36 billion held at the bank on the eve of the uprising against Mubarak, and below the $15 billion required to cover three months imports.
And while the government itself is at risk of having its foreign trade ground to a halt, the bigger risk is that very soon Egypt will have no choice but to follow in Argentina's footsteps and order a price freeze, or else risk a run on the supermarket:
One senior executive at an Egyptian company that imports goods from abroad said companies were able to source their dollar needs from the black market, but forecast that supply would tighten further in the coming weeks.
"Corporates are not having problems arranging for U.S. dollars from the open market. However, there is a spread that ranges between 16 to 20 piasters between the bank rates and the open market," he said.
Speaking on condition of anonymity because he was discussing an illegal market, he forecast that dollar supply would dry up further because of factors such as political uncertainty.
"What will happen? Most probably you will start seeing products disappearing from supermarket shelves," he said. "The challenges that we are facing now are nothing compared to what we could be heading to."
He could well be speaking about the entire developed world. And sadly, there is no simple resolution, because while the Egyptian government may promptly devalue the EGP overnight by some 20%, 40% or more, as Chavez just did, it will merely accelerate the scramble to procure hard assets (in lieu of a hard currency), and further destabilize an economy already on the bring of a second civil war.
And the worst news is that should Egypt indeed devalue just as Venezuela did, it is assured that everyone else in the "less than developed" world category will suddenly scramble to be the next just so they are not the last. What happens then is anyone's guess.