• A study by an associate Economics professor at a Saudi university has warned of a possible disappearnce of the Saudi middle class, and the increase in poverty. The study attributes this trend to continued high inflation which seems uncontrollable, and to its impact on living conditions and on society in general. It claims that the endangered middle class forms 90% of Saudi society, an assertion I would strongly doubt, for I believe that anyone who lives in a society is part of its economy, be they natives or expatriates.
• This hyper-inflation, the study warns, will lead to higher unemployment and a rise in crime. The study partly attributes this to the system of 'exclusive agencies' that dominates the Saudi import sector. It notes that Saudi membership in the WTO might require dismantling this monopolistic system of trade.
• In fact, in all the Gulf oil states, because of a system of monopolistic dealership for imports of consumer goods, and they do import almost everything except oil, prices are upward biased. Increased oil prices are automatically reflected in higher prices for consumer goods, both luxury items and staples.
• There is a normal economic reason for an inflow of foreign exchange to push domestic prices up through its impact on liquidity, unless this is sterilized by the monetary authorities. In the Gulf, foreign exchange flows to the public sector, which would then pump it into the private sector through the budgetary process.
• Apparently this mechanism and its impact on prices is speeded up by merchants, presumably monopolistic importers, who anticipate increased public spending by the state that controls the oil income. Hence prices are raised automatically and quickly.
• Looks like the regime i Iran is stuck in a new crisis of its own creation, one that it cannot handle. Regardless of where the British sailors were taken- and the exact location is subject to dispute- the wise course would have been to release them quickly. It is not likely that the Americans, for example, will release any Iranians they are holding inside Iraq or elsewhere, before they are ready, in exchange for these sailors.
• Saudi media reports that King Abdullah had warned Iran's Ahmadinejad against underestimating American resolve, and the dangers this poses to his country.
• On the other hand, Syrian media, all state-controlled, have been pleased, almost gushing, about the rsults of the Arab Summit. Do they know something we don't?

Cheers

Mohammed