In the month of Ramadan, over a billion Muslims fast from sunrise to sundown. Ramadan is marked by family get-togethers and catching up with friends as every "breakfast," or fast-breaking dinner, differs from those of the remaining 11 months. The food is different, generally more varied and richer. The location is different, you generally take turns inviting people over and being invited yourself. Finally, the circumstances are different, you have not had food or water for the entire day.
Similar to Lent or Yom Kippur, the fasts of Ramadan remind us to be thankful for the food and water we have readily available throughout the year and asks that we abstain from immoral acts or deeds. It also reminds us to take care of neighbors in need and help the less fortunate wherever they may live. An interesting fact about Ramadan and fasting that many people don't know is that Islam prohibits fasting all year round. This is actually a sin. It is also a sin to not break the fast, that is, to continue abstaining from eating or drinking after sundown. In this respect Islam very much respects the golden mean and teaches to stay away from extremes.
Attributed to Aristotle, "the golden mean" is the term the Greek philosopher used to describe the sweet spot of moral behavior, half way between excess and deficiency. The middle of the road is always the hardest course to stay, swerving to extremes is far too easy, Islamic scholars have taught for centuries, embracing the concept of the golden mean. Even when it comes to prayer and other religious duties, Islam places limits. It is ironic, therefore, that so much of the Islamic world have swayed so far from this simple lesson. Extremism and deficiency exist in the Islamic world in politics, religion and socioeconomic standing of populations. Many have strayed from the golden mean.
As in life, so too in financial markets. Only disciplined investors that stay the course are able to survive. Lessons in diversification, asset allocation, and taking profits and losses are all lessons in staying near the golden mean. The famous Wall Street phrase, "bulls make money, bears make money, but pigs always get slaughtered," implies that those who are greedy will not last as investors. Extreme volatility in currency markets, interest rates, balance of payments, even growth, and other economic indicators are recipes for long-term financial collapse.
While high oil prices appeared to be good for oil-exporting Middle Eastern countries, the later collapse of oil prices, now down nearly 70 percent from their peak have left these economies reeling. Excessive spending by some parts of government and society have led to mass deprivation for other parts. Now with oil at "new normal" levels, many budgets have deficits that need to be made up through borrowing. Such deficits have led to further crises of confidence which lead to more expensive borrowing and ultimately all of these excesses will lead, at this rate, to a collapse of the entire system.
The recent row between Qatar and its neighbors is, at its core, an economic one. Qatar's support of political groups that worked to counter the monarchies and dictatorships of the Middle East left these leaders in a precarious situation. Qatar argues that it fought for democracy and to embrace the Arab Spring, Saudi Arabia, the UAE and Egypt argue it did so to achieve regime change in these countries. Whatever the truth, these monarchs were forced to spend more to appease their citizens to stay in power and thus caused larger deficits at a time when no one can afford deficits. Whether or not you agree with Qatar's moves, they were an affront to the economic interests of those that have now broken off diplomatic ties with the Gulf monarchy. A response was inevitable and depending on how long this row lasts, suspending relations will be costly for all parties.
While cutting off trade between Qatar and the five Middle Eastern countries is not an existential threat for Qatar, it is a sign of the desperation that some of these countries face economically. The ability of many of the countries to continue to hold their currency pegs is very much in question. Should this row continue, irreparable damage will be done to all and adherence to the golden mean and a peaceful resolution, in this month of Ramadan, is the only solution.
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