Wednesday, May 04, 2011

Fed Policy Causing Arab Revolts

In this article Andrew Lilico at The Telegraph shows a strong correlation between the Fed's QE2 and global food prices.

The fact that the food price boom started before QE2 might lead some to deny the link, but this overlooks that the mere expectation of QE2 caused commodity prices to rise and that the drought in Russia that raised wheat prices had only a transitory effect which should have faded out long ago.

The sharp increase in food prices, which hurts poor people disproportionately as they spend a much larger share of their income on food, likely contributed to the Arab uprisings which have toppled the governments of Egypt and Tunisia (it is still unclear just what will replace them) while causing widespread violence in Syria, Yemen and Bahrain and starting a war in Libya