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Posts Tagged ‘Larry Kudlow’

The Law of Unintended Consequences Strikes Again

Posted by Nancy on January 31, 2011

I have been trying to rationalize why there has been unrest and riots in so many Middle Eastern countries this month. Admittedly they are all autocratic regimes, and the domino theory may explain the spread to some degree, but what started it? Was it planned by some nefarious behind-the-scenes force? Are these flash-mob riots started through Twitter and Facebook gone out of control?  Is it just an example of Murphy’s Law on steroids? 

The current riots in Egypt are not the only ones; the government has already fallen in Lebanon and there have been uprisings in Tunisia, Algeria, Yemen, and Jordan.  Saudi Arabia’s rulers have increased security around their palaces and the country’s oil fields, and there is talk of unrest spreading to Iran.  What is happening?

Larry Kudlow’s article in National Review may have the answer, and if he’s right United States policy shoulders some of the blame. 

We may be causing hunger around the world.

A few facts:
1. Food commodities worldwide are priced in U.S. dollars
2. The Federal Reserve has been printing trillions of excess dollars, causing worldwide inflation in the commodities markets.
3. The food market is up 36% over last year’s prices (8% this month alone).
4. Egypt is the world’s largest importer of wheat, and wheat’s price has risen 113% in the past year.
5. The average Egyptian spends up to 56% of their income on the acquisition of food.

Could longtime underlying resentment toward dictatorial governments + increasing inability to procure enough food to sustain life = riots?

The U.S. government is also culpable in another way. Environmentalists have been demanding independence from fossil fuels and increased dependence on sustainable fuel – like flex fuels made from mixing gasoline with ethanol.

Some more facts:
1. Ethanol is made from corn.
2. 33% of the 2010 production of U.S. corn was converted to ethanol for use in gas tanks.
3. 14% of the world’s production of corn in 2010 went into gas tanks.
4. The price of corn is up 70% over last year.

Our food prices are rising too, but we are a wealthy country.  We will feel a pinch in our budgets, but we will survive.  The questions are, will we continue to to knowingly cause worldwide inflation?  Will we continue to burn food while prices rise throughout the world?  Are we willing to allow people to go hungry and governments to fall in order to pay for our financial folly, or to meet some arbitrary environmental standard?

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Posted in Economy, Food | Tagged: | 3 Comments »