The events in the Middle East are not helpful to anyone. Yes, the governments are oppressive, at least in our eyes. But sometimes the devil you know is preferable to the unknown devil that follows. Those who believe these countries deserve “democracy” don’t understand the difference between democracy and liberty. Our founders truly feared democracy, knowing that it would destroy a country.
A case can be made that our Federal Reserve is responsible for these uprisings. Quantitative easing does not know borders. Flooding our country with money effectively floods much of the world with money, causing rising prices on food and other commodities.
Democracy as a motivator of these movements is a romantic way to view them. Food deprivation or starvation is more realistic. When the poor spend most of their meager incomes on food and food prices escalate, they are unable to shift funds away from discretionary spending to buy food. They have no discretionary spending. They must do something and if all they can do is protest and riot, that is what they will do.
While these motivations are understandable, they provide the opportunity for more devious forces to take advantage. In The Road to Serfdom Friedrich Hayek included a chapter on why the worst rise to the top. We will witness this chapter play out in the countries suffering duress.
Our exported inflation is not limited to food prices. Oil and other commodities have been soaring as well. Ironically, a form of roundabout “justice” may result. As the most highly developed economy, the US is the most dependent upon oil and energy. It has been estimated that each $1.00 increase in oil prices is the equivalent of a $95 Billion tax increase on consumers. Based on the frightening charts below, a large portion of our stimulus program has been “taxed” away in the form of higher energy prices.
Fed Chairman Ben Bernanke shows no willingness to stop his enabling of the drunken sailors we politely call politicians. Continuation of current policies will cause inflation and oil prices to go exponential. Our GDP may soon appear as an upside down image of the oil price chart. The seeds that Bernanke sowed that are disrupting economies and lives around the world may very well cause the collapse of the US economy.
Things are beginning to get ugly in many places around the world. These did not begin as political problems but will be viewed as such. Political solutions will be tried. Will we have more wars? Will the world enter an economic dark ages? Will cities in the US begin to “go Cairo?”
These are questions that become more relevant the longer we continue our destructive economic policies.
Answers will follow, but not in time to save your investments. Be careful out there ….It seems that we may get a small teaser of what is to come. Libyan oil output has, for now, been cut in half. The price of Brent Crude had this to say :
Notice the parabolic tendency at the end there. Yeah, if this spreads to Saudi Arabia, who knows – we might see a spike above $200. $300? Heaven is the limit for such a scenario. The problem is that it only takes a short time at these levels before the economic damage starts becoming bad. And as business and people start discounting higher fuel prices in the future, we are going to go straight back into recession, as the whole “we need to recalculate our consumption patterns” thing go into full speed. And all the printing presses in the world cannot save the Bernank and his faux recovery then.
Meanwhile, somewhere in currency land, we have a very large, very drunk idiot who is very close to falling off a cliff.
Combine this with the strange crash moves yesterday in the agricultural commodities, and it gets really scary. What is happening? Where are we going? Who is to blame?