As we have discussed on The Blogmocracy, one of the major reasons for these ‘revolutions’ in the Middle East is the spike in food prices, I would like to expand on this here and do a post mortem on this trigger of the revolutions. Food inflation and corruption were the main triggers in Tunisia, then the revolution spread. The area already had decades of most of the long term prerequisite foundations for revolution: zero development, high birth rates without job growth for new workers, high unemployment especially among young males in the urban space, a radicalizing force in this case called islam, and abusive regimes.

A successful revolution rarely comes from the countryside. There is a reason for this. A subsistence farmer has to spend many hours a day scraping together enough calories to feed him and his family. That is tiring work that will beat the revolutionary zeal right out of you, its too hard to ‘take to the barricades’ when you have spent all day stooping in the fields to gather the evening meal .  The urban unemployed, on the other hand, have plenty of time on their hands and the calories usually comes from money handouts form the government or whatever they can earn doing informal day work or from criminal activities. Its easy to be an urban revolutionary when you can go to the cafe for some tea and listen to fellow revolutionaries regurgitate the tripe of the day.

The Middle East, as stated above, already had the triggers in place for revolution in the streets, the food price trigger was the one that got pulled.  But what caused the trigger? It certainly wasn’t supply and demand, there is plenty of food to go around. I would argue that a good portion of the pull was a result of the Quantitative Easing and printing of Dollars by the United States and the resulting actions that occurred in the markets afterward. The commodity markets got flooded with new dollars that should have been lended out to individuals and businesses. But because the US economy is so fouled up, there is no lending because there is no way banks can predict the rules that the economy will be operating in.

When the US prints all of this money, it goes out into circulation in the international markets. This can have disruptive consequences like commodity inflation OR the perception of commodity inflation. In this case, the perception of coming inflation causes futures speculation upward in the markets.  This drives prices for food upward (regardless of supply or demand). It is kind of like what mass hoarding would do. In fact, several countries that are ripe for revolution did just that and purchased tons and tons of grains in a rush and paid higher than normal prices as a ‘hoarding fee’ driving prices even higher. Algeria purchased 800,000 tons of wheat last week to secure enough food to prevent riots.  Indonesia has ordered 820,000 tonnes of rice so as to plug in a price to avoid the riots they had over food in 2008. Other vulnerable countries are in line to secure grains even at these inflated prices to avoid what is happening in the Middle East. If you live in a non-vulnerable country, the price of your loaf of bread went up and you shrugged and complained a little and then you got distracted by that phone call and forgot about the bread price. If you live in a vulnerable country, you riot over the price increase of the staples of your diet (and the corruption and lack of jobs, et cetera)

While food inflation is not the main cause it is a trigger that got pulled. We flooded the market with dollars to stimulate our economy. Lending that was supposed to happen did not. the money flowed into commodities. International commodity contract are paid in dollars, this causes inflation and more dollars in the commodities market starts a vicious cycles of speculation raising the prices beyond what normal inflation would have done on its own.  By monetarizing  our debt, and  because contracts are paid in US dollars, we exported some of our debt through the international markets into the pockets of already angry would be revolutionaries. Whether they like it or not, those street rioters helped the US debt load. I just wonder if this was a feature or just an effect of Quantitative Easing.