cereal revolutions

DailyReckoning | That will bring to three the number of regime changes in the last few weeks. Which leads us to ask: what’s up?

The answer comes from our old friend, Jim Davidson. He pins the revolutions on Ben Bernanke. Behind the popular discontent is neither the desire for liberty nor the appeal of elections. It’s food. And behind soaring food prices is Ben Bernanke.

The Arab world is a model Malthusian disaster, says Davidson. Populations have ballooned. Food production has not. Which makes Arab countries the biggest importers of cereals in the world. And when the price of food goes up, the masses rise up too.

From Jim’s latest newsletter, Strategic Investment:

Food prices hit an all-time high in January. According to the UN’s Food and Agricultural Organization (FAO) “the FAO Food Price Index (FFPI) rose for the seventh consecutive month, averaging 231 points in January 2011, up 3.4 percent from December 2010 and the highest in both real and nominal terms” since records began. Note that prices have now exceeded the previously record levels of 2008 that sparked food riots in more than 30 countries. “Famine-style” prices for food and energy that prevailed early in 2008 may also have helped precipitate the credit crisis that Federal Reserve Chairman Ben Bernanke described in closed-door testimony “as the worst in financial history, even exceeding the Great Depression.”

This time around, the turmoil surrounding commodity inflation has taken center stage with more serious riots and even revolutions across the globe. Popular discontent is not just confined to “basket case” countries like Haiti and Bangladesh as in 2008. High food prices have roiled Arab kleptocracies with young populations and US backed dictators such as Tunisia, Egypt, Bahrain and Yemen. Even dynamic economies have been affected. Indeed, all of the BRIC countries, except Brazil, have witnessed food rioting.

Well, how do you like that, Dear Reader? All those billions of dollars spent propping up dictators – $70 billion was the cost of supporting Hosni Mubarak in Egypt alone – and then the Fed comes along and knocks them down.

The Fed lowers the cost of money so speculators can borrow below the rate of inflation. And then it prints up trillions more – just to top up the worlds’ money supply.

Is it any wonder food prices rise? Imagine you’re a farmer…or a speculator. You can sell food. Or you can hold it in storage. You know the food is valuable. You know the world has more and more mouths to feed everyday. You know food production is limited. And you know Ben Bernanke can print up an unlimited number of dollars. What do you do?

Do you sell immediately? Or drag your feet…holding onto your valuable grain as the price hits new highs?