One curious aspect of recent events in the Middle East and North Africa is how unwilling most commentators have been to join the dots between the Federal Reserve’s second phase of quantitative easing and these revolutions. I’m less queasy. Of course, all revolutions have many causes, and I don’t mean to belittle the achievements of brave non-violent protesters, desperate self-immolators, or saloon-car rifle-wielders. But, as a trigger and driver of these events, the Fed seems very clearly to have achieved more in the Arab world in six months than the Pentagon achieved in decades.
See Graph 1 above.
The first graph illustrates the correlation between the prices of food and the Fed’s purchase of US Treasuries (i.e. its quantitative easing programmes). (A widely-discussed graph illustrating correlation between QE and broader commodities indices can be seen here.) We see how the food price index broadly stabilised through late 2009 and early 2010, then rose again from mid-2010 as quantitative easing was re-started (QE2) following Ben Bernanke’s Jackson Hole speech of August 27 – with prices rising of about 40% over an eight month period. Similar correlations can be observed between Fed purchases and wider commodities indices, but let’s focus on food for now. (read more)
