Well, I guess it’s semi-official now. The demonstrations in Egypt were caused by Ben Bernanke’s monetary policy. I heard it once, and my jaw dropped. Then, I heard it again. Now, it’s commonplace. What can I say?
I’ve wondered about “black box economics” lately, but this one really has me perplexed. What is the causation? Just where does the infamous slap in the face in Tunisia fit into the chain of causality? Did QE2 lead to the slap in Tunisia, which led to the self-immolation, which led to successful Tunisian demonstrations, which led to similar demonstrations in Egypt?
Or, maybe the Treasury purchases of U.S. government securities in the U.S. market caused food prices in Tunisia and Egypt to rise directly, skipping over the United States, and the slap was a sideshow. Interesting how we can export something we don’t even have. Treasury purchases get sterilized into excess bank reserves without a significant expansion of U.S. money, but some reserves seep out and cause an expansion in foreign money, which is only spent on food.
But where are the demonstrators in Egypt holding “food inflation” signs? I really haven’t seen any. This doesn’t look much like a food riot to me. It looks like a freedom riot. Imported inflation is not a hard problem to deal with. You just let your currency float against that evil doing dollar. Imported freedom is harder.
Of course, we’ll have to wait to see how it all turns out to know whether to give hapless Ben the blame or the credit.