31st January 2011
Larry Kudlow connects the dots.
While the mainstream media focuses on the political aspects of this turmoil, they are overlooking the impact of rising inflation, driven mainly by record food prices. For example, former Bush advisor Dan Senor notes that Egypt is the world’s largest wheat importer. Yet because of skyrocketing prices, Egyptian inflation is now over 10 percent, while some experts estimate that Egyptian food inflation has risen as much as 20 percent.
So I have to ask this tough question: Is Ben Bernanke’s ultra-easy QE2 money pump-priming partially to blame?
Commodities are priced in dollars, and the Federal Reserve has been overproducing dollars for more than two years. Consequently, emerging markets throughout the world — and the food sector in particular — are suffering from rising inflation.
The CRB food index is up an incredible 36 percent over the past year, including 8 percent year-to-date. Raw materials are up 23 percent in the past year. Inflation breakouts have occurred in China, among various Asian Tigers, and in India, Brazil, and other Latin American countries. Even Britain and Germany are registering higher inflation readings.
In dollar terms, the price of wheat has soared 114 percent over the past year. Corn has surged 88 percent. These are incredible numbers.