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Tuesday, Oct. 21, 2014
The World on EdgePosted Sunday, January 30, 2011, at 7:16 AM
In the past couple of months, there have been riots in Chile, Albania, Greece, Italy, France, Spain, Portugal, England, Ivory Coast, Morocco, Libya, Algeria, Tunisia, Egypt, Jordan, and Yemen. What do all of these riots have in common? They all have governments with socialist economic systems and rising food and energy prices.
Who is at fault? It is an unfortunate byproduct of American and European economic policies. It appears to be similar to the riots and revolutions of the late 1970s and early 1980s. Here is why.
As those who follow investment markets, particularly commodities, know well that the U.S. and the European Union (E.U.) have been inflating their currencies like there is no tomorrow. Due to terrible financial mismanagement, both by the citizens individually as well as their governments, the financial systems of the western world teetered on the brink of collapse three years ago and continue to hover at the edge today. The answer by adopted by America and the E.U. was to print trillions more in currency.
As the dollar and the euro are inflated, the prices of commodities rise. This is felt worldwide in energy prices. As electricity, natural gas, and petroleum prices rise, the price of all goods rise.
Food production is highly energy intensive. However, food has additional pressures. Grain is an international commodity traded like oil on the international market denominated in dollars. As the dollar inflates, the price of food on the international exchanges rise further. Add to that, like in the late 70s, there is a huge push to put grain and beans in your fuel tank. You can't eat petroleum, but livestock and people eat corn and beans. Moreover, as the price of corn and beans goes up to meet fuel demand, farmers plant more of them and less wheat making the price of bread rise. In poor places, bread is literally the staff of life.
In places where the people have barely enough income to provide for their basic needs, these price rises literally cut into the individual food budget. Countries with socialist economic systems are less adaptable than free market systems amplifying the problems.
If you want to make a population ready to fight, make them hungry.
At the moment, the most covered riots are in Egypt. Egypt is the most powerful Arab country (though not the wealthiest) in the Middle East. Moreover, Egypt controls the Suez Canal. The Suez Canal is how oil gets from the Middle East to Europe and West Africa. If the canal were closed, shipping would have to go around the Cape of Good Hope at the Southern tip of Africa and transit some of the most stormy and dangerous waters on earth. If Middle Eastern oil is choked, supply will tighten severely and our suppliers, Canada, Mexico, Venezuela, etc. will hike prices dramatically.
As Egypt's "President" Mubarak is a dictator, news reporters are hopeful that toppling his government will result in a democratic government. However, for democracy to succeed, there must be an educated voting public. The Iraqi people are among the most educated in the Middle East. Unfortunately, the Egyptian people rank toward the bottom. This increases the likelihood of a theocratic government taking over, even if there is a democratic government that emerges first. (In 1917 Russia, the Czar was replaced with a brief democracy that was in turn replaced by the communists.)
The upheaval in the 70s and 80s resulted in governments friendly to us falling and being replaced by hostile ones. Will that happen again? Time will tell. Egypt is friendly with us and at peace with Israel. It wouldn't be the first time that history took a repeat.
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