As the Federal Reserve continues to weaken our dollar with massive bond-buying programs that are intended to stimulate the economy, we should realize how bad inflation is to countries that don’t have developed economies.
Sure, inflation is still a problem, but at least in the US there aren’t food riots everyday (not yet at least). However, travel to the Middle East, and it is these food riots, due to the increased cost of food as a result of inflation and bad weather patterns, that are toppling governments. In fact, there is a claim that the Tunisian dictator Zine el Abidine Ben Ali, the first of the Middle East dictators to be overthrown in the Arab Spring, was “toppled by a vegetable cart”, citing the rising food costs.
Food price inflation, though, is not limited to the Middle East. In the last year alone, the food commodity index has risen 27% just last year, with some basic food items like corn nearly doubling in price. As a result, the dollar has declined in value due to the rising prices driving other goods up as well.
However, wages have not kept up with the inflating currency, leading to more people seeking government assistance, which in turn leads to more government spending and a larger government. This can be somewhat prevented if the Fed would keep the dollar from inflating unnaturally. The Fed’s “quantitative easing” schemes caused unecessary inflation, which drove food prices higher than they should be. They were already high due to less than ideal weather patterns in the agricultural areas of the world, but further inflation leads to even more financial headaches than there needs to be.Published in