Krugman defends Fed’s role in EM inflation

In Mr. Krugman’s recent post, Commodities: This Time It’s Different, he admits Fed actions may be playing some role in spiking commodity prices.

According to Krugman, though, it’s more important to focus on “fixing” unemployment. Even if his proposals could stimulate employment efficiently, it’s a hard argument to make. From the start:

I’ve been getting a fair bit of correspondence insisting that political unrest, in the Arab world and elsewhere, is being caused by … Ben Bernanke. You see, quantitative easing is responsible for rising food prices, which leads to riots, which — OK, there are a lot of broken links in that chain.

China is primarily to blame, per Nobel Laureate Krugman. It’s their strong(er) economy, surpluses, currency manipulation (lol glass houses), and lack of consumer overspending and debt. Those are the real problems. And hoarders! Chinese farmers are hoarding cotton, apparently (though he admits that there’s no real proof of significant hoarding.)

First and foremost, China: it’s clear from news coverage that Chinese demand is driving the markets. As I and others have been pointing out, we’ve got a bifurcated world right now, with advanced economies still depressed but emerging economies in an inflationary boom; commodity prices are reflecting the boom part of the picture.

But Chinese demand isn’t just a matter of fundamentals: all the evidence suggests that there’s a lot of physical hoarding going on. Chinese farmers are apparently hoarding lots of cotton, while China is holding record stockpiles of iron ore.

Now, what about food prices?

Not much evidence of hoarding, as far as I can tell. So this is straightforward supply and demand. Demand may be up to some extent because of that emerging-market boom.Oh, and what about Ben Bernanke? Well, to the extent that emerging markets are insisting on a fixed exchange rate against the dollar in the face of obvious overvaluation, that contributes to the boom and hence to demand.

But I don’t think it’s reasonable to demand that the Fed stop fighting US unemployment in order to keep Chinese currency manipulation from leading to cotton hoarding by Chinese farmers [talk about being confused, and on the wrong side of history… -Adam].

Sure, increased demand is part of the equation. China should let the Yuan rise over time, and I suspect they will. The big point is that Krugman and others continue to discount all negative side-effects of loose money, deficit spending, bailouts, etc. These things have consequences, tanstaafl.

Fed liquidity is not helping the situation.

It’s a Revolution, Not a Riot

The revolution underway in Egypt is inspiring. Any person who values freedom and liberty should be overfilled with joy at the thought of a free Egypt. Especially those warmongers who lectured us just a few years ago on the necessity of sacrifice for freedom (Iraq).

But Obama is following a very dangerous course. If the U.S. continues to support this dictator, this torturer, we lose the chance to start a fresh and positive relationship with the Egyptian people. Wake the f@ck up, D.C.

The Egyptian people are educated and secular. We must not continue to insult them by calling into doubt their ability to run their country.

Protests have been peaceful so far. That will change, should we continue to supply Mubarak with weapons to suppress the revolution. Tell Mubarak and his people they’re done. Might not be a bad idea to take exile, the dictator’s plea-bargain, while it’s still an option.

I am unusually active on twitter since this began. It really is a fantastic medium for these types of events, though I don’t have much use for it on a day-day.

By the way, El Baradei is headed to Tahir Square to address protesters. The procession is growing in size. From a local journalist:

El Baradei is going Tahrir Square with a group of people who r increasing as the proceed. Amazing scenes being told to me. #jan30 #Egypt

http://twitter.com/#!/Tahirimran/status/31746994305241089

Intense video of Protest/Revolution in Egypt

Egyptian Revolution Jan 25th 2011 – Take what’s Yours! from JoeChaban on Vimeo.

Jim Rogers on trade wars, politicians, and blaming China

Nice interview via RT. Rogers warns against trade wars, talks politics and central bankers, says he would encourage faster yuan revaluation.

His shrewd understanding of politics is part of what makes Rogers so interesting.

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