Could the U.S. Federal Reserve have had an indirect hand in the unrest that is plaguing Egypt and other nations in North Africa and the Middle East?
CNBC’s Rick Santelli says yes, in terms of America’s domestic monetary policy, since much of the turmoil taking place is believed to have been started due to rising food prices.
As “Squawk Box” co-host Joe Kernen pointed out, that’s possibly an indirect result of the Fed’s latest round of quantitative easing, or QE2, the practice of the central bank creating money, which is then used to buy government debt, thus devaluing the U.S. dollar and causing prices to increase.
“I just briefly last week said we wonder about QE2 and the effect on commodities around the world and we had [Steven] Rattner on saying there’s no way to tie it to — and I wasn’t tying it to price inflation necessarily in the developing market but you could almost draw the line, maybe draw some dots of that,” Kernen said on his Tuesday program. “I finally got him to concede a tenth of 1 percent maybe had something to do with what’s happening. What do you think, Rick?”
Santelli said there absolutely was a correlation between monetary policy in industrialized nations and the unrest in the developing world. He explained that this rise in commodity prices has rocked Egypt, which is the world’s biggest importer of wheat.
“Well, I can’t comment on Mr. Rattner’s comments but I would say this – I don’t think QE2 is where you want to draw the — or connect the dots,” Santelli said. “I think monetary policy in many industrialized nations like the U.S., like Japan, have indeed – especially the U.S. because of the reserve currency status, have without a doubt in my opinion contributed to some of the food issues, whether it’s this go around, several years ago. Egypt is one of the biggest importers of wheat and I think it makes sense. So yeah, I think you can absolutely connect the dots.”