Did the Fed do in Bin Laden?

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In an article in the Telegraph, “How the Fed triggered the Arab Spring uprisings in two easy graphs,” Andrew Lilco argues that ” the Fed seems very clearly to have achieved more in the Arab world in six months than the Pentagon achieved in decades.” (hat tip Richard Smith):

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The first plank of his argument is a point most readers and many foreign central banks believe is happening but the Fed insists is a collective fantasy, namely, that the Fed’s continued loose money policies and its QE programs have fueled commodities price hikes (note even if you don’t believe strongly in an operational link, you can argue for investor expectations: the Fed looks determined to reflate, and if you believe as many do that the Fed will overshoot, finding inflation hedges is sensible. Why arguing that is depicted as economic Luddism is beyond me).

The second point comes from Paul Mason’s blog, that rising food stress increases the odds of revolution:

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The food stress/revolution point is not new; Clusterstock had a good recap in February of a stab by Nomura of analyzing the vulnerability of various countries to revolution based on youth population and GDP per capita. Note I am pretty certain Clusterstock was asked to revise this post; the version I saw earlier had more countries (IIRC 25) and had two other key metrics: what their food imports/exports were as a percentage of GDP (importers are more vulnerable to commodity price moves) and food as a percent of average household budget (countries with typical citizens living at or not much above survival level are clearly at risk).

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  1. attempter

    Those are compelling correlations, though you neglected to describe what it might have to do with bin Laden.

    The possible connection is that the wave of uprisings (proximately triggered by food stagflation) demonstrates a resurgence of interest in the Arab world in social revolution. Since this is a competitor of Islamic fundamentalism, its new rise is a good measure of jihad’s fall. (For years Arab interest in jihad has been declining, though the US government and MSM do all they can to suppress that fact.)

    So if the neoliberal elite think Arab democracy is becoming the real threat while jihad is waning as a threat, they may have decided the bin Laden bogeyman was reaching its Sell By date, so they might as well cash in on killing him now. They may have thought if we want to get a big political boost out of that, it’s now or never.

        1. tyaresun

          Al Qaeda plans to move into Yemen did not sit well with their Saudi financiars, particularly under the present circumstances.

  2. Foppe

    that the Fed’s continued loose money policies and its QE programs have fueled commodities price hikes

    Two questions: Isn’t the more important point to note (regarding institutional/regulatory failure) that all the major banks have, since 1991 (thanks to GS) obtained waivers allowing them to speculate in commodity markets (See the Foreign Policy article linked a few days ago, or the relevant chapter in Taibbi’s Griftopia for a more exhaustive account), so that (2) they could market the ComEx index investment as an island of stability (because long only) for investors fleeing the stock market bubble? Or do you think that this is a less important driver of the commodity price bubble than the (I imagine prop) trading being done with government money is? (Or do you mean that the loose money policies are leading investors others than the big banks to borrow in order to use that money for commodity speculation?)

    With regard to the link between food prices and popular revolts: I think I read somewhere that an outburst of a volcano on Island back in the early 1780s led to a sharp decrease in crop yields, and that the resulting hunger fed the flames of the French revolution. (See, e.g., this abstract at the Nature website (sub probably required, but not sure): “The 1783–84 eruption of Laki, another Icelandic volcano, might have contributed to the French Revolution a few years later. Laki’s toxic cloud polluted the atmosphere, lowered temperatures and caused famines across the Northern Hemisphere.”.)

  3. Maju

    While it would seem to have a correlation, the real problem denounced once and again by ad-hoc revolutionaries in all the region is lack of jobs, specially lack of jobs for young graduates. The guy who set himself on fire in Tunisia was a young graduate who, like so many others, had no job whatsoever and had to sell vegetables at a street stand in order not to become a criminal or suicide (until he was pushed a step too far). Unemployment is like 40% in all the region (double than in Spain!, four times OECD average!), much more for the young, and that’s why all those people are either emigrating to Europe or making revolutions.

    There’s no way to reduce unemployment under market conditions nowadays, states would need to put people to dig holes and fill them for a salary – but that is pointless. So we need a different kind of economy: one that makes sure that everyone gets the basics and splits the work. These revolutions are therefore just a beginning because merely changing rulers will not solve the real problem.

  4. Cedric Regula

    I have no doubt that in Ben’s next press conference he will remind us that the intent of QE2 was to capture bin Laden.

    Ben’s Press conference II, additional points:

    We are delighted that QE II was a rousing success. But in spite of this success we see additional threats and we intend go after al-Zawahiri. Desert QE III is scheduled to begin sometime in August 2011.

    “The size of QE III is still under discussion. Inflation expectations are well anchored, so we are thinking big. The Federal Reserve has considerable experience fighting threats, going all the way back to 2001-2002 when Chairman Greenspan was fighting Sadam Hussein. The Taylor Rule indicates a trillion would be about right, but the final number will be decided on after discussions with the board of the New York Federal Reserve Bank. The Federal Reserve will continue to be vigilant and monitor additional threats.”

    1. gruntled

      Your forgot to add that “the Fed believes in a strong and stable dollar.”

  5. Dirk77

    In graph 1, the rise in Fed purchases _lags_ the rise in commodity prices. I would think this invalidates the argument?

  6. Paul Tioxon

    Social System analysis using a more comprehensive view than economics is on the case.


    This article confirms the contributing and critical component of wheat imports for bread baking in Egypt in creating social disruptions. Egypt is a major importer of wheat, hence at the mercy of international commodity prices in order to import. Hunger gets people’s attention much quicker than the breach of law when the bundled notes of mortgages are transferred outside of the statute of limitations governing trusts in the state of NY in relation to MERS.

    It is good to see real world depictions with bread, the staff of life featured prominently on a chart at NC. Of course, food prices are up in the USA as are food stamps. So why don’t we revolt? Not enough angry Americans? Well, in addition to commodity prices creating hunger in the everyday life of people in the Arab world, there is the brutal state internal security forces that beat, rape, and murder their own citizens regularly. And this has been going on for decades. We have food stamps, unemployment insurance etc instead of the jack boots coming down on our throats.

    So yea, Bernanke is a genius, even among the really smart people at MIT, he was known as the smart one. But his analysis is not global, taking into account foreign relations, except as far a trade goes. And of course, the big unspoken issue here is class. We are talking about bread, not silver prices or gold contracts. No one is going to get rich by setting up a consulting firm that advises the wretched of the earth just how miserable they are in aggregate. The poor, the working class, and now the middle class, have always suffered the unintended consequences of the big men in history and their decisions. After all, they weren’t thinking about the price of bread or gasoline, they were thinking about the falling rate of profits, interest rates and a currency war with the Chinese. The collateral damage is unfortunate but in service of a greater cause.

    And speaking of crisis in the price of bread, here is an article from The Phila Inquirer biz section about a key component of the hoagie and cheese steak, the Italian Roll. It seems an entire unionized staff of truck drivers are to be fired. Of course, they can buy back their jobs for $100k as the proud owner operators of their very own business, selling the rolls they buy from their ex employer to the stops on their bread routes. How is that for a new union busting technique, force them to convert to capitalism under pain of death. Now that could cause a social disruption if rolled out in a national program by the Business Roundtable.


  7. Pat

    “Those are compelling correlations, though you neglected to describe what it might have to do with bin Laden.”

    I can answer that. QE2 has caused the price of gas to spiral and increased inflation, by causing the dollar to go down. This has led to a drop in Obama’s popularity / approval rating. And because the dollar’s value is being diluted, there is pressure on the Administration to cut its budget, in order to satisfy bondholders (such as China). One of the best ways to save money is to get out of the completely useless war in Afghanistan.

    OBL’s “death” increases Obama’s popularity (for now, at least) and allows him to get out of Afghanistan/Pakistan (since the main justification was to blot out “terrorism”). Supposedly global tension will be reduced since there be less risk of terrorists attacks and wars, which in turn will cause the price of oil to go down (even though we all know that speculators like Goldman Sachs have caused oil to go up). OBL’s death also allows the US to withdraw from AFPAK, which will save money.
    So this is why OBL was “captured and killed” right now.
    In fact, OBL most likely died in 2001-2002, and he has been kept “on ice” (either figuratively or literally) until now.
    According to various ex-officials who have appeared on Alex Jones, OBL had Marfans disease, which caused him kidney problems and other serious health problems. In 2001 he had to travel with two dialysis machines. There is great deal of direct and circumstantial evidence to suggest that he actually died in late 2001 or 2002 (see Alex Jones’ site and Asia Times archives.)
    OBL’s death story is highly suspicious. First, there are the inconsistencies. OBL hides behind a woman, then he doesn’t. He shoots back, then he is unarmed. He is shot once in the eye, then he is shot twice above the eye. There is a firefight, then there isn’t. Neighbors don’t hear much fighting. The White House supposedly monitors the operation live, then we learn that the cameras were out for 25 minutes in the middle of the fight. Plus, the White House insiders’ photo was staged. Second, the story is illogical. Why shoot-to-kill someone who is full of information? Where and who are the other residents of the compound? Where’s the body? Why not release photos? Where’s the DNA evidence? How did they identify this house in a country of 180 million people? Why give an honorable burial to a hated murderer? Why fly in with noisy helicopters and land right on top of the compound? Why burn up the compound? Why are there no injured Seals? And on and on.

    It’s obvious that the whole story has been made up.
    But people shouldn’t take out their anger on Obama. Obama is a bad president and an enormous disappointment, to be sure. But OBL is an invention of the neocons and the Republicans, and Obama is simply closing the door on this disturbing and embarrassing episode.

    1. Maju

      Totally agreed, Pat. However something does have to do with Bin Laden in the ample (and confusing) sense of the name because his youngest son Hamza, 18 or 19, was killed: the photo has been published (no. 7 at The Guardian’s gallery), as “unidentified” but he looks so much like his father while still being different that there is no doubt for me in this case.

      It is possible that the USA has killed Osama’s son (maybe because he was becoming a problem as he grew adult, maybe for some other reason) and this murder of a young man (without any criminal record AFAIK) is being sold to us as the execution of OBL.

  8. Doug Terpstra

    The charted correlations surely indicate causality, despite Ben’s denials. And certainly time will tell.

    If Osama’s key goals were to become a martyr, to expose the illusions of rigged-market cannibalism, and to bankrupt America, he may yet achieve them. Then we might invert the question:

    “Did Bin Laden do in the Fed?”

  9. Jim Haygood

    Where are the beloved MMTers today? They claim that the sovereign spends money into existence. With the federal deficit near 10% of GDP, dollars are being spent into existence like never before, according to this view of the world. And food prices are rocketing.

    A ‘monetarily autonomous’ government CANNOT spend its way to prosperity, or even sustained recovery, because the resulting inflation will either derange the economy (as in high energy prices inducing recession) or collapse the currency.

    TANSTAAFL, comrades.

    1. F. Beard

      A ‘monetarily autonomous’ government CANNOT spend its way to prosperity, or even sustained recovery, because the resulting inflation will either derange the economy (as in high energy prices inducing recession) or collapse the currency. Jim Haygood

      You are wrong:

      1) Set reserve requirement to 100% to put banks out of the counterfeiting business. Forbid the Fed from any new money creation.

      2) Send every American adult a large and equal bailout check of new, debt and interest free United States Notes.

      And what would we have? ans: A debt-free population with little price inflation risk beyond perhaps a one-time burst.

    2. Deus-DJ

      If I were you I’d try learning the difference between fiscal and monetary policy, bud.

  10. Kyoden


    Regarding volcanic eruptions, there was also a major eruption of Mt. Asama in Japan in the spring of 1783 that helped ruin crops in the northern hemisphere.

  11. Bart von Zastrow

    ” Note I am pretty certain Clusterstock was asked to revise this post…”
    By whom and for what reason?

  12. PreferAnonymousStill(Wouldn'tYou?)

    One Ponzi scheme larger than another.

    (everyone’s savings drafted in favor of the living lie of
    excessive wealth concentration and the final mortgage
    Ponzi scheme aimed at extracting borrowing power from a more-than-depleted middle class–that played on both sides of the fence, kited worldwide, including taking Japan’s
    export advantage from a devalued yen (the carry trade–the
    exaggerated Icelandic banking sector))

    Instead of recapitalizing in batches.

    It’s transportation (as in not mass transit and gorgeous
    cities looking like the Embarcadero, saved by Joseph Alioto from a freeway extension) and control of water (informational connection to Gov. Brewer?) and sell-outs by very rich health insurance executives caring less about the apx. 45,000 perrenially dying from lack of access, their costs all along passed on to you.

    0 interest reserves for the TBTF banks means serious after-inflation losses for everyone else. Hard enough for Americans. Quite deadly beyond its borders.

    The answer: enforce the laws. no bribery.
    rights must be respected. happiness assured, even if
    someone doesn’t like you

    No science or religious belief thereby threatened.
    All include insights to a greater understanding. The religions are appearing to include tip-offs for science that actually make it possible to believe people can travel
    between solar systems.

    And, the ideas pertaining probablities and relativity being seamlessly integrated may be what first clued in Ernst Mach, Carl Mach, Albert Einstein.

    And wondered if there was a confirming pattern.

    Take the economics for what it’s worth.

    Take the religion for what it offers to connect all your
    diverse beliefs and dreams.


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