Egypt and the growing problem of global inflation

When prices rise faster than economic growth, the outcome is damaging for any population, but especially for a young one like Egypt's. Unfortunately, there are worrying signs that stagflation is spreading around the world.

By Keith R. McCullough, Hedgeye

Suffocating your citizenry with stagflation is a problem, particularly when that citizenry is young, hungry, and unemployed. By definition this is the Egypt we're seeing today. While this may be a very old country (established in 3100 BC), this 21st century social revolution is being driven by the very young. Almost two-thirds of Egyptians are under the age of 30, and of the 79 million people who live in Egypt, approximately 40% of them live on less than $2 a day.

The Egyptian government has been telling its people that inflation is currently running around +12%. The people of Egypt obviously don't believe that -- and they shouldn't. However, they do believe that the country is running double-digit unemployment. They don't have jobs.

Captains of Keynesian economics don't use the word 'stagflation' very much for a reason. The last time these bubble-makers plugged the world with stagflation was in the mid-to-late 1970s. That's when US Federal Reserve Chairman Arthur Burns was attempting to monetize America's debt as President Jimmy Carter bet that it would not create any globally interconnected risk. Sound familiar?

We call it stagflation when real-world inflation readings are growing faster than economic growth. Even if we were lemmings enough to believe the Egyptian government on a +12% inflation number, that would be plenty enough to justify calling this situation for what it is. Egyptian GDP is only running +5% at this stage of what the thinkers in Davos, Switzerland last week would have you believe is an "emerging market boom." It's sad.

It's time to recognize what America's debauchery of the US Dollar is doing to global inflation. If US monetary policy makers are still in the camp of the willfully blind and want to believe there's no real-world inflation out there because Ben Bernanke's conflicted and compromised calculation of CPI says so, Godspeed having the world agree with them on that.

http://finance.fortune.cnn.com/2011/02/01/egypt-and-the-growing-problem-of-global-inflation/

These are neo-con rantings.

This "hot money" is flowing into the commodity markets, fueling commodity price inflation. This is not a political issue. It is a monetary policy issue and it cannot be denied. Look at the inflation problems in Egypt, Saudi Arabia, China, and on and on...