From Dan Denning in Melbourne:

--If there’s one lesson to have learned over the weekend it is this: inflation can lead to revolution. That may be putting it simply. But the task of today’s Daily Reckoning is to show that the love of bad money is the root of all politically-destabilising price increases in the developing world.

--That doesn’t exactly roll of the tongue. But it may explain why Tunisian President Zine al-Abidine Ben Ali is watching the events on the streets of Tunis from a hotel in Saudi Arabia. The Tunisian President fled the country after his efforts to placate protestors failed.

--There are certainly other political factors at play. But rising food prices are a factor. Businessweek reports, “On Thursday night he [Ben Ali] went on television to promise not to run for re-election in 2014 and slashed prices on key foods such as sugar, bread and milk. A day later he declared the state of emergency, dissolving the government and promising new legislative elections within six months.”

--None of that worked. And now he’s gone. But rising food prices are not. And for that Tunisians can thank, at least in part, Ben Bernanke’s policy of Quantitative Easing. The Bernanke Fed has in effect exported commodity inflation in its relentless drive to weaken the dollar (and force China to revalue its currency).

--As we mentioned to Australian Wealth Gameplan readers last week, to the extent that there’s a global food crisis, it’s really a global crisis in paper money driving up the price of real things. That doesn’t mean it isn’t a real crisis. It’s just important to understand that the origin of these political and social events is fundamentally unsound money.

--Of course there IS a non-monetary factor too. Flooding, drought, and lower-than-expected crop yields have put the People’s Bank of China announced it would raise reserve ration requirements at banks by 50 basis points, effective January 20th. China is trying to prevent excess liquidity from driving prices out of control (house prices, food prices, stock prices).

--In fact, China’s President Hu Jintao understands perfectly that too many dollars are bad for everyone. China included. In written answers to questions posed by the target="_blank">the IMF is scheduled to re-weight the currencies that make up its special drawing rights (SDRs). In with the Yuan, down with the dollar!

--By our reckoning, 2015 is about four years from now. And that’s a long time to tolerate/endure higher oil, energy, and food prices. These well-laid plans may not be good enough. In the meantime, investors can speculate on higher commodity prices. But if high prices lead to increased political instability, even that will be a risky bet.