Egyptian Food Riots and the Golden rule

One of the more overlooked aspects of the Egyptian revolution is the price of food.  Are the people of Egypt tired of corruption at the hands of a dictatorial president Mubarak?  Sure…But in every article reporting the action in Egypt one fact stands out to me above the rest - food.

What causes the price of food to go up, anyway?  Some mainstream economists and talking heads like to blame the weather, or poor yields due to natural disaster which no doubt play a factor.  However, cyclical environmental events have always and for all of human history played a role in the price of food.  Droughts, famines, floods, seasonal rains, monsoons, snow, frost; these things are nothing new.  Shortages are nothing new – but this is a different beast altogether.

When a country has a monopoly over the issuance of their currency and they print (inflate) in excess of production, the price of everything that is produced goes up nominally.  More units chasing the same or less commodities = higher prices.  This means that those on fixed incomes, low incomes, or with limited savings now have to allocate more of their income proportionally to the bare necessities (commodities) that they need to survive.  Typically, the detriment of a country’s inflationary activity is relegated to that country – since that country can only spend that money within the borders of their influence.  But what happens when your currency is considered the world reserve currency, and is the only currency accepted globally and is used to settle debts internationally – such as the United States Dollar?

Inflation can be exported.

Egypt is starving because the inflationary activity we have engaged in over the last decade has caused food prices to rise globally.  The United States is the beneficiary of their global monopoly on counterfeit because foreign countries have to deal with dollars and therefore our dollars get sent overseas and consequently their goods get sent back.  We don’t export cars, dishwashers, electronics, knives, clothes, or furniture anymore; we export PAPER MONEY.  When this inflation is exported; everyone loses purchasing power and thus can no longer afford food.  When this chicken comes home to roost, we will find ourselves in the same situation.  This will happen when foreigners come to understand the worthlessness of our paper money and no longer accept it as a store of value.  When this happens you will see stories like this from your friends and relatives or you may even see it in your own back yard.

What is happening in Egypt right now is a microcosm of what is going to make its way back to the United States.  Are we not sick of corruption in government?  Are we not tired of the same old political families having influence in our government?  Are we not upset that Wikileaks has confirmed what we have felt for years – that our representatives no longer have our best interest at heart?  Of course we are, these things are constant – just like the Egyptian people – but the principal difference is that we are not starving.  Nothing will get you out in the streets like the need to eat and feed your family.

When paper money returns to its intrinsic value (nothing), you will have to buy food somehow.  Some people have nothing to purchase food with so they resort to looting.  Others have enough hard assets that they can liquidate in exchange for food.  Some grow it, and others resort to the bare-bones of economic exchange; barter.  Cigarettes, ammunition, clothing, firewood, metal – anything that has utility can be traded.  In situations like this it is important to understand what asset has most utility as a medium of exchange.  Hence, The Golden Rule.

Global Revolution and the internet

If you think about how the internet has eked its way into our everyday lives and exercise even a brief moment of imagination to compare it to the movie The Matrix, you begin to wonder how easily a Government could “unplug” you from reality.  Does Facebook, Twitter, Reddit, Digg, Myspace, iPhone, Google, FlickR, Friendster, Blackberry, or any of the other myriad of modern ways we connect with society directly control our mind?  In the dystopia of The Matrix it seems hyperbolic that such an environment could exist outside of hollywood – but if you really think about how much we rely on internet technology to not only connect with the world but also to run our economy and circulate money, you begin to realize what a perfect ecosystem the internet is to force government control and propaganda on the people.

Take my cellphone for example; I have a Motorola Droid Pro which runs the Android operating system.  I have a Facebook, WordPress, Gmail, Google Voice, Google Talk, Tumblr, Amazon, Ebay, Sharebuilder, Wachovia, Chase, and Twitter account that all syncs to my phone.  I have a phone number which is linked to my credit card and bank account.  My social security number is also linked to several of these.  Additionally, the exact location of my phone can be tracked within inches of its actual location through the GPS technology it holds.  Every e-mail, Gchat conversation, facebook message, voicemail, text message, phone call, and website can be tracked.  My political ramblings, the stuff I like to buy, the places I go, the people I talk to; everything can be tracked.  Can you imagine a more valuable tool for an oppressive regime to manipulate the way I connect with the world?  Not just manipulate, but intercept – or even cut off.

Is this really so outlandish?  Not if you believe the reports coming out of Egypt.  Due to protests and riots against the establishment, the Egyptian government has strong-armed private internet service providers to turn off SMS texting, and any internet connections to stifle protests and organization efforts to overthrow the dictatorship there.  Read about it here.

Some might ignorantly think this could never happen in the “land of the free.”  Think again.

Why would a government with the people’s best interest at heart need an emergency authority to control private internet companies?  To protect us?  Or is it to protect themselves from us?

The dichotomy is striking; The internet could be freedom’s saving grace or its ultimate downfall.  We are seeing all across the world in oppressed third world countries the use of social media to spread truth, organize protests, demonstrations or literal coup d’états.  From the center for research on globalization’s article on a possible global revolution beginning they find:

The nearly universal access to radio, television and increasingly the Internet is creating a community of shared perceptions and envy that can be galvanized and channeled by demagogic political or religious passions. These energies transcend sovereign borders and pose a challenge both to existing states as well as to the existing global hierarchy, on top of which America still perches

…But at the same time we see Government’s recognition of this fact and its attempts to stop it.  Even well meaning legislation that feigns public benefit remain suspect.  Efforts to make the net “neutural” are just more government intrusions into matters that need not be fiddled with as it is just another way for the government to create a slippery slope of regulation. 

What would gold have to do with any of this?  If the internet was shut off today, would you have the cash to purchase groceries?  Would you be able to wire your money overseas, or trade securities?  Could you pay your bills?  What about your job?  Gold is the only currency that can exist outside the international banking system.  It is not a debt instrument and does not have an electronic account number.  It can be accessed without the use of a card, a terminal, the internet, a phone, an ATM, mainframe, pin number, login information, social security number, or finger print!  Not only that, but it is accepted as valuable GLOBALLY.
I think it is important to recognize the power that the internet plays and how it intertwines with our money, our personal lives, our entrepreneurial ambitions and our political leanings.  Understand that so much of our current wealth is not just generated from the internet and its current state of openness, but it is also controlled and shifted by that same force.  Be wary of any attempts – no matter how attractive they may seem – by the government to seize power in this domain.