Mr. Bernanke said that the rapid growth of developing economies was behind the increase in food prices, rather than the Fed’s decision to embark on a second, $600bn (£371bn) round of printing money. “Clearly what’s happening is not a dollar effect, it’s a growth effect,” Mr. Bernanke said in a rare question and answer session with journalists at the National Press Club in Washington on Thursday
The United Nations Food and Agriculture Organization (UN FAO) has warned that high prices, already above levels in 2008 which sparked riots, were likely to rise further.
The FAO measures food prices from an index made up of a basket of key commodities such as wheat, milk, oil and sugar, and is widely watched by economists and politicians around the world as the first indicator of whether prices will end up higher on shop shelves.
The index hit averaged 230.7 points in January, up from 223.1 points in December and 206 in November. The index highlights how food prices, which throughout most of the last two decades have been stable, have taken off in alarming fashion in the past three years. In 2000, the index stood at 90 and did not break through 100 until 2004.
Well, how do you like that? It’s growth that it driving food prices to records. Not money printing.
But wait…hold on…is the emerging world growing faster now than it was two or three years ago? Nope. Hmmm… Is the growth a big surprise? Did something happen to make investors and traders suddenly realize that…well…hey…the world is growing!