It is now more than two months since the self-immolation of a young Tunisian street vendor, Mohammed Bouazizi, triggered a chain reaction that has so far ousted entrenched authoritarian regimes in Tunisia and Egypt and sparked mass protests and revolts in Libya, Bahrain, Yemen, Algeria, Djibouti, etc. Dominoes, anyone? The image is irresistible.
Actually, the domino theory is a vintage Cold War concept employed to justify America's intervention in Vietnam. If Saigon fell to the communists, the rest of Southeast Asia would soon follow.
An all-purpose response to any perceived threat, the image of tumbling dominoes was revived to justify America's invasion of Iraq in 2003, only this time in reverse. While other pretexts were cited – Iraq's alleged weapons of mass destruction, ties to international terrorism and non-compliance with various UN resolutions – US President George W. Bush offered his own domino theory as part of what became known as the "Bush doctrine" as a moral justification for the war.
In a speech to the conservative American Enterprise Institute just prior invading Iraq, Mr. Bush proclaimed, "A new regime in Iraq would serve as a dramatic and inspiring example of freedom for other nations in the region." Thus, the "reverse domino" theory of democracy spreading across the Middle East. Obviously, few if any in the region shared his vision; and today's occupied, terror-riddled and barely functional Iraq can hardly be seen as a role model for any country.
So, no democratic dominoes were set in motion by Mr. Bush eight years ago. Nonetheless, that process now seems to have started in earnest, if for very different reasons.
Paraphrasing Lenin, as quoted by Keynes, the best way to destroy a nation is to debauch its currency. While the origin of this remark is disputed, I think it neatly summarizes one of the real causes of the turmoil today in the Middle East and North Africa.
Counterfeit money has often been used to destabilize enemy regimes during wars, triggering prices increases and sending inflation out of control. However, it was not a forged currency that sent the people of Tunisia out into the streets in January, with all the dramatic consequences that are still unfolding. Rather, it was America's ultra-expansive monetary policy.
The US Federal Reserve's quantitative easing has flooded the world with liquidity, which in turn has fueled prices increases of many assets, agricultural commodities among them. While drought and forest fires in Russia and floods in Australia certainly contributed to surging food prices, the main driver, in my view, is the deluge of money spilling out from US printing presses.
Countries whose currencies are pegged or closely aligned with the US dollar, like many of those in North Africa and the Middle East, took the biggest hits as food prices climbed. To be clear, I am not arguing that US monetary policy is the sole cause of the far-reaching events now unfolding in these countries, but it is certainly a major trigger.
Seeking phantom weapons of mass destruction, George W. Bush tried and failed to set the region's dominoes of democracy in motion by brute force. Today, probably inadvertently, Fed President Ben Bernanke accomplished this miracle with weapons of monetary destruction. Who could have imagined it?
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