What's the price of a loaf of bread in Cairo?

I was wondering if anyone knew what was happening to the price of goods in Cairo.

The Egyptian Pound is off just a few % from November, and, if the country is experiencing inflation it cannot be because 1) the central bank is flooding the financial system with too many reserves or 2) the deficit is too big.

Either way, I'm probably looking at this incorrectly as it's pegged to the US$ anyway (as are many Arab currencies) so they aren't running a true fiat regime.

Start eating out more?

Economic models take it as a given that, in the face of expected inflation, savers start to spend more.

In practice, this isn't at all clear. I keep posting a simple example, and nobody seems to have a good story for how the actions taken by the individual in the scenario will lead to broad CPI increase.

Here's the example again -- please post your mechanisms in the comments:

You're a responsible Brazilian living in your decent Sao Paolo apartment (paid off!). You have a tidy pile of cruzeiros in your local bank, saved from the income your reasonable private sector job generates. But it's 1979 and you're worried about inflation looming on the horizon. What do you do?

I'm interested in two things, but all ideas are welcome. First, the above situation is not hypothetical, so people actually made decisions in these circumstances. If anyone knows what folks did in real life, I'd love to hear them. Second, this example is meant to focus on exactly how increasing inflation expectations actually leads to rising CPI. No hand-waving please, I need transactions!

QE2 is about rates, not prices

A big thank you to Fernando for stepping up and playing the Monetarist. If there's a better source for why Monetarists have no understanding of money, and therefore the economy, I cannot think of it. And if any of your are wondering, Fernando is not a plant! He's the real deal. I could not make him up if I tried.

In the last couple of posts I outline why QE2 is a non-event. I assert that 1) you cannot move consumption forward, and 2) inflation expectation has no channel that leads to CPI. Fernando makes two claims:

[If there was a positive inflation expectations shock]... I would buy commodities and demand a rise in my salary.

When people expect more inflation they tend to spend more today, velocity rises.

The scenario was a sober minded Brazilian rich in Cruzeiros circa 1979.

Fernando has not responded yet, but I think it's fair to assume that, in the face of inflation, the commodities he would buy would be commodity futures, not actual sheafs of wheat. So Fernando is swapping one financial asset (nominal savings) for another financial asset (commodity futures). This would increase the price of commodity futures, but as far as I know, futures are not part of CPI. Going long futures only makes sense if the anticipated inflation comes to be, and Fernando continues to come up goose egg for any actual mechanism for this inflation. If everyone anticipating inflation goes long futures, it will have no impact on actual inflation and that positioning will come to naught.

Real life actual third world countries take a different approach to expected inflation.