There has been quite a media storm surrounding rising food prices lately. It’s become so apparent that even mainstream media is now discussing the concerns shared by millions of Americans and citizens of other countries regarding what seems to be out of control price inflation in essential commodities like wheat, rice, and cotton.
From the standpoint of governments, the threat is that the rising price of food may potentially lead to catastrophic economic consequences the world over. When the general population needs to spend 25% to 100% more on food at grocery stores, that means less money is spent on iPhones, HD TV’s, GM cars and other consumer goods. This global shift in capital from non-essential discretionary spending to basic survival goods could wreck havoc on an already frail economy and have dire consequences for the many corporations who depend on mindless spending to sustain shareholder profits.
Not only is there a real and present threat to the stability of the economic system, but rising food prices will put pressure on the social and political systems around the world, as we have recently witnessed in isolated incidents in places like Tunisia, Algeria and Mozambique.
As is typically the case, the leading governments of the world have waited until the threat is at its precipice before taking action. And, just as with the financial crisis, economic ministers of the G-20 nations, either voluntarily or due to ignorance, have proposed drastic global action to stem the rise in prices by directing regulatory control at the symptoms of the disease, as opposed to the disease itself:
Agriculture ministers gathered in Berlin said they were “concerned that excessive price volatility and speculation†in international markets for agricultural commodities may threaten the security of the world’s food supply.
The ministers from 48 countries called on the G-20 nations to “fight the abuse and manipulation of prices†in agricultural markets, according to a joint statement handed out at a press conference in the German capital today.
France presides over the Group of 20 this year, and the country’s agriculture minister, Bruno Le Maire, has said world agricultural markets require more regulation. German farm minister Ilse Aigner, who hosted the meeting, said today that price and position limits should be among measures considered.
“All the member countries in the G-20 have to oppose this price volatility,†Le Maire said in a press conference. “With this text we already have a good starting point.â€
Source: Bloomberg
The primary proposal from the G-20 suggests that regulatory agencies in the developing world must take actions via the financial markets, that is, the commodity exchanges on which food, metals and energy are traded. If we understand this correctly, the French et. al. suggest that we create stability through price controls and restrictions on the trade of food – essentially centralized planning for the global agricultural markets. Blame the speculators seems to be the soup du jour, once again, as it was before the crash in 2008.
While one cannot argue that speculation is partly to blame for the rise in commodity prices (and stock markets), it is only a symptom of the underlying, fundamental issue.
Mainstream media and governments would have us believe that the speculators are day traders initiating buy/sell orders on their laptops in their local coffee shops. While they certainly play a role in the volatility of prices, they are likely not responsible for the mega moves we’ve seen in commodity prices as of late.
The real problem, the disease that politicians and world leaders refuse to talk about, are the governments and central banks that they purport to control. We’re not talking about just the Federal Reserve, but the European and Asian central banks as well.
In case you haven’t noticed, the central banks around the world are printing (or digitally conjecturing) their currencies ad infinitum. This money ends up in the hands of, either governments, or banking conglomerates. While banks are continuing to lend money on a limited basis, most of the cash they have is supposedly sitting in reserves. The reality, however, is that all of the excess magic money has found its way into financial markets (via organizations like the Plunge Protection Team), resulting in price inflation that runs the gamut of financial assets, including equities, food, oil, and precious metals.
So yes, there is speculation in financial markets that is leading to yet another commodity bubble, one that threatens catastrophic consequences on a number of different levels. The solution, however, is not to target the speculators, but rather, to target the out of control monetary policies of the world’s central banks and the transfer of all that excess liquidity to the shadow banking system.
Price controls and more regulation in the “free market” are not the answer. We need to control the people who control the money, or get rid of them altogether in their current form.
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Commodities got smacked down last week before Hu came into town. The Dow is starting to get a little frothy before the speach tomorrow night. The insiders are riding the wave. Let the show begin.
I’d agree, Mac. Speculation is merely people moving in advance of where things are going to probably go anyway.
But I’m not convinced govt money creation is the total problem either, more of another symptom.
The REAL problem is that world population is about to butt head long up against finite amount of natural resources…..and when you throw in govt’s monkeying with money, or weather induced food problems, there isn’t enough reserve capacity, and cracks start to show.Â
And if you think things are interesting now, wait until we get another 2-5 billion mouths to feed. The 4 horsemen will ride.
Some industries will suffer as folks shift their spending…
First thing I did was cut cell phones. Then cut eating out. Further, stopped taking vacation..we just had our last one to Universal and Disney. No more for a few years. Lined the basement with foods from beprepared.com. Got the bugout bags ready…Watch food riots! Bought a few cases of bird shot…can you say “squirrel sandwich”. Filled the freezer with chickens. Each year I do more with the garden to get it into a sustainable situation. Worst case …. beans and rice with wild game tossed in for protein. Solution…stop feeding the third world. If they can’t grow it…then that part of the planet should not be having kids. Also, get into global backyard farming. Require it by law. Everybody should have a few feet they cultivate just to remind folks how hard it is to grow food. Lastly, do away with Walmart…they are killing all aspect of American life. ps. “Hopium” Obama’s big promises…just more democratic socialism.Â
TnAndy, I think WW3 will be here long before another 2 billion people do… how else will we make room?
We still have enough nabisco for “us”, #1 just doesn’t WANT to. Natural smells.
just as mother nature uses the survival of the fittest,so will the earth and our species moves forward.hundreds of millions will die for the betterment of our specie.it is only right and the cycle moves forward!
it reminds me of the opening of road warrior……the leaders of the world talked and talked and talked. that what the leaders of the world do…is talk. no solutions just more meetings
We have another item to watch in this dope show. Already the third-world has a transportation issue with the movement of food goods. As commodities rise, so will the price of fuel. Insurance has gone up. Profitability is becoming difficult for the developed nation’s trucking industry. Lose profitability and the trucks don’t move, ergo food doesn’t move. The first to go will be small markets where the delivery volume doesn’t provide enough to cover the costs of distribution. Due to low population density, rural America will probably experience distribution interruptions.
Ask a trucker.
I think its funny how we talk about them doing the wrong thing.
First of all, for this to be the wrong thing, the goal must be to empower, feed and make prosperous the citizens of the world. They do try desperately to make it APPEAR that is what the G20 wants to do, however, just the opposite happens.
One needs to understand that most of the big money people, the power people and the diplomats and the politicians (at their core) believe in the zero sum game: if you are prosperous, this has happened at the expense of someone else. So, you see, the undertow here is the make the rich and powerful more so at the expense of the not so.
But! If that was outwardly apparent, the masses would protest, burning and trashing the world around them. That would be bad for profits. So, while the G20 meets to try to make things “better”, they are only trying to contain the realization of the sheople massses that they are being screwed, deep and hard.
This is the world in which we live. This is what happens when corruption and stupidity creep into the halls of power and the people are not running the show anymore.
So, please, go back to your TVs and your mindless games and entertainments. The people of power and riches, literally, bank on you doing just that.
I read an article yesterday from NIA about the parent company owning Sav-a-Lot and others stores is probably going to raise food prices on a lot of stuff by up to 14% during the course of 2011. McDonald’s is also saying they are probably going to raise prices.
BTW – those wanting to stock the old light bulbs – go to Rite Aid this week. You can get 3 free packs if you use the up rewards. Don’t forget you can buy one pack for $1.99, then use the $1.99 up reward to pay for the next pack, etc. The last $1.99 will need to be spent on something else in the store.
Comments…..My grandfather sold wheat for $5.75 in 1975
now wheat is $8.50 a bu..This is a problem ? you all have been eating way to cheap.Â