infoseek

Why is the world reporting so much more on food crisis than us?

This latest food emergency has developed in an incredibly short space of time - essentially over the past 18 months. The reason for food "shortages" is speculation in commodity futures following the collapse of the financial derivatives markets. Desperate for quick returns, dealers are taking trillions of dollars out of equities and mortgage bonds and ploughing them into food and raw materials. It's called the "commodities super-cycle" on Wall Street, and it is likely to cause starvation on an epic scale.

The rocketing price of wheat, soybeans, sugar, coffee - you name it - is a direct result of debt defaults that have caused financial panic in the west and encouraged investors to seek "stores of value". These range from gold and oil at one end to corn, cocoa and cattle at the other; speculators are even placing bets on water prices.

Just like the boom in house prices, commodity price inflation feeds on itself. The more prices rise, and big profits are made, the more others invest, hoping for big returns. Look at the financial websites: everyone and their mother is piling into commodities. It is the great bull market of the Noughties. The trouble is that if you are one of the 2.8 billion people, almost half the world's population, who live on less than $2 a day, you may pay for these profits with your life.

This speculation doesn't happen on its own, however. Commodities such as gold and oil are favourite "hedges" against falling currencies. But this time all manner of other commodities, such as wheat and rice, have been swept along in the inflationary slipstream.

Investment houses, pension funds, private equity groups and banks are driven by profit not morality, and they invest wherever they can see the biggest return. It is not a conspiracy, but it is a conscious strategy, backed by the central bankers of the west as they try to help Wall Street back on its feet. Put another way, the banks are exporting our debts to the developing world. The collapse of the dollar means that most international commodities are more expensive for poor people to buy. The dollar's decline is a direct result of the low interest rate policy of the US Federal Reserve and the Bank of England, which shockingly cut interest rates on 10 April even as inflation spiralled.

When interest rates are below the rate of inflation, investors have to keep moving their funds from sector to sector in search of higher returns. In the 1990s they piled into internet stocks. When that bubble burst in the 2000 stock-market crash, they shifted into property and complex collateralised debt dealing based on US "sub-prime" mortgages. Now, with the collapse of the property bubble - not just in the US but across the world - investors are on the move again, and the only place left is commodities. It's the third bubble and it's hitting the developing world hard.

There are other reasons for food shortages: the diversion to biofuels because of the depletion of oil reserves, the increasing population, changing eating habits in south-east Asia - all these are putting long-term pressure on agricultural resources. But the efforts of institutions such as the US Federal Reserve to revive the economy on the back of a commodities boom have dramatically speeded up global inflation.

Will it work? Will the new "asset bubble" restore the profits of the banks and revive the US economy? In the short term, possibly yes - but at terrible human cost. In the end, the US may be cutting its own throat. Once speculative prices get out of control, there is no knowing when they will stop. Oil is now more than $100 a barrel. Resource-rich countries such as Russia are suddenly world powers again. Hungry people are desperate people. This might be the bubble to end all bubbles.

Source / Full Story

Why prices are jumping in other countries?

Petrodollar: Others are importing U.S. inflation. Many countries hold large reserves of U.S. dollar or even peg their currencies to dollar.

Many countries print more of their currencies to offset dollar declines or their currency increases. Thus, inflationary condition exist in their own countries.

guest1234567

I like your avatar. Whenever I go to a ballpark, I always have to tell the concession people that their menu signs are wrong, because they invariably say "Cracker Jacks" as in plural.

Most of the time, most people don't have any idea at all that the correct spelling is Jack, not Jacks.

infoseek

Thanks.

I don't know why people aren't outraged by this.

Speculation to drive up food prices, rather investments to actually produce more?

It's pure greed.

Civilization at its worst.

Backward capitalism.

Malkavian

Well, higher food prices enable non-mechanized 3rd world agriculture to survive and compete...

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Woof!

infoseek

After some of the 3rd world population starves to death.

Malkavian

True. But low food prices are responsible for the misery and poverty in 3rd world economies in the first place... They are fucked either way, but at least high prices give them the opportunity to raise capital and invest in tech to improve yields, hopefully helping them to get out of poverty.

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Woof!

infoseek

Can everybody see what's going on here?

Who do you think want us to accept:

High oil prices curb consumption.

• The fact is, you can't consume that much more even if it's $1.00/gallon. You can't consume that much less even if it's $6/gallon.
• All you're doing is buying into snake oilers' justification for their windfall profits.

High oil prices induced high food prices curb consumption.
We're not agri based economy because of scale and efficiency. The small additional amount of energy spend on food means a lot more output or lives. Speculation over lives for the good of those who are starving to death?

Talk about cool-aid...

Malkavian

Why not?

If you don't like speculation, don't sell your food to speculators who... offer you better price??? Lol.

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Woof!

infoseek

That really depends, Mexican workers who pay for their foods here have been said to be taking our foods, but that's another story.

You're missing the point. The point is higher prices don't necessarily induce more output.

Malkavian

Are they? Those goddamn foreigners!

Perhaps, but without higher prices the only way to induce more output is through government investment. And government running agriculture didn't exactly pan out where i came from.

Who are you batting for these days anyway? Last i recall, you became a Republican. Have you gained senses and switched Democratic yet?

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Woof!