Its Now Worse Than 2008Coming to a country near you....? Some governments should pay attention...and put Agricultual Independence on the top of the agenda until their people can afford to eat. Ethiopia has a 5 year Agricultural Plan in place...it involves massive land leases to foreign Ag. Companies to grow food and use fertilizers to maximize crop yeilds...and as part of the deal, Ethiopians get a percentage of those crop yeilds for domestic consumption....4 million hectares is alot of food...more countries should take note
Karma
Food Wars
By Doug Hornig
Lately, the mainstream media hasn’t quite known where to fly its talking heads. First the turmoil rocking the Middle East is the story du jour. Then the crisis in Japan shoves that onto Page 2. Then, with the U.S. military involvement with Libya, it’s back to the Middle East again.
That that region is coming unhinged is undeniable. But from the first, the media have focused their attention in the wrong direction, seemingly oblivious to the elephant in the room.
Yes, the people are restive. Yes, they’re tired of vicious authoritarian rule. Yes, a few of them know enough to mouth the word democracy, though even fewer know what it means.
To say they are somehow yearning for “freedom,” in any sense we would assign to the term, is mostly a projection on our part. Wishful thinking.
That makes the recent involvement in the Libyan civil war all the more problematical. Sure, Qaddafi is a mad tyrant, everyone knows that. The world would be a better place without him. But the fact of the matter is that we are backing a gang of “rebels” who are probably acting out tribal animosities that have been simmering for decades. We have no idea who they are nor whether, if they do replace Qaddafi, they will be an improvement.
Beyond that, all of President Obama’s lofty words about moral and strategic necessity fail to address the most important root cause of all this revolutionary fervor: impoverishment. People will put up with all sorts of indignities, restraints upon their liberty, government oppressions, beatings, jailings, and so on. But when they can’t afford to eat, you will have unrest.
That’s the case in the Middle East. Back in late January, at the World Economic Forum in Davos, Switzerland, economist Nouriel Roubini warned that food prices posed a serious threat to global stability.
"What has happened in Tunisia,” he said, “and is happening right now in Egypt, but also the riots in Morocco, Algeria, Pakistan, are related not only to high unemployment rates and to income and wealth inequality, but also to the very sharp rise in food and commodity prices.”
When the average Egyptian family spends up to 80% of its income on starvation prevention, there is a deadly serious problem. And it ain’t the lack of freedom of speech. In a very real sense, Mubarak found himself in the middle of a food war, one that he couldn’t win. Adios, amigo.
Problem is, it’s going to get worse before it gets better.
World food prices are on a rocket track upward, according to the UN's Food and Agriculture Organization (FAO), whose index measures the cost of a basket of basic food supplies –sugar, cereals, dairy, oils and fats,and meat –across the globe. That index rose by 3.4% in January and 2.2% in February –the seventh and eighth monthly increases in a row –to its highest level since recordkeeping began in 1990.
Remember the 2008 food riots? Now look at the following chart, and it’ll be clear why people are angry in North Africa. And in India, likely the next flash point after tens of thousands of protestors marched on Parliament in Delhi in late February.
Supply problems are partly to blame. The droughts in Russia last year took that country’s wheat exports off world markets. Floods in Australia and Brazil and a new drought in China have factored in. And the 100 million tons of American corn being funneled yearly into the ethanol debacle has played its part.
Shortages are a part of life. Nature is unpredictable. People understand that. But, increasingly, even the least educated of the world’s citizens are also coming to recognize the role corrupt governments and ill-advised economic policy play in their woes. Their rage may be inchoate, they wouldn’t know Ben Bernanke from a flop-eared mule, and quantitative easing means nothing even when translated into their own language. But they are directing their anger in precisely the right direction.
Why are food prices escalating all out of proportion to supply and demand? Largely because central banks have been inflating money supplies the world over, at an alarming rate. It’s not just the Fed. In Egypt, for example, the money supply increased 50% between 2007 and 2010.
But there’s no question that the Fed is leading the charge. Dollars are proliferating,and those who have them need someplace for them to go that isn’t a sure loser. There is no point in clinging to a deteriorating asset. So there has been a stampede into stuff. Commodities are booming. And that, to the detriment of much of the world, includes food.
Someday, perhaps, if the Food Wars spread to the United States, Bernanke and Co. will be tried as criminals in a latter-day Nuremberg.
OK, probably not.
But lacking that, the next time someone (channeling Dick Cheney) tries to persuade you that monetary inflation doesn’t really matter, tell him to go give that little speech in the streets of Cairo.