"global food crisis" caused by Fed, not shortages

[oldsoul]

Global famine? Blame the Fed
By Mike Whitney
Online Journal Contributing Writer


Apr 29, 2008, 00:19

 Email this article
 Printer friendly page
 

The stakes couldn't be higher for Ben Bernanke. If the Fed chief decides to lower rates at the end of April, he could be condemning millions of people to a death by starvation.

The situation is that serious. Food riots have broken out across the globe destabilizing large parts of the developing world. China is experiencing double-digit inflation. Indonesia, Vietnam and India have imposed controls over rice exports. Wheat, corn and soya are at record highs and threatening to go higher still. Commodities are up across the board. The World Food Program is warning of widespread famine if the West doesn't provide emergency humanitarian relief.

Venezuelan President Hugo Chavez said it best: "It is a massacre of the world's poor. The problem is not the production of food. It is the economic, social and political model of the world. The capitalist model is in crisis."

Right on, Hugo. There is no shortage of food; it's just the prices that are making food unaffordable. Bernanke's "weak dollar" policy has ignited a wave of speculation in commodities which is pushing prices into the stratosphere. The UN is calling the global food crisis a "silent tsunami," but its more like a flood; the world is awash in increasingly worthless dollars that are making food and raw materials more expensive. Foreign central banks and investors presently hold $6 trillion in dollars and dollar-backed assets, so when the dollar starts to slide, the pain radiates through entire economies. This is especially true in countries where the currency is pegged to the dollar. That's why most of the Gulf States are experiencing runaway inflation. This doesn't mean that oil depletion, biofuel production, over-population, and giant agribusinesses don't add to the problem. They do. But the catalyst is the Fed's monetary policies; that's the domino that puts the others in motion.

Here's Otto Spengler's summary in his recent article in Asia Times, Rice, Death and the Dollar: "The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington's economic misery now threatens to become a geopolitical catastrophe. . . . The link between the declining parity of the US unit and the rising price of commodities, including oil as well as rice and other wares, is indisputable.

"Never before in history has hunger become a global threat in a period of plentiful harvests. Global rice production will hit a record of 423 million tons in the 2007-2008 crop year, enough to satisfy global demand. The trouble is that only 7% of the world's rice supply is exported, because local demand is met by local production. Any significant increase in rice stockpiles cuts deeply into available supply for export, leading to a spike in prices. Because such a small proportion of the global rice supply trades, the monetary shock from the weak dollar was sufficient to more than double its price." ["Rice, death and the dollar", By Otto Spengler, Asia Times]

The US is exporting its inflation by cheapening its currency. Now a field worker in Haiti who earns $2 a day, and spends all of that to feed his family, has to earn twice that amount or eat half as much. No wonder that six people were killed in Port au Prince in the recent food riots. People go crazy when they can't feed their kids.

Food and energy prices are sucking the life out of the global economy. Foreign banks and pension funds are trying to protect their investments by diverting dollars into things that will retain their value. That's why oil is nudging $120 per barrel when it should be in the $70 to $80 range.

According to Tim Evans, energy analyst at Citigroup in New York,

[joeblow]

What is truely sad is that it will take something like this that directly affects the sheeples' pocketbook to wake them up. Unfortunately, I belive that prices (read that as inflation) will have to increase many, many more times until they put 2 and 2 together to equal J E W.