Wednesday, April 30, 2008

A food bubble

Food prices are rising. There are food riots in the third world, and food rationing of certain items in the United States. Various analysis pundits are trying to figure out exactly where to place the blame.

This is a real concern, as due to the economic collapse in the United States the prices of many commodities both at home and abroad will be rising. The Federal Reserve insists there is no recession yet, posting a 0.6% growth for the previous quarter, but Shadow Stats begs to differ. There is a possibility that food will become a more scarce commodity, which is why it is important for people to ensure a proper food supply through urban and suburban farming. But we aren’t at the crisis point yet.

Many people blame ethanol, and rightly so. While those who know what foods we should eat enjoy telling us that it takes many pounds of grain to enjoy one pound of beef (based on acreage) any acreage devoted to ethanol cannot be consumed as grain or beef. This has had a direct impact on the price of corn and corn products, but it doesn’t tell the whole story.

Unknown News author Mahdi Abdul Finke blames the current situation on another speculative bubble. With the Dot Com bubble a distant memory, the Housing Bubble still deflating, and the source of them all, the Currency Bubble, not being reported, other bubbles will of course sprout. Until the Currency Bubble finally pops, pressure will be relieved by venting into other markets, creating bubble conditions there until the subsidiary bubbles pop.

All of the bubbles making headlines are subsidiary bubbles. The reason why various government agencies cannot address the cause of the subsidiary bubbles is because they will not address the root cause of the subsidiary bubbles. As long as the Federal Reserve is not looked at as a cause, as long as it is looked at as a cure, then there will be no way to stop these bubbles from growing in the first place.

This doesn’t mean that there isn’t a food crisis looming. There is, but the early signs of it are being exacerbated by the Federal Reserve.

Rising fuel prices are at the root of the real aspect of the food crisis. It takes fuel to power farm equipment, and fuel to transport food from growers to consumers. The fuel crisis has two roots. One root is environmentalist policies that restrict drilling for oil, restrict the construction of refineries, and mandate the use of ethanol (it takes 120 barrels of oil to create 100 barrel of ethanol). The other root is the insane policy of aggression towards countries that produce oil, such as Iraq, Iran, and Venezuela.

Since it is more expensive to grow food and to ship food, prices are rising. Since the economy is in a recession and the Housing Bubble has thrown people into panic mode, this hysteria is taking that rise and turning it into a bubble.

While it is an excellent idea to prepare for upcoming food shortages, it is not yet time to panic. It is, instead, time to plant a garden while stocking up on durable food stores.

1 comment:

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