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It's easier to believe that these events are
intentional than to believe that all branches of the
administration are completely stupid. They could not have
written such a harmful plan for the nation and the world out of simple
stupidity.
----- Original Message -----
Sent: Saturday, April 26, 2008 11:52
AM
Subject: [Livingontheland] Rice, death
and the dollar
Finally, here is the real story. Connect the dots, and it's
not hard to see around the curve. This is why food and oil are going to keep
going up and inflation is soon going to be our number one problem.
"What are the world's investors doing with
the trillion dollars a year they used to invest in American securities,
including subprime derivatives and various forms of collateralized obligations
that turned out to have more obligation than collateral? They aren't buying
American companies because they are not permitted to. They are buying food and
other stores of value instead. ... China is exchanging its depreciating
reserves of US dollars for things of value, notably rice, with frightening
consequences for dependent countries, and deadly consequences for American
foreign policy. .. The chart below shows the price of 100 pounds of rice
against the euro's parity against the US dollar during the past 12 months. The
regression fit is 90%. There is an even tighter relationship between the price
of rice and the price of oil, another store of value against dollar
depreciation."
Apr 22, 2008
Rice, death and the dollar
By
Spengler
http://www.atimes.com/atimes/Global_Economy/JD22Dj01.html
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.
Months ago, I offered that China, Russia and other
cash-rich nations held the antidote to the incipient credit crisis: "If the US
wants to remain the magnet for world capital flows it became during the 1990s,
it will have to allow the savers of the world to become partners in the US
economy, that is, to buy into its first-rank companies."(Western grasshoppers
and Chinese ants, AsiaTimes Online, September 5, 2007.)
No such thing
occurred, of course, as Washington has made it clear that it would not allow
sovereign funds to own the likes of Citicorp. What are the world's investors
doing with the trillion dollars a year they used to invest in American
securities, including subprime derivatives and various forms of collateralized
obligations that turned out to have more obligation than collateral? They
aren't buying American companies because they are not permitted to. They are
buying food and other stores of value instead.
Washington has weakened
the value of the dollar as a palliative for the credit crisis, so much so that
"nobody seems to doubt that the US dollar will lose its status as the world's
reserve currency", as journalist Amity Shlaes wrote in an April 9 Bloomberg
News column entitled "Monks may hold clue to dollar's future".
"Perhaps
the dollar won't surrender its anchor role so soon," Shlaes continued. "And
perhaps that loss, if it comes, will happen because of events that take place
nowhere near men in suits at a central bank. Maybe the answer to the dollar's
riddle can be found in the cellphone photo image of a Tibetan monk in crimson
and orange squaring off with a Chinese soldier ... China might recede into
years of ethnic chaos. In any of these cases, the new Chinese government won't
be forced to deliver the same growth, and therefore won't spend commensurate
energy tending the dollar ... The flash of orange in the robe of the monk is
important enough to change the picture for the greenback."
Misguided is
not the word for this sort of thinking. However unlikely it might be, one
cannot exclude the possibility that "ethnic chaos" will afflict China at some
future point. The one thing that can be stated with certainty is that long
before chaos reaches China, it will have shattered a great deal of the rest of
the world.
China is exchanging its depreciating reserves of US dollars
for things of value, notably rice, with frightening consequences for dependent
countries, and deadly consequences for American foreign policy.
The
chart below shows the price of 100 pounds of rice against the euro's parity
against the US dollar during the past 12 months. The regression fit is 90%.
There is an even tighter relationship between the price of rice and the price
of oil, another store of value against dollar depreciation.
Rice price
vs Euro/US$ rate, April 15, 2007 to April 15, 2008
As the chart
makes clear, the ascent of the cost of rice to $24 from $10 per hundredweight
over the past year tracks the declining value of the American dollar. The link
between the declining parity of the US unit and the rising price of
commodities, including oil as well as rice and other wares, is indisputable.
China has bid aggressively for rice all year, and last week banned rice
exports, along with Vietnam and several other producers.
Euro/US$ rate
vs rice and oil, April 16, 2007 to April 16, 2008
For developing
countries whose currencies track the American dollar and whose purchasing
power declines along with the American unit, this is a catastrophe, as World
Bank president Robert Zoellick warned the Group of Seven industrial nations in
Washington last week. Food security suddenly has become the top item on the
strategic agenda.
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.
It is not only rice, of course, that the
cash-rich countries of the world are buying as a store of value; the price of
wheat, soy and other grains has risen almost as fast. This might deal the
death-blow to America's hapless efforts to stabilize the Middle East, where a
higher proportion of impoverished people eat off state subsidies than in any
other part of the world. Egypt has been the anchor for American diplomacy in
the Arab world since the Jimmy Carter administration (1977 to 1981), and is
most susceptible to hunger. Food prices have risen by 145% in Lebanon and by
20% in Syria this year. Iraqis depend on food subsidies financed by American
aid.
Reduced to essentials, America's foreign policy sought two
unattainable objectives: to stabilize the Middle East and destabilize China.
That is an exaggeration, of course, for Washington hoped not to sow
instability, but only to put China in its place over the Tibetan
affair.
The George W Bush administration might as well have used the
State Department as a set for the Jackass reality show. American arrogance has
eroded the ground under many of the governments on which its foreign policy
depends. It is hard to characterize what will come next, except, like the
stunts on Jackass, that it is going to hurt.
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