Food prices at record high - to stay high for extended period

[barnaby33]

To put it bluntly my point is that foreigners don't vote. The Feds move was a calculated destruction of purchasing power of the dollar would do two things. One keep the global economy (of which we are a large part) from collapsing. Second to keep government borrowing costs absurdly low, which would make it easier for the US to run huge and now structurally necessary defecits. The Fed could not function as a practical matter in either of these things without the TBTF banks, so as an outgrowth of its policy it had to save them, or so it thinks. I happen to disagree because I know that the collateral damage to whats left of the middle class is huge.

The biggest problem I see with trade deficits at this point is that they are now a political matter. So when a nation decides to let its currency strengthen (if ever) it will be a political decision over which markets have no warning. This will mean huge uncertainly and even more instability.

@Tom Edison, you don't need documents that corporate profits are being used to speculate. Its far easier to look at the macro environment of our economy and ask yourself what food prices SHOULD be in that type of environment. Close to 20% unemployment and underemployment in America is not normally a recipe for food price inflation. Not with 11% of the nation receiving food stamps. So if commodity input costs are rising, as they are. Where are those price increases coming from?

 

[gouchobob]

To put it bluntly my point is that foreigners don't vote. The Feds move was a calculated destruction of purchasing power of the dollar would do two things. One keep the global economy (of which we are a large part) from collapsing. Second to keep government borrowing costs absurdly low, which would make it easier for the US to run huge and now structurally necessary defecits. The Fed could not function as a practical matter in either of these things without the TBTF banks, so as an outgrowth of its policy it had to save them, or so it thinks. I happen to disagree because I know that the collateral damage to whats left of the middle class is huge.

The biggest problem I see with trade deficits at this point is that they are now a political matter. So when a nation decides to let its currency strengthen (if ever) it will be a political decision over which markets have no warning. This will mean huge uncertainly and even more instability.

@Tom Edison, you don't need documents that corporate profits are being used to speculate. Its far easier to look at the macro environment of our economy and ask yourself what food prices SHOULD be in that type of environment. Close to 20% unemployment and underemployment in America is not normally a recipe for food price inflation. Not with 11% of the nation receiving food stamps. So if commodity input costs are rising, as they are. Where are those price increases coming from?

I am still not following what your endpoint is or your logic. Are food prices solely the function of the U.S. economy, doesn't the rest of the world matter? Don't crop failures and droughts around the world have an impact on supply that would effect prices? Sounds like you have notion of some kind of fuzzy conspiracy theory that big corporations funded by the Feds QE policies are causing the price of food to go up, so the big bad corporations can line their pockets through speculation. Actually according to the USDA food prices in the U.S. are predicted to rise only 2 to 3 % in 2011. However, rising food prices are an issue in poor countries where a large percentage of income is used to buy food.

 

[bigbadwolf]

Does the fact that the purported motive has not brought sufficient results yet mean it is not the true motive?

That's correct. The large financial firms have a lock on the political process.

Ascribing the "probable" real motive to be to bolster balance sheets of large financial firms ...- is that like saying the real probable motive is helping US corps to stay profitable? Is that bad?

It's no longer the case that "what's good for General Motors is good for the United States." Corporate profits are in the stratosphere -- but if you look at real unemployment numbers (not the fabricated ones released by the government), foreclosure rates, and bankruptcies, they tell another story. Job losses continue as no-one wants to invest in the US, outsourcing continues, and small businesses go to the wall. Large financial firms are making out like bandits and multinationals are doing well (using labor arbitrage and deriving an increasing percentage of their profits outside the US).

Would apprecite links to some analysts who demonstrate the profits showing up on corporate balance sheets are being used to speculate on food prices to a significant degree.

You can do your own research and I surely don't need to spoonfeed you. You're entitled to your own opinion. Look at the operations of firms like GS and hedge funds for starters.

Take anything far enough and it will buckle. What do you want to say? Should the US remain quiescent while China adopts a monetary policy geared to gain unfair advantage? What do you suggest to create a better system?

But that isn't the motive. A lot of that trade deficit (maybe 65%?) is coming from US multinationals who have transplanted their manufacturing operations to China. The US government doesn't want to rock that particular boat, regardless of what empty rhetoric it spouts. It is perfectly happy for foreign central banks to keep amassing paper assets (dollar-denominated T-bills and cash) while the US spends beyond its means. The annual fiscal deficit -- related in some ways to the current account deficit -- will be over a trillion dollars. Foreigners (hopefully) finance that using their current account surpluses vis-a-vis the US. If they become reluctant to do so, then in comes QE. At some point foreigners will get sick of trading real exports for worthless paper and demand a real quid pro quo; at that stage the deficit-financed US empire comes tumbling down.

 

[gouchobob]

That's correct. The large financial firms have a lock on the political process.



It's no longer the case that "what's good for General Motors is good for the United States." Corporate profits are in the stratosphere -- but if you look at real unemployment numbers (not the fabricated ones released by the government), foreclosure rates, and bankruptcies, they tell another story. Job losses continue as no-one wants to invest in the US, outsourcing continues, and small businesses go to the wall. Large financial firms are making out like bandits and multinationals are doing well (using labor arbitrage and deriving an increasing percentage of their profits outside the US).



You can do your own research and I surely don't need to spoonfeed you. You're entitled to your own opinion. Look at the operations of firms like GS and hedge funds for starters.



But that isn't the motive. A lot of that trade deficit (maybe 65%?) is coming from US multinationals who have transplanted their manufacturing operations to China. The US government doesn't want to rock that particular boat, regardless of what empty rhetoric it spouts. It is perfectly happy for foreign central banks to keep amassing paper assets (dollar-denominated T-bills and cash) while the US spends beyond its means. The annual fiscal deficit -- related in some ways to the current account deficit -- will be over a trillion dollars. Foreigners (hopefully) finance that using their current account surpluses vis-a-vis the US. If they become reluctant to do so, then in comes QE. At some point foreigners will get sick of trading real exports for worthless paper and demand a real quid pro quo; at that stage the deficit-financed US empire comes tumbling down.

Lots of statements, nothing to back it up. Based on the hope that the U.S. is finished, from this post and others in the past the poster has a irrational hatred of the U.S.

 

[bigbadwolf]

Actually according to the USDA food prices in the U.S. are predicted to rise only 2 to 3 % in 2011.

*Snort of derision* -- if you're using official US govt. stats, I don't see the point of this discussion. A recent piece in the NYT:

The global food price index hit a new record high for the third straight month, the Rome-based Food and Agriculture Organization said today. The index averaged 236 points in February, 2.2 percent higher than the previous all-time high set in January.

I find this prognosis more credible:

NIA is projecting that the U.S. will see double-digit food price inflation in the first half of 2011.

And this piece in MSNBC:

I checked the prices of the following goods to see where we stood month over month (December to January) and year over year. Monthly figures are first, annualized are second. Read it and weep:

• <LI class=textBodyBlack>Ground beef up 6.8 percent month over month, and 11.1 pct year over year.
  <LI class=textBodyBlack>Butter, up 3.2 percent monthly and a stunning 27 percent over the past year.
  <LI class=textBodyBlack>Coffee, up 6.5 percent and 16 percent.
  <LI class=textBodyBlack>Potatoes, up 3.6 percent and 7.1 percent.
  <LI class=textBodyBlack>Lettuce actually fell 5 percent monthly after a spike higher in December, but is up 5 percent over the past year.
  <LI class=textBodyBlack>Bread up 1 percent and 3 percent.
  <LI class=textBodyBlack>Chicken up 0.8 percent. and 4.3 percent .
  <LI class=textBodyBlack>Egg prices have been fairly steady.
• Milk, down slightly month over month, but up 2 percent year over year.

That doesn’t sound like the 1.6 percent inflation rate the government is feeding us, now does it?

 

[bigbadwolf]

Lots of statements, nothing to back it up. Based on the hope that the U.S. is finished, from this post and others in the past the poster has a irrational hatred of the U.S.

Ah, back to ad hominems. Congratulations. The last refuge of the retarded.

 

[Ries]

The Fed cant even make the dollar go up and down, much less control world food prices.
The US government does not have anywhere near the resources to back the dollar as it sinks. So to assign evil motivations is kind of giving them the pass- if they had the opposite evil goal- to make the dollar MORE expensive against the Euro- they just plain couldnt do it- there is not enough borrowing power in the world.

And you are completely ignoring the fact that world population is increasing, many people in China and India have joined the middle class and now eat meat, requiring ten times the grain to produce as just eating grains and rice. You are ignoring world weather conditions- or did The FED use their evil weather ray to cause those floods in Australia, the crop failures in Russia, Egypt, and even the USA, meaning world yields are way down this year?
And then there is the misguided US ethanol program, which drives up corn prices, and takes food off the market and makes it into fuel.

World food prices are actually very tied to energy prices, as well, and global demand is way up this year, as in most of the world, the recession is tapering off. Then we have political considerations that affect global oil prices- again, raising food prices a significant amount without any relationship to the dollar whatsoever.

In short, the natural chaos of the world economy provides plenty of reasons for food prices to be on an upward trend, without the need of any evil intervention from a US Fed- a Fed, I would add, that has proven itself spectacularly incompetent at doing really simple, obvious things.
I am completely unconvinced they have the ability to pull off even the most basic global market manipulation.

But hey, believe what you want.
And check under the bed before you go to bed.

 

[tomedison]

For those who want some perspective here is a piece that I found helpful.
http://www.telegraph.co.uk/finance/...ency-wars-and-the-end-of-dollar-hegemony.html
I think we could all benefit if we kept the exchanges civil. I am prepared to accept that QE 2 has negative consequences for commodities and food prices. What I am not convinced of is that 65% of the trade deficit with China is attributable to US corps who have outsourced the manufacturing process as BBWolf maintains. I'd be interested in reading more about this phenomenom.
It seems that reckless spending on foreign wars and defense in general together with astronomical health care expense has limited US options to manage its economic house. Nevertheless, I continue to wonder how much fault for the current mess China has for manipulating the relative weakness of the yuan?
Whoever bears the blame, the world seems to have a dismal future. If climate change doesn't inundate my coastal residences before I go, then I hope my health and money lasts long enough to enjoy my final years. After all, in the words of John Kenneth Gailbreath, in the long run...we all die.

 

[steveinbsas]

And then there is the misguided US ethanol program, which drives up corn prices, and takes food off the market and makes it into fuel.

Didn't the EPA recently allow a 50% increase in the amount of ethanol added to gas (for newer cars) in the USA?

http://content.usatoday.com/communi...llow-15-ethanol-in-gasoline-up-from-10-now-/1

 

[bigbadwolf]

The Fed cant even make the dollar go up and down, much less control world food prices.
The US government does not have anywhere near the resources to back the dollar as it sinks. So to assign evil motivations is kind of giving them the pass- if they had the opposite evil goal- to make the dollar MORE expensive against the Euro- they just plain couldnt do it- there is not enough borrowing power in the world.

And you are completely ignoring the fact that world population is increasing, many people in China and India have joined the middle class and now eat meat, requiring ten times the grain to produce as just eating grains and rice. You are ignoring world weather conditions- or did The FED use their evil weather ray to cause those floods in Australia, the crop failures in Russia, Egypt, and even the USA, meaning world yields are way down this year?
And then there is the misguided US ethanol program, which drives up corn prices, and takes food off the market and makes it into fuel.

World food prices are actually very tied to energy prices, as well, and global demand is way up this year, as in most of the world, the recession is tapering off. Then we have political considerations that affect global oil prices- again, raising food prices a significant amount without any relationship to the dollar whatsoever.

In short, the natural chaos of the world economy provides plenty of reasons for food prices to be on an upward trend, without the need of any evil intervention from a US Fed- a Fed, I would add, that has proven itself spectacularly incompetent at doing really simple, obvious things.
I am completely unconvinced they have the ability to pull off even the most basic global market manipulation.

I can't find anything to disagree with in your post. World population is rising. There has been bad weather. But what you're ignoring is the impact of quantitative easing, which makes it easier (and cheap) for the big players to speculate in various markets. That is the key point. We can quibble about its impact.

I don't think anyone here (at least not me) is saying the Fed is acting malevolently. But its policies lead to speculative bubbles in one area after another. If anything, I'd argue that the present economic policy consists solely of building up another speculative bubble.