Jan 18, 2011
A few weeks ago, we highlighted the United Nations Food and Agriculture Organization (FAO’s) food index, which has risen to new record heights, and wondered aloud if crises were coming. Our question has been answered; it has come… the only question now is whether or not it will be spreading.
But just as the food bubble began suddenly in 2006, the United Nations is again warning of rising food prices—a product of bad government policy and the massive currency creation by central banks around the world. Even as consumers are mired in deflation, central bank policy is stirring up inflation in all the wrong places.
And only a few days after we published our article, the U.S. Department of Agriculture cut forecasts on supply for key crops. As a result, essentials like corn and soybeans soared to their highest level in nearly 3 years. Fires in Russia and floods in Australia have destroyed enormous amounts of wheat and grain—causing prices to continue to skyrocket.
Foreign Policy had this to say:
As the new year begins, the price of wheat is setting an all-time high in the United Kingdom. Food riots are spreading across Algeria. Russia is importing grain to sustain its cattle herds until spring grazing begins. India is wrestling with an 18-percent annual food inflation rate, sparking protests. China is looking abroad for potentially massive quantities of wheat and corn. The Mexican government is buying corn futures to avoid unmanageable tortilla price rises.
As rises in food prices continue unabated, crisis is beginning to grip many nations. Countries with already high unemployment are facing the stark reality of rising prices as well.
Last week, Tunisians overthrew Ben Ali, the authoritarian president that had ruled Tunisia for 23 years. Up until just recently, the nation was considered stable and wealthy in comparison to some of its neighbors, but economic disaster led the country from riots to revolution in a less than a month. Tunisian youth, well-educated but jobless, began protesting with public and symbolic suicides—throwing the country into unrest as pictures and news quickly spread through Twitter and Facebook.
In 2008, food riots broke out, not only in dirt-poor nations like Haiti and Bangladesh, but in rapidly developing nations like Egypt, Mexico, Brazil and India. Now we see Tunisia, which has a GDP per capita that is in the top 50% of the world, revolting over rising prices and economic disaster. When will governments realize that their policies of currency creation and debt have only worsened this crisis?
This article was posted: Tuesday, January 18, 2011 at 5:19 am