There is something shockingly familiar about the news over the last few days. Tax havens remain in trouble, and are causing trouble. Banks remain under scrutiny, are failing to recognise their obligations, and are resisting regulation, partly by using tax havens. Stock markets are increasing in value, although there is no clear underlying reason why that should be the case given the current state of the world economy. Another potential banking crisis is looming if American municipalities default on their debt. But most important of all, as the Financial Times notes this morning, there is a looming world food price crisis.
The price of corn and soya bean have just reached their highest levels in 30 months. This is serious. These are staple products. These affect developing countries. These price increases will induce real poverty. Shortages will have serious economic impact. And if central bankers react to the resulting inflation by increasing interest rates then, although that reaction will be wholly unjustified, they will create a recession.
The underlying sense of unease that I, that we have learned nothing as yet about how to manage the realities of our economy, continues to grow. The need for a new economic understanding is pressing. I noted recently (and can't find the link now) that Paul Krugman said something very similar recently. The difficulty is that neoliberalism is dead, but in the absence of an alternative it remains in place. And that's worrying for real people who will be facing the real problems its prescriptions give rise to. Like hunger.
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@Richard Murphy “Shortages will have serious economic impact.”
And a serious social impact.
There is only fourteen days supply in the human food supply chain.
In other words if food production stopped (completely) today some of us would begin considering eating each other by the 27th January.
Hunger …
It is my belief that the world food price crisis and the unfettered activities of the financial sector are directly linked. Take a look at the following (and indeed the rest of the STWR site):
http://www.stwr.org/food-security-agriculture/massive-bank-and-hedge-fund-speculation-causes-food-prices-to-soar.html
Overpopulation is far more of a threat to food prices than interest rates. Yet it is the global crisis which dare not speak its name.
@Trevor Border
sorry, but I think Malthus was wrong the first time round, and I’m quite sure that we can feed the world now. okay, we need to reduce the amount of meet in our diet, and maybe eat a little less, that there is no food crisis if we got proper distribution in place
@Deeply Depressed
I’m sorry but that is just not true. I can personally show you many instances where pension funds have made extremely handome returns from commdity markets. Just look at some of the general commodity funds which have provided strong performance.
However, returning to Richard’s original post and the situation is definitely worrying, especially considering the inflation we are facing and the problems faced by raising rates at the present time to combat this infation. Once you factor in increasingly worrying weather patterns (what impact will the recent floods have in Australia?) it gets even worse!
@Trevor Border
Children are the only insurance the poor have against infirmity and old age. The way to solve population growth is to address gross inequality.