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Generational Dynamics Web Log for 21-Nov-2010
21-Nov-10 News -- Food prices skyrocket to 2008 crisis levels

Web Log - November, 2010

21-Nov-10 News -- Food prices skyrocket to 2008 crisis levels

North Korea building vast new nuclear facility

Global food prices skyrocket to 2008 crisis levels


FAO Food Price Index versus CPI, 1990 to 2010
FAO Food Price Index versus CPI, 1990 to 2010

The United Nations Food and Agriculture Organization (FAO) predicts that there will be a major food crisis in 2011, unless food production is increased substantially. The analysis appears in the organization's biannual "Food Outlook Report."

Food prices spiked to crisis levels in 2008, sparking food riots around the world. FAO's food price index increased to 197 in October, higher than the 2008 level, although the average for the entire year so far is slightly lower.

According to the FAO:

"Contrary to earlier predictions, world cereal production is now forecast to contract by two percent rather than to expand by 1.2 percent as anticipated in June. Unexpected supply shortfalls due to unfavourable weather events were responsible for this change in direction, according to the report.

Global cereal stocks are forecast to decline sharply and Food Outlook makes a strong call for production to be stepped up to replenish inventories. World cereals stocks are anticipated to shrink by seven percent according to FAO, with barley plunging 35 percent, maize 12 percent and wheat 10 percent.

Only rice reserves are foreseen to increase, by six percent according to the report."

From the point of view of Generational Dynamics, what we're seeing is what I call the "Malthus effect," a continuing increase in the price of food as the population grows faster than the supply of food. (See "Food: Green revolution v Malthus effect.")

As you can see from the above graph, food prices were steady or declining until 2002. Since 2002, food prices have been surging much faster than inflation.

The survivors of World War II (GI and Silent generations) were well aware of the horrors of famine and starvation that occurred during the war, and they developed the Green Revolution to make sure that everyone in the world would be fed.

It's really not surprising that the surge in food prices occurred in the same time frame as the tech, real estate and credit bubbles that have developed into the current global financial crisis. The same generational greed and nihilism that led to the debauched use of credit has also led to the collapse of the Green Revolution.

Additional links

North Korea has revealed that it's rapidly building a vast new facility to enrich uranium that can be used to build a far more powerful type of atomic bomb. NY Times

Once upon a time, the war in Afghanistan was supposed to end in 2011. On Saturday, NATO officials in Lisbon announced that the new end date is 2014. Maybe. VOA

Bailout discussions for Ireland are continuing this weekend, where the hottest topic is whether the EU officials are going to force the Irish to raise their 12.5% corporate income tax rate. French President Nicolas Sarkozy said that he expected Ireland to raise that rate, but that it would not be a condition for a bailout. At any rate, no decision will be made until after Tuesday, when Ireland's cabinet will publish its four-year austerity budget plan. The unpopularity of the austerity measures is likely to cause the collapse of prime minister Brian Cowen's ruling coalition, and force a new election. Reuters

(Comments: For reader comments, questions and discussion, see the 21-Nov-10 News -- Food prices skyrocket to 2008 crisis levels thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Nov-2010) Permanent Link
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