Goldman Sachs says, hey!, shocking news here – food prices are rising! But also says that as long as they don’t go much higher, everything is cool – quoted from Zero Hedge:
…the recent surge in food commodity prices poses upside risk to both our core and headline CPI forecasts, particularly the latter. The rise in food costs should push up headline CPI inflation by roughly ½ point even without meaningful pass-through effects into the core index, reducing household real income growth accordingly. While clearly undesirable from the standpoint of households, these results suggests that as long as commodity prices stabilize relatively soon, the burst of food inflation would not have a major impact on the broader economic outlook.
Translation:
…it sucks to be middle class or poor, but as we’re neither, we don’t figure this as a bad thing unless food prices continue to rise as that will piss off the peasants and might make them take it out on us.
The real problem here is that as long as Ben Bernanke is printing up money at the Federal Reserve on the asinine theory that this will get the economy rolling there is nothing to stop food prices from rising – and from rising to disastrous levels. Remember, not necessarily disastrous for we here in the United States (though it will pinch and may toss us back in to recession), but disastrous for the poor around the world who already spend 50% or more of their disposable income on food and simply can’t afford to pay much more. The recent revolution in Tunisia can be traced to food prices – as can all manner of unrest spreading around the world.
The follow on to all this is that unrest leads to wars, revolutions and various things which tend to crush economic activity. No one likes to invest when the peasants are revolting, you see? Here’s our prospects:
1. Printing money until our dollar becomes worthless, thus sparking an economic collapse.
2. Stop printing money and the stock market crashes, thus sparking an economic collapse.
3. Some how or another the money printing doesn’t entirely devalue the dollar (possibly because all the other central banks are printing like mad in a “race to the bottom” devaluation of currency), but the rise in food prices so dislocates the Third World (our banksters call these areas “emerging markets” these days) that growth there collapses, thus sparking an economic collapse.
Pick one, because one of the three will be the ultimate outcome of this. The fix is to stop printing, slash government spending, endure the renewed recession and set in place policies which will encourage mining, manufacturing and agriculture here in the United States. 20 years from now, if we do this, we’ll be back on top of the world. Or, we can just keep on as we are and 1, 2 or 3 will happen to us.
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