No sooner do I publish than the New York Times publishes confirmation. Someone has either read, or not read, my Stagflation blog, because in the USA they are again talking about excluding those pesky "food and energy prices" from the inflation calculator because of their "volatility".
Expect to read more and more of this in coming years, in my opinion. The two most important costs issues for the general population - food and energy - will be manipulated out of reported inflation permanently for political purposes.
Why? Because the costs of each will continue to rise faster than income and other costs. And there is not a lot than can be done in the short term although longer term there could be all sorts of responses to food price inflation, say, similar to those that occured during the food price crisis of 2008, For example, closing trade borders such as Thailand did for its rice production, or forcefully stockpiling, or price fixing, or, as happened in Latin America, nationalisation of the food production chain.
Most of those actions are (for the moment) politically unpalatable as they affect international trade agreements and property rights. But that may well change.
As we all know, Maslow's heirachy of needs put food, warmth and shelter up there at the top. Nothing drives a populace to riot faster than not having enough of each at a reasonable price. (Again, as happened in Thailand).
Expect to read more and more of this in coming years, in my opinion. The two most important costs issues for the general population - food and energy - will be manipulated out of reported inflation permanently for political purposes.
Why? Because the costs of each will continue to rise faster than income and other costs. And there is not a lot than can be done in the short term although longer term there could be all sorts of responses to food price inflation, say, similar to those that occured during the food price crisis of 2008, For example, closing trade borders such as Thailand did for its rice production, or forcefully stockpiling, or price fixing, or, as happened in Latin America, nationalisation of the food production chain.
Most of those actions are (for the moment) politically unpalatable as they affect international trade agreements and property rights. But that may well change.
As we all know, Maslow's heirachy of needs put food, warmth and shelter up there at the top. Nothing drives a populace to riot faster than not having enough of each at a reasonable price. (Again, as happened in Thailand).
I was fortunate to hear a renowned geographer, Professor James Kirkpatrick AO from Australia, and he was explaining where the world is headed within the next two decades as a consequence of this massive food price inflation. He suggested that there will be reversal of the multi decade trend of people swarming to cities from the country to have a career, as people will rush to the country to obtain food. All the secular indicators suggest this is true. Taking that literally, people will abandon consumerism and culture and move closer to self reliant sources of food, shelter and warmth.
Taking that argument further, it won’t just be people from London, New York, Paris or Beijing, say, it will be people from all over the world, leaving countries that have poverty and insufficient food, in their masses, on ships not boats, and moving to those that have food surpluses. Illegal immigrants.
And their origin may surprise you. For example the USA
Mass migrations, the Occupy groups, the slow manipulation of all appears to be heading in the direction of significant upheaval in the 99%ers.
So to follow what is happening with inflation and therefore what investment decisions you make, first ensure it includes food and energy costs for the masses. Otherwise you will be missing the real story.
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