Daily Digest 1/31 - New Era of Global Food Revolutions, Consumer Spending, Irish Central Bank Lowers Growth Forecast
- Egypt And Tunisia Usher In The New Era Of Global Food Revolutions
- Mauldin: A Bubble in Complacency
- What Happens Next: The US Consumer Sector Gets Crushed
- The 5 Black Swans That Keep Dylan Grice Up At Night... And How To Hedge Against Them All
- Consumer Spending in U.S. Rose More Than Estimated
- Euro Rises Versus Dollar as Inflation Accelerates; Canadian Dollar Climbs
- Irish Central Bank Lowers Growth Forecast for 2011
The surge in global food prices since the summer – since Ben Bernanke signalled a fresh dollar blitz, as it happens – is not the underlying cause of Arab revolt, any more than bad harvests in 1788 were the cause of the French Revolution. Yet they are the trigger, and have set off a vicious circle. Vulnerable governments are scrambling to lock up world supplies of grain while they can. Algeria bought 800,000 tonnes of wheat last week, and Indonesia has ordered 800,000 tonnes of rice, both greatly exceeding their normal pace of purchases. Saudi Arabia, Libya, and Bangladesh, are trying to secure extra grain supplies.
My points were that much of Europe is getting ready to give us a real crisis, sooner rather than later. Great Britain is headed for what looks like a recession and further problems. Japan, as I am wont to say, is a bug in search of a windshield. We are going to get some great real-time lessons on what happens when you don’t deal with a problem in time. The longer you wait, the worse the results will be when you are forced to deal with the issues.
Now that the food crisis is in full swing, I want to write about what happens next. Before hyperinflation begins in America, the US consumer sector is going to experience economic disintegration, crushed out of existence by two competing forces: skyrocketing costs and weakening demand.
Few are willing to accept and recognize the humility that they really know little if anything about how a non-linear, chaotic system evolves. Which is once again why we believe that Grice is among the best strategists out there: in his attempt to hedge the stupidity of the crowd, he has coined a term that may well be the term that defines 21st century finance and economics: instead of foresight, Grice believes the far more correct term to explain the process of prognostication should be one based on foreblindness.
Households are driving demand at companies from Coach Inc. to Ford Motor Co. and bolstering the recovery. The economy needs even faster growth to reduce unemployment, which is projected to average more than 9 percent this year, one reason Fed policy makers are pushing ahead with a second round of monetary stimulus worth $600 billion. “The consumer is doing OK, and household spending will continue to grow this year,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “We expect it to continue to play a part in this recovery.”
ECB policy makers will discuss the inflation outlook at their meeting Feb. 3, a day before European leaders gather in Brussels to advance their response to the sovereign-debt crisis. ECB President Jean-Claude Trichet has said he only expects euro- area inflation to “moderate again” toward the end of the year. U.S. inflation slowed further below the central bank’s long-term forecast. The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 0.7 percent from December 2009, the smallest increase since records began in 1959.
Ireland’s government said in December it plans to cut spending and raise taxes by 6 billion euros ($8.2 billion) this year, double an earlier target. The central bank’s October forecast was based on a budget package of 3 billion euros. Irish Finance Minister Brian Lenihan unveiled the tougher austerity measures as part of an 85 billion-euro rescue package from the European Union and International Monetary Fund. The government aims to lower the budget deficit to below the EU limit of 3 percent of GDP in 2014 from about 12 percent last year. Including the cost of bank bailouts, the shortfall amounted to 32 percent of GDP in 2010.
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