To Have and Have Not
Global food shortages are about to get real
(Source: Getty Images)
Joel Bowman, checking in today from Buenos Aires, Argentina...
Month-long protests... food shortages... rolling blackouts... and a 700 basis point rate hike.
That’s what happens when your government goes broke, inflation gets out of hand and the local currency begins to spontaneously combust in consumers’ pockets.
Just ask the good people of Sri Lanka.
After a month of practically non-stop protests and street demonstrations, and facing severe shortages - nay, outages - of everything from food, fuel, power... even medicine, the government stepped in on Friday and jacked up its key lending rate by 7%.
But with “official” inflation already running close to 19%, and supply chains tightening around the world, one gets the feeling the toothpaste is already out of the tube for the Democratic Socialist Republic of Sri Lanka.
In fact, many countries across Europe and Asia are already feeling the pinch of too much paper money chasing too few (and too unreliable) real world goods. And we’re not just talking Birkin bags and iGagets here (although, presumably, there’s a backlog there, too...) but everyday consumables people need to actually... you know... live.
Why does this matter, apart from the obvious and harrowing abyss of the alternative?
As witnessed during the last year of the great covid panic (remember covid?) honest, hard-working citizens are generally ok with their Amazon deliveries being delayed a few days. They can even “suck it up” when their preferred lunch item is temporarily unavailable at their favorite restaurant... or when their plane is delayed because of pilot and/or fuel shortages.
But when staple grains like wheat and corn become “insecure,” and bellies go empty... well, that’s when mobs take to the street with pitchforks and heads of state begin fueling up the chopper for emergency Helivac plans.
So, where are we with all that, food prices and such? Here’s NPR:
The Food and Agriculture Organization announced on Friday that its FAO Food Price Index, which tracks monthly changes in the international prices of a "basket of commonly-traded food commodities," averaged 159.3 points in March. That's up 12.6% from February, which already saw the highest level since the organization began tracking in 1990. It's also 33.6% higher than it was last March.
BPR Investment Director, Tom Dyson, sent around this rather unpleasant chart yesterday afternoon...
Hmm…
Transitory inflation... two weeks to flatten the curve... pandemic of the unvaccinated... Putin’s Price Hike...
Look where listening to these people has gotten us so far. What’s that definition of insanity again? Something about doing the same thing over and over, expecting different results?
And on that note, here’s word from our resident macro analyst, Dan Denning, checking in from the High Plains of Laramie, Wyoming...
Food lockdowns? I have to admit, I didn’t see it coming so soon. Granted, we’re talking about lockdowns and curfews in Peru, where rising fuel, food, and fertilizer prices led to street protests, which led to lockdowns and curfews.
This month Lima. Next month, Los Angeles? It may be early to start expecting food lockdowns (and riots) in America. It starts with empty (or emptier) shelves. Fewer choices. Higher prices. And then?
And then the public finds out that cheap energy is a critical component to cheap, digestible calories. Take away one, and you take away the other. This is not a supply chain issue. And it’s not Putin’s food riots. What is it?
It’s inflation. And as history shows, when high prices start to lead to empty stomachs, people with nothing left to lose start to take matters into their own hands. Keep this in mind in Shanghai, too.
China’s Communist Party has locked down the city of 25 million because of 20 thousand new positive Covid cases per day earlier this week. On Twitter, you’ll find stories of people opening as many food delivery apps as they can in the morning, hoping to get something delivered by the end of the day (with no luck, in some cases).
If you were the sort of person who was inclined to conspiracy theories, you might begin to wonder if mass starvation was part of the population control playbook. First plague. Then war. Then famine. Strictly by the Book.
Soaring food prices, their effect on social stability and civil society, and Chinese ‘zero covid’ policy in Shanghai are the stories NOT making the front page this week. That’s why I led with them from my desk in Laramie. Misdirection is when a good magician draws your attention to something unimportant so that you miss the important thing (the trick). Keep your eyes open...
As always, the question begs itself: What to do about all this? All year, Dan and Tom have been urging readers to, in their own words, “Hold lots of cash, lots of hard assets, a select few deep value stocks and stay away from bonds and stocks in general.”
With stocks broadly down (the S&P 500 is off 6% year-to-date) and US government bonds notching their worst first quarter since 1973 (down 5.6%), that’s proven the right advice. As of Friday’s close, gold was up 6.3% year-to-date.
And we’re not out of the woods yet. Not by a long way. Looking at the tax-and-spend bonanza in DC... and judging by what’s already coming down the pike in other countries around the world... from Colombo to Shanghai to Lima and beyond... what you’re seeing at your local grocery store and gas pump may only be the beginning.
The time to implement a Plan B is always yesterday. Failing that, you could always get on it today, by joining our paid subscribers right here. BPR members get monthly, in-depth investment analysis and twice-weekly market updates from Tom (Wednesdays) and Dan (Fridays). Plus there’s invite-only Zoom calls with Bill’s private network of analysts and money managers, special reports, webinars and plenty more. All for less than a cup of coffee per week. Really.
And now for Bill Bonner’s missives from the past week...
That’s all from us for today. Tune in tomorrow for your regular Sunday Sesh, where we take a look at the oft-ignored concept of unintended consequences... particularly overlooked by those with their fat fingers on policy triggers.
We also caught up with our old mate, Eric Fry, who joined us for an episode of the Fatal Conceits podcast this week. Eric shared his thoughts on Trades of the Decade, old and new, plus the widening “technochasm,” the new era of Made in America and how the Russo-Ukraine conflict is serving to further the de-globalization trend.
All that and plenty more, tomorrow. Until then...
Cheers,
Joel Bowman
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Yes, very similar world experiences to those pre WWll. I would say we are witnessing the repeat of history, as it is written, so shall it be done. Shame we simple mortals continue to bicker over such trivial matters. The important things in life are in your face, but you still sweat the small stuff….not a bad thing to prepare now for things that may or may not arrive, it’s better to be prepared. Some need toilet paper to survive. For many it may become part of their diets when the SHTF…so please work together, support those who do the right thing, avoid those who don’t, and always keep your faith in our one true God 🙏
Why don't you get to the underlying cause of what's gone wrong these past few years.
1. World governments completely over-reacted to Covid and went into total "Communism like control" in exercising Power over their citizens, coupled with money splashing solutions brought about by that first tragic decision. Academics shouldn't be advising pollies who by and large have no skills for the positions they hold. What are the credentials for being a politician. There aren't any, yet they are running the biggest business with the greatest impact on the society they are governing.
2. Had Ukraine - a profitable and democratic society been accepted at the time they sought admission into the European Block, the war and its carnage in my view would never have arisen.
Citizens of the world need to come to understand the motives of those who they elect to power and who at the the end of the day, citizens turn to, to fix the carnage whether it be economic or war. The world should be led for the greater good of mankind and not for those who manipulate power for their own ends or for the extremely wealthy few.