You can't eat the paper T-bonds are printed on
The
world is a fine place and worth fighting for. - Ernest Hemingway, For
Whom The Bell Tolls
Washington
– The PIIGS (Portugal, Ireland, Italy, Greece, Spain) won this
battle, if not the war.
When the foreign ministers of Italy and Spain stormed out of the euro-zone debt crisis talks earlier this month, they got their way – a lower cost-of-credit concession from the Germans.(click here to read an earlier report)
Ten-year
bonds from that nation were auctioned at a record low yield of 1.36
percent this week - the lowest on record.
But
the Earth abideth forever, and weather conditions in the midwest –
torrential rains and torrid heat – is both keeping farmers out of
the fields to plant - and causing a predictable low yield in grains.
Government
forecasters are calling for a resulting 12% reduction in production
of that high-calorie, low nutrition staple – shelled corn – for a
predicted yield of 13 billion bushels, down from an expectation of
13.5 billion bushels, and way, way down from the June estimate of
14.79 billion.
Futures
prices are hovering between $7 and $7.50 – in the same notch they
occupied during the July crunch of 2008, when the people of the
western world rioted in the capitals of the republics, just the same
as they did in the streets dominated by the despots and dictators.
Banking houses turned into orphanages - and the safe and solid
Republican world of high finance turned into a crime scene.
That
figure, $7.50, represents a 33% rise in price over the past month.
Everything
from the price of a can of Coca-Cola to a plate of ham and eggs is
going up, up, up – and the sky is the limit when you're hungry.
Unlike
government paper, food prices – and corn futures are a bellwether
predictor of the category – have a huge influence on the way your
friends and neighbors behave.
The
common man is not like executives, whose behavior is completely
unpredictable until the moment of crisis occurs; the common man will
always fight like hell when he gets hungry, and he's powerless to do
anything else when the price of what it takes to feed the women and
kids is climbing higher and higher.
High
food prices bring down governments. Look it up.
Governments
go down when the cost of credit and the cost of food cross on a
rising curve, and men begin to feel that first unreasoning,
unyielding pang of hunger. When they look into the eyes of their
lovers and see fear - listen to their children as they cry - they
become as savage as their Creator made them, as tough as the tooth,
claw and hide with which they are endowed.
Brian
Hunt wrote in “Daily Wealth,”… one of the great fears
of dictators around the world is a big spike in food prices. After
all, the average Joe – whether he lives in Madrid, Mumbai, or
Mexico City – will willingly march to war for the craziest reasons.
He will endure punitive tax rates. He will cheer on the dumbest
government actions. But should his food become expensive, he'll be
rioting tomorrow…alongside every one of his neighbors.
The
smart money in the commodities pits says it best. If bad corn weather
persists, “the people of the world will riot like crazy as food
prices continue to climb.”
That's
their bet, and money - no matter its relative worth - talks.
Depend
on it. So mote it be.
-
The Legendary
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