Rice, death and the dollar

[FarCenter]

By Spengler, Asia Times http://www.atimes.com/atimes/Global_Economy/JD22Dj01.html

The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington's economic misery now threatens to become a geopolitical catastrophe.

Months ago, I offered that China, Russia and other cash-rich nations held the antidote to the incipient credit crisis: "If the US wants to remain the magnet for world capital flows it became during the 1990s, it will have to allow the savers of the world to become partners in the US economy, that is, to buy into its first-rank companies." No such thing occurred, of course, as Washington has made it clear that it would not allow sovereign funds to own the likes of Citicorp. What are the world's investors doing with the trillion dollars a year they used to invest in American securities, including subprime derivatives and various forms of collateralized obligations that turned out to have more obligation than collateral? They aren't buying American companies because they are not permitted to. They are buying food and other stores of value instead.

...

China is exchanging its depreciating reserves of US dollars for things of value, notably rice, with frightening consequences for dependent countries, and deadly consequences for American foreign policy. The chart below shows the price of 100 pounds of rice against the euro's parity against the US dollar during the past 12 months. The regression fit is 90%. There is an even tighter relationship between the price of rice and the price of oil, another store of value against dollar depreciation.


...


It is not only rice, of course, that the cash-rich countries of the world are buying as a store of value; the price of wheat, soy and other grains has risen almost as fast. This might deal the death-blow to America's hapless efforts to stabilize the Middle East, where a higher proportion of impoverished people eat off state subsidies than in any other part of the world. Egypt has been the anchor for American diplomacy in the Arab world since the Jimmy Carter administration (1977 to 1981), and is most susceptible to hunger. Food prices have risen by 145% in Lebanon and by 20% in Syria this year. Iraqis depend on food subsidies financed by American aid.

Reduced to essentials, America's foreign policy sought two unattainable objectives: to stabilize the Middle East and destabilize China. That is an exaggeration, of course, for Washington hoped not to sow instability, but only to put China in its place over the Tibetan affair. The George W Bush administration might as well have used the State Department as a set for the Jackass reality show. American arrogance has eroded the ground under many of the governments on which its foreign policy depends. It is hard to characterize what will come next, except, like the stunts on Jackass, that it is going to hurt.

[SpiralHawk]

1. "We republicon homelanders are doing a heckuva job. Smirk." - Commander AWOL

[Wiley50]

4. "Hey Condi!. There's a whole crowd of peons out there yelling for "Rice"

"Go out and see what they want with you"

[UndertheOcean]

2. K&R

[thunder rising]

3. This is just so much BULLSHIT I can't read anymore. It looks like somebody bought a lot of options

[Fovea]

5. The necons add another horseman

to the apocalypse.

But this is a big gamble. Anger makes people stupid.
Hunger makes people desperate.

Again, no gate or CACI merc is going to keep this from their door.
What do they think will happen to their third world strongmen when that infamous third hungry day rolls around.

And who will the mop follow? Whoever has the food.