It is quite an unusual occasion to see a major currency in a developed country lose more than 10% of its buying power in less than a year. However, these are unusual times!

But no matter how dire the fundamentals are for the greenback, it should still adhere to the technical rules that govern financial markets. Therefore, despite there being a massive bear market in the US dollar, we should still see periods of consolidation or perhaps even minor bear market rallies.

The last time the USD went through a period of consolidation

Apr 28 2008 11:00AM

Inflation Fears & Food Shortages by James Turk

There have been numerous media reports about food shortages around the globe and the resulting riots caused by empty store shelves. Usually missing from these reports though is the reason for the shortages.

The problem is not agricultural, but rather monetary. In other words, the problem is not too few food staples, but too much money – or too much fiat paper currency to be precise.

In contrast to the classical gold standard, there is today no discipline on the creation of money, with the consequence that it is being created to excess. Rising prices of all goods and services are the inevitable result, and what’s worse, surging inflation has become a global scourge. All currencies are being inflated. Only the rate of debasement is different.

In an inflationary environment, it is basic common sense that soaring prices will empty store shelves. This outcome is also the experience of countless inflationary episodes throughout history. People dump the depreciating currency in favor of tangible, useful assets, and basic staples are high on the list of things to acquire.

The following table of commodity prices is from the April 24th 2008 print edition of The Economist magazine. Note the monthly and yearly increases for food.

The 69.0% increase in food prices over the past year makes a mockery of government reported price indices. Their bogus reports obviously understate the true rate of monetary debasement. Don’t let this happen to you: Call The Superior Gold Group today at 888-969-6465 and protect yourself today with precious metals.

There is of course another problem causing food shortages, and no, it is not the speculators being so roundly blamed by the media. Government – or governments to be more precise – is again the cause. Many of them are acting in ways that cause food shortages.

I don’t want to alarm anybody, but maybe it’s time for Americans to start stockpiling food.

No, this is not a drill.

You’ve seen the TV footage of food riots in parts of the developing world. Yes, they’re a long way away from the U.S. But most foodstuffs operate in a global market. When the cost of wheat soars in Asia, it will do the same here.

Reality: Food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund. And there are very good reasons to believe prices on the shelves are about to start rising a lot faster.

“Load up the pantry,” says Manu Daftary, one of Wall Street’s top investors and the manager of the Quaker Strategic Growth mutual fund. “I think prices are going higher. People are too complacent. They think it isn’t going to happen here. But I don’t know how the food companies can absorb higher costs.” (Full disclosure: I am an investor in Quaker Strategic)

Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you’ll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.

Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.

And some prices are rising even more quickly. The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They’re all up by more than 10%. Eggs have rocketed up 30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.

These are trends that have been in place for some time.

And if you are hoping they will pass, here’s the bad news: They may actually accelerate.

The reason? The prices of many underlying raw materials have risen much more quickly still. Wheat prices, for example, have roughly tripled in the past three years.

Sooner or later, the food companies are going to have to pass those costs on. Kraft saw its raw material costs soar by about $1.25 billion last year, squeezing profit margins. The company recently warned that higher prices are here to stay. Last month the chief executive of General Mills, Kendall Powell, made a similar point.

The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people are joining the middle class each year, and that means they want to eat more and better food.

A secondary reason has been the growing demand for ethanol as a fuel additive. That’s soaking up some of the corn supply.

You can’t easily stock up on perishables like eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals, and cans of everything from tuna fish to fruit and vegetables. The kicker: You should also save money by buying them in bulk.

If this seems a stretch, ponder this: The emerging bull market in agricultural products is following in the footsteps of oil. A few years ago, many Americans hoped $2 gas was a temporary spike. Now it’s the rosy memory of a bygone age.

The good news is that it’s easier to store Cap’n Crunch or cans of Starkist in your home than it is to store lots of gasoline. Safer, too.

Hyperinflationary Depression

Until now, I have given equal credence to two possible scenarios:

1. We could have several years of inflation as we do now, and the powers-that-be would have a sudden rush of brains to the head, like Paul Volcker and Ronald Reagan did in 1980, and stop the “printing press,” ending inflation and the gold and silver bull market, for at least a few years; or
2. It is too late to stop it. The political forces and the Unfunded Liabilities would prevent the powers-that-be from ending the money-printing process, and in fact, would grossly accelerate it. This would result in a hyper inflation (400 percent inflation or more), and the eventual total destruction of the dollar. Suddenly America would find its money totally useless. Store shelves would be empty, gas would go through the stratosphere, and Americans would suffer through the greatest threat since the Great Depression of the ’30s.

So what caused me to settle on number two?

I received John Williams’ recent newsletter “Shadow Government Statistics,” www.shadowstats.com in which he describes his case for a hyper-inflationary depression. It was most persuasive. It certainly persuaded me, and is consistent with what I’ve said for years.

I spent the ’70s fending off the media label of “Prophet of Doom,” arguing that I expected much less than doom. It turned out to be so.

I’ll face the same accusations, and this time they are right. The financial world we know and love is facing genuine doom. You could lose the value of all your assets in the stock market. You could find yourself unable to buy essential commodities, when you want them, and gold and silver will be valued, not in the tens or hundreds of dollars per ounce, but in the thousands!

John Williams’ Shadow Government Statistics newsletter is most unusual. John is a consulting economist with all of the academic credentials. Most of his clients are bank officers and high-ranking corporate officers.

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UN experts warn: long-standing conflicts set off by higher food prices are in store for the world.

“Imminent wars will break out due to worsening living conditions in poor countries,” Jean Ziegler, the UN Special Rapporteur for the Right to Food said. Within the past two months prices on rice increased by 52 percent, while grain prices soared by 84 percent. As a result, several countries in Asia, Africa and Latin America were hit by mass riots and revolts of the hungry.

Experts associate the price growth with several factors. First of all, food demand is increasing rapidly in such developing countries as China and India. Secondly, the record-high prices on fuel affect food prices. Thirdly, expensive traditional fuel and developing modern technologies whip up global economies’ interest in biofuels which can be obtained from such raw materials as maize, rye, sugar

Since 9/11, and seemingly without the notice of most Americans, the federal government has assumed the authority to institute martial law, arrest a wide swath of dissidents (citizen and noncitizen alike), and detain people without legal or constitutional recourse in the event of “an emergency influx of immigrants in the U.S., or to support the rapid development of new programs.”

Beginning in 1999, the government has entered into a series of single-bid contracts with Halliburton subsidiary Kellogg, Brown and Root (KBR) to build detention camps at undisclosed locations within the United States. The government has also contracted with several companies to build thousands of railcars, some reportedly equipped with shackles, ostensibly to transport detainees.

SECRETS

OF THE

FEDERAL RESERVE

FEMA CONCENTRATION CAMPS: Locations and Executive Orders
There over 800 prison camps in the United States, all fully operational and
ready to receive prisoners. They are all staffed and even surrounded by
full-time guards, but they are all empty. These camps are to be operated by
FEMA (Federal Emergency Management Agency) should Martial Law need to be
implemented in the United States and all it would take is a presidential
signature on a proclamation and the attorney general’s signature on a
warrant to which a list of names is attached. Ask yourself if you really
want to be on Ashcroft’s list.
The Rex 84 Program was established on the reasoning that if a “mass
exodus” of illegal aliens crossed the Mexican/US border, they would be
quickly rounded up and detained in detention centers by FEMA. Rex 84
allowed many military bases to be closed down and to be turned into
prisons.
Operation Cable Splicer and Garden Plot are the two sub programs which will
be implemented once the Rex 84 program is initiated for its proper purpose.
Garden Plot is the program to control the population. Cable Splicer is the
program for an orderly takeover of the state and local governments by the
federal government. FEMA is the executive arm of the coming police state
and thus will head up all operations. The Presidential Executive Orders
already listed on the Federal Register also are part of the legal framework
for this operation.
The camps all have railroad facilities as well as roads leading to and from
the detention facilities. Many also have an airport nearby. The majority of
the camps can house a population of 20,000 prisoners. Currently, the
largest of these facilities is just outside of Fairbanks, Alaska. The
Alaskan facility is a massive mental health facility and can hold
approximately 2 million people.
Now let’s

“The power of the Executive to cast a man into prison without formulating any charge known to the law, and particularly to deny him the judgment of his peers, is in the highest degree odious and is the foundation of all totalitarian government whether Nazi or Communist.”

- Winston Churchill, Nov. 21, 1943

Since 9/11, and seemingly without the notice of most Americans, the federal government has assumed the authority to institute martial law, arrest a wide swath of dissidents (citizen and noncitizen alike), and detain people without legal or constitutional recourse in the event of “an emergency influx of immigrants in the U.S., or to support the rapid development of new programs.”

Beginning in 1999, the government has entered into a series of single-bid contracts with Halliburton subsidiary Kellogg, Brown and Root (KBR) to build detention camps at undisclosed locations within the United States. The government has also contracted with several companies to build thousands of railcars, some reportedly equipped with shackles, ostensibly to transport detainees.

According to diplomat and author Peter Dale Scott, the KBR contract is part of a Homeland Security plan titled ENDGAME, which sets as its goal the removal of “all removable aliens” and “potential terrorists.”

Fraud-busters such as Rep. Henry Waxman, D-Los Angeles, have complained about these contracts, saying that more taxpayer dollars should not go to taxpayer-gouging Halliburton. But the real question is: What kind of “new programs” require the construction and refurbishment of detention facilities in nearly every state of the union with the capacity to house perhaps millions of people?