Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

World is in the Early Stages of a Major Leg Up in Food Prices

Economics / Food Crisis Jan 20, 2011 - 03:29 PM GMT

By: Michael_Pento

Economics

From all accounts it appears that the world is in the early stages of a major leg up in food prices. The major macroeconomic trend will likely drive economic policy and the investment outlook for years to come. Although mainstream pundits like to focus on cyclical drivers like the weather, the real force behind the move is secular. The U.S. is leading the world in a pandemic of monetary inflation that is helping to cause commodity prices, food in particular, to skyrocket across the globe.


The Federal Reserve's monetary excess is currently being magnified by China's misguided currency peg policy. As the United States debases its currency through excess printing, China must follow suit. In order to maintain a consistent relative valuation, China must adopt the monetary policy of the United States.

Just last week, China announced that in the 4th Quarter 2010 its foreign currency reserves leapt by $199 billion to $2.85 trillion. The increase was much larger than economists expected, and suggests that China is printing as much as $2 billion worth of RMB per day in order to buy dollars to maintain the peg. The big problem is that China, with a booming economy, is adopting a monetary policy of an economy that is contracting. This is the perfect recipe for inflation.

And it's not just China that is enforcing a currency peg. Many other countries intervene in the forex market when they feel their currency has risen too high against the greenback.

For example, the Chilean currency gained 17% in value against the USD in just 7 months during 2010. The surging currency underscored the country's status as an emerging markets success story. But that condition abruptly ended last week when Chile's central bank pledged to intervene in the local currency market by increasing foreign currency reserves by $12 billion in 2011. After the announcement, the currency predictably dropped against the dollar and caused a major sell-off in Chilean equities.

The specious idea behind this action is that foreign governments believe that by keeping their currencies cheap they can bolster exports and maintain a strong economy. But a rising currency does not necessarily restrain exports. If those countries currently committed to pegs were to reverse course, their problems with local inflation could diminish. And those lower prices could offset to a certain degree the decreasing purchasing power experienced by the importers of those countries' domestic goods.

For in-depth analysis of this and other investment topics, subscribe to The Global Investor, Peter Schiff's free newsletter. Click here for more information.

By Michael Pento
Euro Pacific Capital
http://www.europac.net/

Michael Pento is Senior Economist and Vice President of Managed Products for Euro Pacific Capital. He is a well-established specialist in the Austrian School of economic theory and a regular guest on CNBC and other national media outlets.

Copyright © 2011 Euro Pacific Capital, Inc.

Disclosure: Euro Pacific Capital, Inc. is a member of FINRA and SIPC. This document has been prepared for the intended recipient only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in U.S. Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money.

Data from various sources was used in the preparation of this document; the information is believed but in no way warranted to be reliable, accurate and appropriate. Euro Pacific Capital, Inc. employees buy and sell shares of the companies that are recommend for their own accounts and for the accounts of other clients.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in