Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Global Food Riots Protend Trouble for the US Dollar

Commodities / Food Crisis May 08, 2008 - 11:20 AM GMT

By: Chris_Galakoutis

Commodities

On a trip to Canada recently I couldn't help but notice the extensive media coverage paid to the worldwide food price inflation, as well as the riots breaking out in many countries over food shortages.

And of course the list of reasons given by the so-called ‘economists' interviewed are completely devoid of the one all important reason fueling what may arguably become an epic food price inflation: the declining value of the US dollar.


Many countries around the world peg their currency to the dollar, either through what are called soft or hard pegs.

As I have written on numerous occasions, these countries are paying the price for their ‘loyalty' by importing the inflation the US is creating. In order to support the US currency and keep theirs from appreciating, countries must create more of their own and sell it in the open market to buy dollars. This increased supply of their own currency fuels the inflationary conditions in their own countries.

Akin to a destructive typhoon that has hit shore in some and about to in others, the inflation monster wasn't an issue so long as it was gestating and churning over open water after developing and departing US shores.

But as it starts to hit the many nations foolish enough to have invited the storm, the question that arises is how will the affected countries respond?

In my opinion, as this food crisis grows and civil unrest intensifies worldwide, all nations impacted by it will finally be forced to stand up and walk off this particular field of dreams.

For if it is one thing and one thing alone that all politicians understand it is power, and remaining in power. And in most places that means votes.

The question for the longest time has been ‘when,' as in when will countries begin to un-peg from the dollar. That's already happened in some places, but I believe is about to pick up pace as prices of not only food but also all basic necessities spiral out of control. The un-pegging will cause those foreign currencies to strengthen, bringing down domestic prices virtually overnight.

Authorities here in the US have, up until now, been able to ‘fool' the people into believing there was no inflation, by working to bring down the cost of their big screen TV's and other imported consumer electronics. By doing so, the rising costs of life's necessities have been camouflaged, as it were, since the average consumer was left par for the course after all was said and done.

But in a slowing economy and home equity cash-out's a thing of the past, the now frugal consumer is hurting, having to carry and service large debt while also feeling the full force of the price increases for everything from food, energy, health care and all other necessities that can not be outsourced on the cheap.

As this inflation spread it can therefore mean only one thing: countries will let go of their currency pegs sooner rather than later.

This will come as a complete and total shock to those currently calling for a massive dollar rally and corresponding collapse of gold and commodities prices.

It is why we have been picking up more of our favorite gold, silver and energy stocks this past week. Some of these stocks are trading it ridiculously low prices, a few approaching their cash on hand. It is these stocks that will have the most explosive moves to the upside in the months ahead.

The MurkyMarkets.com website by Christopher G Galakoutis is a running macroeconomic commentary on the state of the financial markets with emphasis on gold, silver, the currency markets and energy. Visitors to our new site are always welcome.

By Christopher G. Galakoutis

CMI Ventures LLC
Westport, CT,
USA Website: www.murkymarkets.com
Email: info@murkymarkets.com

© 2005-2008 Christopher G. Galakoutis

Christopher G Galakoutis is an independent investor and commentator. A student of finance and economics, he has in the last few years directed his attention to studying the macroeconomic issues that he believes will impact the United States, and the world, for many years to come. While working diligently to cater investments for his own portfolio to the changing economic landscape, he also decided to start writing about these issues in an effort to reach as many people as possible. In that respect Chris also highly recommends tuning in weekly to the Financial Sense Newshour with Jim Puplava, and Peter Schiff's book “Crash Proof: How to Profit From the Coming Economic Collapse.”

Christopher Galakoutis  Archive

© 2005-2019 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

6 Critical Money Making Rules