Amerika

Furthest Right

Incoming crisis: Food prices rise as supplies fluctuate before a fall

Ahead of the curve learning:

Despite the economic crisis and widespread deflation fears, world food prices are rising. This major escalation in food prices calls to question the conventional wisdom that inflation is not a problem.

Today’s worldwide food inflation is a far different story, because it is happening in the face of widespread deflation fears. Consumers are delaying purchases. Banks are hoarding cash (ie: most Chinese merchants aren’t accepting credit cards because banks are delaying payments). Businesses are scaling back expansions and reigning in spending. Yet, despite all these factors, food prices are going up. Isn’t that interesting?

The US is not immune from rising food inflation: prices for food in US grocery stores jumped 6.6% last year, the biggest spike since 1980. Even this December, which saw gasoline prices fall by 17.2% (the biggest monthly decline in 71 years), food costs refused to fall. If US food prices couldn’t muster a fall in December, five months after the commodity bubble burst and deflation fears gripped the world, then they should not be expected to fall at all.

Market Skeptics

So capitalism, democracy, etc. make us free, eh?

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