Sunday, April 27, 2008

It's 1973 All Over Again

"The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. ... Washington has weakened the value of the dollar as a palliative for the credit crisis, so much that 'nobody seems to doubt that the US dollar will lose its status as the world's reserve currency,' as journalist Amity Shlaes wrote in an April 9 Bloomberg News column. ... 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. ... [T]he ascent in the cost of rice to $24 from $10 per hundredweight over the past year tracks the declining value of the American dollar. ... For developing countries whose currencies track the American dollar ... this is a catastrophe. ... Never before in history has hunger become a global threat in a period of plentiful harvests. ... 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. 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", Spengler at, 21 April 2008.

Spengler strikes again. China's position is like Japan's in 1973 when Nixon embargoed the shipment of soybeans to Japan. Are US export controls coming next? See my 4, 19 and 21 February 2008 posts.

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