Saturday, April 5, 2008

Price Pressures Worldwide

"Protests and violent skirmishes over rising prices are hitting parts of the Middle East, a region already beset by strife but otherwise enjoying an unprecedented, oil-fueled economic boom. Hundreds of [UAE] workers ... burned and battered dozens of cars and buses at a U.S.-owned contracting company, then ransacked and set ablaze parts of the company's offices. ... Popular discontent over rising prices comes as Egypt and other large, oil-poor Mideast countries benefit from a region-wide investment binge fueled by petrodollars. ... Even the wealthier countries are vulnerable. Saudi Arabia, Qatar and the [UAE] have all been socked with soaring inflation. Because they peg their currencies to the U.S. dollar, those currencies have followed its sharp fall. ... In Qatar, inflation hit 12% last year, the region's highest. ... Yesterday, Saudi Arabia, the UAE and Bahrain were forced to match the Fed's most recent hefty rate cut. ... Tuesday, hundreds of workers for Drake & Scull, an electrical and mechanical engineering contractor, owned by U.S.-based Emcor Group Inc., rioted. ... Still, workers are finding it difficult to keep up with rising costs. Inflation in the UAE hit 8% last year, according to the IMF. But a recent consumer rights group said a survey it conducted showed food prices had risen 27%", WSJ, 20 March 2008.

"Germany's annual inflation rate jumped to a preliminary 3.1% in March from 2.8% in February, Germany's statistics office Destatis said. The pan-German inflation rate was also up 0.5% in March from February, the statistics office said", WSJ, 31 March 2008.

"As rice prices hit new highs, farmers across Asia are hoarding their crops, raising the prospect of a shortage in Asia and Africa that could lead to widespread unrest. ... On Thursday, medium-grade rise exported from Thailand--a de facto market benchmark--reached $760 a metric ton, up from $360 a ton at the end of last year. ... On Friday, India provided a new target for the market: It said $1,000 a ton as the minimum price for rice exports, to encourage dealers to sell to the domestic market instead of waiting for prices to track higher. ... Chookiat Ophaswongse, president of the Thai Rice Exporters Association, says farmers and millers are already holding onto their crops as prices continue to rise. Exporters who had entered supply deals with foreign buyers are now trying to find a way to compensate their customers because they can't physically get hold of the rice, he says. ... Robert Ziegler, ... at the International Rice Research Institute ... said, 'The whole market could become paralyzed. Who's going to sell rice at $750 a ton, when they think it's going to hit $1,000?' ... The U.S. Department of Agriculture predicts global rice stocks will fall to their lowest level in 25 years in 2008. ... Rice traded under $300 a ton until 2006. The price increases began accelerating in the fourth quarter last year when widespread flooding in Vietnam and the Phillipines stoked demand when inventories were falling", my emphasis, WSJ, 31 March 2008.

"In an indication of how soaring inflation is starting to disrupt Vietnam's fast-growing economy, 21,000 workers at a Taiwanese-owned factory that makes shoes for Nike Inc, have gone on strike seeking higher wages to keep pace with the rising cost of food and other essential goods. Vietnam's inflation rate hit 19% in March, the highest in 13 years, and its Communist leaders recently said their economic growth targets may have to be reduced to instead concentrate on curtailing rising prices in a country where the average per capita income is about $800 a year. ... To battle inflation, Vietnamese authorities have been striving to reduce liquidity in the country", WSJ, 2 April 2008.

I wonder if Jeffrey Currie thinks there is any relationship between the price of rice and the weakness of the US dollar? Well?

Communist Vietnam has a sounder monetary policy than the US. Amazing!


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