Weather Report: Commodities, The Dollar And Something Else

COMMODITIES: In a 7-16-08 article in “The Daily Reckoning” the veteran commodities trader (and financial advisory newsletter editor) Kevin Kerr noted that the most common question he’s gotten over the past 18 months is “ When will the bubble pop? “

His response “There is no bubble.”

“Change is often hard to accept, $140 oil, $1000 gold, $8 corn… this is all the new reality. None of these new price trends are a figment of some rogue speculator’s imagination or the product of evil activity. This is a wake-up call that our growing world is hungry for the limited resources it still has.”

THE DOLLAR: We noted on Tuesday, July 15, that the Federal Reserve, in conjunction with the U.S. government, had apparently chosen to support financial stability over price/dollar stability. The result of that decision, we believe, will probably be a further weakening of the dollar and greater inflationary pressure on prices. Especially the prices of oil and food.

SOMETHING MORE: We mentioned also last Tuesday the World Bank’s recent estimate that the cost of food staples had risen about 83% over the past 36 months. The effects of this cost increase, we noted, was to put a substantial portion of some pretty modern countries in a position of actual food insecurity ( a situation wherein people weren’t getting enough food to meet their dietary needs).

Today we want to speak about a thoroughly modern country with concerns about a sure and certain food supply for their future: Britain. We especially want to look at some of their concerns and think how they might match up with conditions in the U.S.

The “Mail Online” in Britain recently published an article entitled “ ‘Nine meals from anarchy…’”. In this article they noted that a fuel crisis wherein trucks were unable to move, would produce bare grocery store shelves within about 3 days. They felt that nine missed meals would put their citizens into the streets and begin the breakdown of law and order. The article pointed to the aftermath of Hurricane Katrina in the U.S. as evidence for this view. The conditions that might also contribute to a post-Katrina-type aftermath would include rapidly rising oil and food prices ( U.S. here also?).

It was noted that mechanized agriculture produced cheaper food ( as a % of household income) and with that an increase in the standard of living. The question arises “ How would a people used to a higher standard of living cope with conditions such as climate change, oil depletion, and reduced food supplies ? ( Is there any nation of people more “ want dependent” than the U.S.?)

Britain now faces an increasing dependence on foreign food imports ( Britain was last food independent in the latter part the 18th century) in the face of global competition for foodstuffs (Here we might note increased U.S. imports of food too!)

So how are Britons coping ? Other articles written about the time of the article we’re discussing point to a waste-not, want-not return to a “ wartime food frugality”, the kind evidenced during WWII. Britain is a nation of 11 million gardeners and although food gardening declined in the last two decades before the end of the current century, in has substantially increased in recent years.

Could Britain be viewed as a sort of “miner’s canary” within a mine of depleting future resources? A bird whose current discomforts give us a both a warning and some ideas on how to prepare?

On Tuesday of next week we hope to discuss future oil availability ( recent articles indicate 95% of current agricultural production is fossil fuel based) with emphasis on the U.S.

Meanwhile, keep your eyes on the horizon.