Weather Report: Economic Crisis, Food, More Sources and Musings

ECONOMIC CRISIS: This past Friday, 9/19/08, we here at PrudentHome noted that the news was full of articles on the current U.S. financial crisis. The same has been true since last Friday with some specifics and congressional hearings added.

Four headlines from money news.newsmax.com on Friday last give us a sense of where things might be headed :

1. “El-Erian: Bailout May Not Fix All the Damage”, The head of the worlds largest bond fund indicated on Friday that the government plan to deal with the Wall Street crisis may be too late to fix the damage suffered by the financial system and the U.S. economy.,

2. “Think $700 billion Is the Limit? Think Again”, This article notes that $700 billion is not the maximum but merely the ceiling at any one time the U. S. Treasury may spend. The proposal also gives the U.S. Treasury Secretary huge power that is “non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

3. “Foreign banks Will Get Treasury Support Too”. Here it is pointed out that toxic American mortgage debt owned by American units of foreign banks will be treated the same as U.S. banks, ’It’s a distinction without a difference whether it’s a foreign or a U.S. one,” stated the U.S. Treasury Secretary.

4. “Paulson: Bold Approach Needed to End Crisis”, We need a bold approach, thinks Secretary Paulson , because “The financial security of all Americans…depends on our ability to restore our financial institutions to a sound footing.”

FOOD: upi.com/Business on 9/15/08 presented an article reminding Americans of concerns other than financial: “Scientist says ag costs continuing to rise”. The article notes that the dramatic increases in the costs of producing corn, soybeans, and wheat should continue for the 2009 growing season with variable costs for “ rotational corn increasing by 29%, compared to 40% for soybeans and 39% for wheat.”

The above article on ag costs takes on an even more somber aspect in light of the September 21, article in The DesMoines Register (desmoinesregister.com) entitled “Brasher: Corn, soybean supply on brink of shortages”. Even if the U.S. governments latest crop forecasts are right and the supply is sufficient to meet demand, the stocks (reserves) are expected to hit historically low levels. The result here is no stock cushion and no margin for error going in to 2009. Grain supplies are also expected to remain tight with “Any disruption anywhere” leading to price increases.

Here again the individual family is put on notice : expect further food price increases in the coming months.

MORE SOURCES: http//grandpappy.info (select, How to Survive Hard Times) by Robert Atkins is a source for short, high-quality monographs on topics that may be of special interest to those concerned about the possibility of coming hard times. Topics are varied and pertinent. The last one we read and enjoyed was #12,” Food Inflation Price Index based On One Year Emergency Food Supply” (revised 9/1/08)

MUSINGS: The typewriter appears to be beyond our control at the moment but we watched an economic panel discussion last including Nouriel Roubini,NYU Economics Professor. This gentleman has been spot-on concerning his analysis of the U.S. credit/financial/liquidity situation (to the consternation of the blue-sky business and governmental commentators/economists). Paraphrasing Professor Roubini roughly: the U.S. is in recession and the only question is whether the landing will be a crash landing or a “controlled” crash landing.

Keep your eyes on the horizon.