We have set up shop in a café near Auteuil in Paris…copy of the International Herald Tribune in hand…and someone’s wifi connection at our fingertips. It is a delightful spring morning in Paris…the chestnut trees are in flower…birds sing, the sun shines, and beautiful women amble along the sidewalk.
We had a café crème and a croissant…and then, we were enjoying the view so much, we ordered another. The waiter brought a check – the damage was just $15, very reasonable, under the circumstances.
The relevant circumstance is that the price of food is soaring everywhere. The grains are selling near record prices…and so is oil. This is no laughing matter. Food is a relatively minor part of our own family budget; the rising prices are only a nuisance. But a news report from Reuters tells us that 20% of Asians live on less than a dollar a day. Many are farmers with their own local supplies of cheap food. But more and more of them live in cities and pay global prices for their daily bread.
Rising food prices are producing famine-like conditions for many of these poor people. For others, they are wiping out years of financial progress, creating what Reuters calls a “Poverty Time Bomb.”
But who should we thank for these remarkable events – a price induced famine…a poverty ‘time bomb’? How could these things be happening in the 21st century – nearly two decades after the fall of the Berlin Wall…more than a century after the invention of the mechanical reaper…and 95 years after the creation of America’s central bank? Ah…there’s the funny part.
Prices are twice as high as they were two years ago. Is the weather twice as bad? Are people suddenly eating twice as much? No? Then what happened? What has happened is that the central bank has created bubble-like conditions in the commodity markets.
Markets and Money