Bruce Walker writes today at the American Thinker that food prices are what is going to do in President Obama’s chances in the next election. One of the signs of hyperinflation is spiraling out of control food prices, and Walker points out that the food commodities are up 27% over the last six months. I don’t know about you, but a 54% annualized increase in food commodities looks a lot like hyperinflation to me. I wrote a post in August 2010 that dealt with food prices, which I reproduce here:
August 3, 2010
Monty Pelerin has a excellent article on inflation this morning. He maintains that the great temptation for government will be to try to solve the problem of debt and unfunded obligations by inflating it away, and that, since politicians are cowards, they will not make the tough decisions to avoid inflation. He writes, however, about the consequences of inflation: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”
I believe that the real danger of inflation may lie in the consequences it will have on the food supply. Never mind that food shortages have never been a problem in the living memory of most North Americans (unless they are over 75 or immigrated here from a war zone or something). Today, obesity in developed countries is feared more than starvation. So I made the following comment on Pelerin’s blog:
I am reading Adam Ferguson, When Money Dies (1975). He tells the story of Frau Eisenmenger, an Austrian who at the end of WWI had sufficient investments to live on and care for her family (31). She went into her bank in 1918 to withdraw some funds and her banker advised her to buy Swiss Francs, but it was illegal to hoard foreign currencies, and so she declined. Eventually, her savings became worthless. Her situation was greatly helped by her daughter working in the “American mission” paid in dollars, renting a room in her apartment to an American, and speculative investments in the Austrian stock market.
I fear that what will happen is similar to Europe in that period, when food was scarce and required a large percentage of income to procure. Eventually, the price of food will sky rocket and so more dollars will be created ex nihilo. Then the farmers will refuse to supply their food to people for worthless dollars and food stamps from the government, and they will have to stop producing–because their costs have to be covered too. Then, we will see shortages like never before. A farmer offered Frau Eisenmenger three month’s provision for her grand piano (33); and an acquaintance of hers sold her own piano for a sack of wheat flour.