From Birch Gold Group
You’ve read about housing market bubbles, stock bubbles, and even credit bubbles. But the next bubble you’re about to discover could be even more dangerous, and may have even more far-reaching consequences.
It’s called a food price bubble, and it’s been inflating under our noses since March 2020. You can also see the dangerous trajectory it’s on compared to three previous years in the FAO chart.
The FAO Food Price Index (FFPI) averaged 107.5 points in December 2020, up 2.3 points (2.2 percent) from November, marking the seventh month of consecutive increase.
The official January 7, 2021 release from the Food and Agriculture Organization explains the chart above in more detail.
And according to a Business Insider piece, grain has risen in price 50% over the last six months while other commodities like industrial metals are starting to drop in price.
In fact, according to an official source, food price inflation has risen each month by at least 3.5% (year over year) since April 2020 both at home and away from home.
And December didn’t show any signs of that trend letting up, with a price increase of 3.9% over December 2019. Keep in mind, we’re talking about food here. Technically this price surge isn’t a bubble ‑ it’s inflation.
This is exactly what we expect to see when the Fed’s loose-money policies support bubbles in the housing, stock and credit markets. An excess of currency chasing a fixed supply of paper assets inflates prices, which isn’t a big problem as long as the feeding frenzy stays contained in the paper asset markets. So long as amateur day-traders stick to playing stock-market roulette with the likes of Tesla and GameStop, the day-to-day world can go about business as usual.
Eventually, though, those inflated prices spill out of the financial sector. Newly-minted bitcoin billionaires and those who’ve profited from the Robinhood lottery take some cash out and start spending it on tangible goods.
When prices go up, we economize. Gas prices too high? Drive less. Electricity bill higher than last month? Stop fiddling with the thermostat, install LED bulbs. But when food prices go up, we can’t exactly eat less…
Price increases on such a core necessity affect everyone – and represent a dangerous escalation if they get out of hand.
Historically, food inflation has caused civil unrest
Albert Edwards, Société Générale’s market strategist and a notorious market bear, claims the Arab Spring in 2011 and other episodes of violent civil unrest were tied to food prices that got out of control:
Many economists believe high global food prices from the end of 2010 were the trigger, Edwards said, highlighting that high food prices also contributed to the French and Russian revolutions, as well as the 1989 unrest in China.
Riots over food prices have occurred with depressing regularity throughout history. You might remember the last time the world saw widespread unrest thanks to food price inflation – during the run-up to the Great Recession, America’s last big asset bubble.
This time we aren’t talking about third-world countries. Almost 15% of Americans (that’s almost 1 in 6) could go hungry, thanks in part to state government mitigation efforts in response to the pandemic.
Even billionaire investor Ray Dalio reports that the U.S. could be on the brink of some kind of major civil conflict. In Chapter 9 of his book The Changing World Order he claims we are at stage 5 of 6, which is the stage just before a civil war or revolution disrupts the old regime.
After that, he claims the cycle starts again at 1, and the whole process “typically takes 100 years, give or take a lot.”
That leaves a lot of uncertainty about the near future. It’s been about 155 years since the last U.S. Civil War, the only one we’ve seen throughout our nation’s 250-year history. Of course this might not happen at all.
There’s a lesson in the famous John Maynard Keynes quote, “The market can stay irrational longer than you can remain solvent.” The same basic idea applies here: a bad situation can hover on the brink of catastrophe without toppling into utter disaster for far longer than even the sharpest analysts could guess.
If we’re truly fortunate, these apocalyptic visions remain in the realm of fantasy.
In the meantime, the best thing you can do right now is not to dwell on black swan scenarios, but to take the steps necessary to ensure you and your family will thrive regardless of the rest of the world’s situation.
Step back from the brink and gain control
Take a deep breath and assess your situation. Do what you can to make yourself and your family resilient to market forces and government whims. No matter what happens to food prices tomorrow, you can put yourself in the best position possible before things go sideways.
From an economic perspective, that means taking a few minutes to examine your nest egg. Consider your exposure to risk levels, and diversify any assets as you see fit. That can include shifting some of your savings into precious metals like gold and silver. When the paper asset markets catch fire and the inferno spreads, tangible physical assets endure – and shine even brighter amid the ashes.
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
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Having access to food is only important if you eat.
Side note- I buy some bulk items online from a couple of different companies usually once or twice a year to keep an inventory on hand for things we use frequently, like salt, wax, bottles, etc. In years past if you spent enough, shipping was always free. No more. Every supplier I have talked to in the past month has dropped the free ship policies regardless of the size of the order, adding anywhere between 20% and 50% to the price. The biggest supplier of day old chicks- McMurray Hatcheries just sent the new catalog and the price increase for all orders was up by 33% over last year. I priced out a rolling door for the greenhouse in November at $650 and put it on hold until I could come up with the capital and when I called the order in the other day the price had risen to $1,130.
You thought 2020 was problematic, just wait.
And foreign suppliers will be demanding upfront payments before shipping so they can dump those fake fed fiat currency before they depreciate overnight and they lose all their profit.
Fact!
Keep in mind “flucht en die sachwerte” and “Katastrophenhauss.” These Austrian School terms define inflation going parabolic and ballistic. Too much money and folks seek stores of value, the
“flight or escape to things of value.” The wild frenzy to spend immediately to obtain the stores of value, the Katastrophenhauss, means “Crackup Boom.” The wild hour by hour price increases accompanying the out of control printing of money.
With the crew of despotic buffoons we have in DC, acting out “Atlas Shrugged,” the Weimar scenario defined by the Austrian terms is far more likely than some adult slamming on the brakes. It has probably gone beyond where that is even possible. We might escape by revaluing Gold to reflect the increase in money supply relative to 1948 Bretton Woods levels, but without a leader who understands economics and the will to enforce reality-get Gold, Silver and lots of sachwerte.
Biden will write an EO prohibiting food price increases. Problem solved.
I guess we’ll see how that works out, won’t we?
I remember the Nixon wage and price controls. The butchers just invented new cuts of meats.
Peanut Carter tried that back in the 70’s and it did not work out too well for him.
Remember the beef boycotts?
No, but I do remember eating horsemeat.
That was before some cretins got it outlawed.
While not having a crystal ball, and not really having any explanation for why, the wife and I both brought up the subject of stocking up in December of 2019. Both of us had a feeling of unease, not sure how else to explain it really.
Sure glad we did though!
Last summer, my wife told me I was wasting time with my little garden. Last week, she said I should get a really good tiller and make the garden bigger. Last year, I was a food hoarder and today I am asked why I do not have more food with extended shelf life.
It is amazing how her attitude has changed.
Don-the-Con increased the debt by 8 trillion$$$ in 4 years while his election BS was a surplus! Too funny! As a geo-finance guy I knew that would happen and banko america is heading to a 40trillion fed debt in the next 4 years of Biden admin! And the majority of that debt will be printed, or rather digitally created, from thin air! Once America loses the reserve currency status allowing fake fiat currency to be its biggest export to finance MIC and entitlement state America will be ravaged by inflation as those 10s of trillions of rapidly depreciating fiat currency will be returning to america as foreigners dump them!
The american empire’s days are numbered and the decline has started and will only accelerate. Social security and medicare will be BANKO, insolvent, by 2029 so there will many more trillions of fake fiat that needs to be printed!
This is for real folks as the american carcass is being picked clean!
Fact!
Except for the snide Trump comment this is unfortunately a bullseye.
How do you become a billionaire?
I may not be the sharpest tool in the shed but the trajectory of the 2019 line from Sept 19 to Dec 19 has the same trajectory as the 2020 one we are supposed to panic about. Then in early 2020 prices crashed again.
What I see is a boom-bust cycle constrained by markets and scarcity. I’d even speculate that government regulations could be creating this cycle so preferred members can profit.
DirtpersonSteve
There has been too much interference with price discovery to determine what has happened short term, but I have a bad “feeling” overall about it.
The Indian in the film “The Outlaw Jose Wales” is relevant here. He has a top hat and a piece of colored rock candy. Not for eating, for looking through. Sounds familiar to me. MAGA hat and a “smart” phone. He went to Washington to meet the Secretary of the Interior. That man told the Indian to “Endeavor to persevere”.
Same thing, essentially, they are telling us today. Wear your mask. Take the jab. Stay home. Buy on line. Stay the course. But should we? Perseverence means being shackled to a work station designed to use up all available energy and deliver diminishing rations. Don’t persevere. Quit. Fuck them. The sooner the machine stops working, the sooner they will lose, and we can start another cycle. Until and unless that happens, we lose more every single day.
When the people in charge like John Kerry tell you that government taking away your $250K job welding pipelines is Joe Biden offering you “more choices” it may be time to take drastic steps.
Anybody think that low IQ washed up former “pretty boy” could make solar panels or learn to code?
His future in a proper world would be as a lamp post decoration.
This coming short squeeze on silver could easily be the final trigger that sends the financial system in chaos.
It you’re not prepared by now it’s already too late.
Firearms are no longer available at reasonable pricing
Ammo is no longer available at reasonable pricing
PM’s are no longer available at reasonable pricing.
Food is still available, but price is going up
Fuel is still available, but price is going up.
Building materials are still available, but price is going up
Clothing is still available
James, my brother from another Mother, told us all last year to stock up while things were still available and I hope everyone did.
Rising fuel prices will exacerbate the problem as farming requires quite a bit of petroleum products from diesel fuel to fertilizer. Trucking food to processing plants and to retail will also increase. Higher utility prices will affect food processors. Aren’t you glad we let Xiden steal the election?
Big ag requires quite a bit of petroleum, farming not so much.
Rising prices are not inflation. Increasing the supply of currency is inflation. We have had inflation in spades for12 years. Currency out of thin air will continue and the result will be rising prices. The only hedge is real stuff.
Increasing the supply of currency is not inflation. Inflation is velocity of money. If I increase the money supply but no one spends it, the velocity is low and prices will not rise.
Is that something that you’ve experienced in your life? People having money but not spending it? If that were true, why would people use credit rather than their own supply of money?
Only 6% of the American population have enough in savings (unspent money) to buy a car. Velocity is at warp speed.
You sound like an economics professor, long on theory, short on reality.
True or not true:
If people do not spend money, will prices rise?
3:30 – 6:30 (roughly)
Jim Rickards
https://youtu.be/JeboQnpt_20
There is no scenario where people will not spend money as long as there is any place left to purchase necessities in order to provide for themselves and their families.
Here’s the problem with eggheads like those two- they are wealthy existentialists who make their livings discussing theories from inside mansions and earn their income from data. While both of these things resemble actual humans, they are much closer to a cyborg. Mssr. Kiyosaki went bankrupt in 2012 to the tune of 24 million, so he’s not the kind of guy you’d ask for financial advice. And the fact that at 75 he’s still dying his hair leads me to question just how mature he is, but that’s a nitpick.
Most people in this country are just making it by week to week with virtually no savings and are one minor catastrophe away from becoming homeless. If everyone was hoarding their money, why did they send out all the relief checks? No one is sitting out the economy even after a virtual year long prison sentence, their assurances not withstanding.
In the past year chicken has gone up 12%, pork 8%, milk 100%, home heating oil 18% and gas 20%. I wouldn’t know where to shoehorn the velocity concept into those numbers, but it sure looks inflationary to me.
I picked those items because they represent what real people spend their money on because they need to. No one cares if cheap Chinese tchotchkes are cheaper if they can’t fill the refrigerator or drive to work, or if millionaires are sitting on the sidelines with their trust funds, sabe?
I’ll bet you that the next 12 months brings more inflation rather than deflation.
I agree with you but it won’t be because people DID NOT spend.
i remember when people complained about 1/2 osb being 13 bucks during hurricanes…historically hovers 7-10 dollars. Currently price is $32 and we already have 4 house packages sold this month just out of the blue. People fleeing the city to our little backwater.
i fear its all about to fall down and go boom.
What is an osb?
Similar to plywood. We used to call it chip board. Our city building code won’t allow it.
technically called oriented strand board…it was a cheaper greener replacement for plywood…wall sheathing primarily, used around here for building chicken coops and what not…typically on the cheap.
no more cheap for you so sorry.
The next couple of years we will experience rising prices like we have not seen since the 70’s. Maybe worse. Guaranteed prices are not going to fall any time soon.