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Great Depression Online Archive Issue:

A Repeat Opportunity to Consider

Great Depression Online
Long Beach, CA
December 10, 2010

Inside This Issue You Will Discover…

*** Malthus Returns via Turner
*** Reaping the Grains of Innovation
*** A Repeat Opportunity to Consider
*** And More

Malthus Returns via Turner

“If you’re so rich, why are you so dumb?” asked Harry Eager in The Miami News on Monday.

His question was directed at Ted Turner and was prompted by Turner’s recommendation to world leaders at the U.N.’s climate change conference in Cancun, Mexico, that a global one-child policy to save the Earth’s environment be instituted. 

Here we pause to make an important distinction.  Surely, Turner’s not an idiot.  After all, he did build a billion dollar media enterprise.  Nonetheless, as Harry Eager would agree, being rich does not excuse Turner from being a dumbass…of which, obviously, he is.

Of course, Turner, a father of five, is not the first to believe the world’s problems would be solved if population growth were limited.  Indeed, doomsayers have been predicting the collapse of civilization from overpopulation for hundreds of years.

~~~~~~Food Crisis Survival~~~~~~

How to Survive the Coming Food Crisis

What would happen if a natural, civil or economic disaster prevented us from growing, transporting and importing food?

Food prices would rise and supermarket shelves would go empty.  Within three days there’d be no food left in most people’s homes.  Chaos and anarchy would break out.  Thousands (if not millions) would starve.

Are you prepared for such a situation? 

~~~~~~~~~~~~~~~~~~~~~~~~~

For example, between 1798 and 1826, English economist, Robert Thomas Malthus, gazed gravely at society and grunted and grimaced.  For what he saw staring back at him was a grave problem.

And the closer he looked, the more the problem magnified.  He muttered to the heavens and mumbled to anyone who’d listen.  He then dedicated his life’s work to scribbling six editions of his famous treatise – An Essay on the Principle of Population.

In the linear world that Malthus envisioned, he projected an impressive collapse brought about by two important factors – population and food.  Namely that population would increase faster than the food supply could sustain unless war, famine, or disease intervened or efforts were made to limit population.

He even had facts, figures, charts, and statistics to back up his professions of doom.  Yet Malthus, like Turner, never stopped to consider the world was more than he could see or imagine.  That perhaps, if he were to stand on his tip toes, and peer over the horizon, he could witness a fusion of innovation and ingenuity overcoming problems of the finite.

Reaping the Grains of Innovation

In the 1830’s Cyrus McCormick was doing some grunting and grimacing of his own.  Except his was of more practical sorts.  For he, like everyone else for all of mankind, was cutting grain by hand.

So it was with weary hands, after a long day’s toil, that Cyrus McCormick had a vision of his own…a nifty invention called the reaper.  Unfortunately for Malthus, he missed out on its glory; for it was about this time he met another reaper…one that was grim by nature.

With the advent of the reaper grain could be cut mechanically rather than by hand.  And more importantly, the time needed to harvest an acre of wheat was cut in half.  When combined with the rapid expansion of mid-western farmland that was also occurring at this time, Malthus’ proclamations of famine proved to be as mad as Y2K did on the first day of the new millennium.

Soon combustion engine tractors, petroleum based fertilizers, pesticides, mass irrigation, agronomy, horticulture, soil science, and Purdue University made food scarcity in the developed world an archaic concern of a more primitive man.

Yet even with all this progress modern man can’t escape a simple fact.  We still live in a natural world and, alas, we are still bound by its natural limits.  Oftentimes government meddling shrinks those limits far beyond what their natural boundaries allow.  Sometimes, however, nature and government meddling conspire to make things extraordinarily unpleasant.

When these situations are identified early on, an opportunity develops.

Here’s what we mean…

A Repeat Opportunity to Consider

Food prices are going up.  In fact, over the past year wheat prices are up 52 percent, corn prices are up 53 percent, and soybean prices are up 33 percent.  What’s more, as we noted several weeks back, General Mills will be raising prices for cereal and baking mixes.

Some of the price increases are being driven by the agricultural markets.  The USDA’s crop reports have been cutting production estimates.  Thus a reduction in grain supplies and crop yields will naturally result in an increase in food prices.

But we suspect what’s also pushing up food prices is the same thing that’s also pushing up copper prices, uranium prices, and gold and silver prices.  That is, an infinite supply of Bernanke’s digital monetary credits being measured against a more finite supply of resource output.

Several years ago, when price increases got ahead of federal fund rate increases, things went haywire.  If you remember, oil prices spiked over $140 per barrel.  What you may not remember is that food prices spiked too. 

In April of 2008, wheat prices had risen 130 percent since March of 2007 and soybean prices had increased 87 percent.  This wreaked havoc on developing countries setting off violent popular protests in countries including Haiti, Egypt, Cameroon, Ivory Coast, Mauritania, Ethiopia, Uzbekistan, Yemen, the Philippines, Thailand, Indonesia and Italy.

Shrewd investors gained 75 percent between May 2007 and June 2008 investing in PowerShares Multi Sector Agricultural ETF (DBA).  Now it looks like a repeat opportunity’s been set.  Since June 1st this ETF is up 30 percent.  With dwindling crop yields and burgeoning money supply growth this could easily dwarf the price increases of 2007-08.

With a little imagination it’s a speculation worth considering.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  The thought that the globe’s leading nations (like the United States and Canada) could suffer even a temporary food shortage (no less a prolonged food crisis) seems unthinkable to most people.  Do you realize how close our technology-driven agricultural industry is to experiencing such a crisis?  In fact, it is because our food system is so sophisticated, integrated and advanced that it is so vulnerable.

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