The Great Depression Online




Great Depression Online Archive Issue:

Misery Index Going Up

Great Depression Online
Long Beach, CA
April 25, 2008

Inside This Issue You Will Discover…

*** Rice Hoarding Hits U.S. Consumer Markets
*** Export Restrictions
*** Misery Index Going Up
*** And More

Rice Hoarding Hits U.S. Consumer Markets

In what must be an unsettling sign of things to come, rice hoarding and purchase restrictions have hit U.S. consumer markets.

Cotton Timberlake, for Bloomberg, reports the particulars…

“Wal-Mart Stores Inc.’s Sam’s Club warehouse unit is restricting the purchase of some rice to four bags a visit because of ‘recent supply and demand trends.’

“The limits on jasmine, basmati and long-grain white rice will take place in all U.S. stores where allowed by law and are effective immediately, Sam’s Club spokeswoman Kristy Reed said today in an e-mailed statement.

“Some consumers have started hoarding rice, the food staple for half the world, as supplies shrink.  Prices have soared as China, Vietnam, India and Egypt curbed sales abroad to safeguard domestic supplies and cool inflation.”

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But it’s not just Sam’s Club, Costco’s had to take similar measures for both rice and flour…

“Some of Costco Wholesale Corp.’s stores, including locations in California, have put limits on sales of rice and flour, Chief Executive Officer James Sinegal told Reuters yesterday.”

Export Restrictions

Who would have thought that in the year 2008 rice rationing would be a concern for the U.S. consumer? 

We certainly wouldn’t have.  But of course the world doesn’t care what we think.  And, just like that, rice rationing has arrived in the U.S.

But maybe we shouldn’t be so surprised…  For in a world of inflating money supplies and increasing demand, food supplies are still limited by what the earth yields.  So, of course, more money, more demand, and limited supply are a formula for higher prices.

And as the thought of a global food crisis sets in, protective measures are taken by individuals – or individual countries – that make matters worse.  Jae Hur and Christopher Swann, also for Bloomberg, give the details…

“Rice climbed to a record after a World Bank official said Thailand, the largest exporter, may restrict shipments, worsening a global food crisis.

“‘If a key exporter like this limits foreign sales, it would be very much like Saudi Arabia reducing oil exports,’ said James Adams, vice president of the bank's East Asia and Pacific department.

“Rice, the food staple for half the world, has more than doubled in the past year.  The grain rose as much as 2.7 percent in Chicago today [April 23, 2008] and has climbed 26 percent this month….  Wheat, corn and soybeans gained to records this year, spurring social unrest in countries including Haiti and Egypt.”

And what’s this?  We see that $4 per gallon gas is forecasted for summer.

Food prices are not the only thing going up.  Oil and subsequently gas prices are going up too.

“The national average price of a gallon of regular gas rose 2.2 cents Wednesday to a new record of $3.533, according to a survey of stations by AAA and the Oil Price Information Service,” reports John Wilen, AP Business Writer.

“Gas prices are nearly 68 cents higher than a year ago, and many forecasters believe they could spike as high as $4 a gallon nationally over the next couple of months.  Prices are already above $4 a gallon in parts of the country, including California, where the state average reached nearly $3.87 a gallon Wednesday.”

These increasing gas prices further perpetuate increasing food prices as the increased shipping costs are often passed on to consumers.

Misery Index Going Up

So as the economy slumps, we’ll take a moment to note a few of the dreadful trends that are unfolding…

House prices – down.  Stocks – down, or flat at best.  Living expenses – including food, gas, and utilities – up.  Unemployment – up.  Inflation – up.

The U.S. economy in the late 1970’s experienced similar stagflationary conditions.  At that time the Misery Index was a common economic indicator used to capture its ghastly realities.  If you don’t remember the Misery Index, here’s the formula for its calculation.

Misery Index = Unemployment + Inflation.

In March 2007 the Misery Index was at 7.18.  And by March 2008 it had increased to 9.08.

Alas, the Misery Index is trending up.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  With the Misery Index trending up and the stock market stagnating it is critical that your stock market investments are good value investments.  Learn more about the Price Appreciation Potential (PAP) strategy used by Half-Priced Stocks here: Half-Priced Stocks.

 

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