Unknown News * Commentary by Mahdi Abdul Finkelstein

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Commentary by Mahdi Abdul Finkelstein

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Next bubble: Food (and other necessary commodities)

by Mahdi Abdul Finkelstein, Unknown News April 27, 2008

The global "food crisis" is a curious phenomenon. I don't believe it is solely the result of the US government's mandate that ethanol will be used in gasoline. Surely we aren't converting rice to ethanol, just corn, and few Americans substitute rice for corn when the price of corn rises.

And I doubt that the dramatic food price increases are the result of Earth's 6+ billion people eating more, in spite of the fact that America has generously contributed trillions of dollars worth of trade deficit money to

It is possible to argue that capitalism requires boom and bust cycles. That's how the railroads got built. That's how the internet cables were laid. It just happens.

But these days it happens much faster, in much bigger waves, with much more disruption, corruption and destruction.

emerging markets. Yes, some people in places like China are eating more animal flesh, but the rate of change in commodity prices is due to something else, in my opinion.

We now live in a Global Bubble Economy. Trillions of dollars (and yen, euros, pesos, etc.) are sloshing around the globe looking for quick profits.

Because governments no longer back their currencies with gold, increases in money supplies have resulted over the past several decades, which greatly exceed the growth in planetary

production. Therefore, in the years following the implosion of the internet stock bubble and the real estate bubble, both of which had global reach, another bubble was "needed" by the "investors" managing the excess trillions of dollars.

China's Shanghai index has fallen dramatically, as if their stock bubble burst in November of 2007. So, what's left? Commodities.

Some perhaps thought that "alternative energy" would be the next bubble. Perhaps someday it will be, and we'll talk about the greedy "Big Solar" "Big Enviro"

corporations, and how they're the worst rip-off artists ever. But for 2008 (until ?) commodities are the Big Game.

Players in Bubble-omics control vast sums of money. Example: CALPERS (California Public Employee Retirement System) and other pension funds have recently invested -- "allocated" -- a percentage of their loot into commodities. Billions upon billions of dollars have flowed into the asset class called "commodities".

And these players use long term buy and hold strategies, meaning that their investments will tie-up and control billions upon billions of dollars of things like oil, metals, food, etc. This drives up prices and, in theory, should result in increased production. Eventually.

In the short term, when these blubbery whales jump into your little wading pools, they MOVE things and make big waves. Prices go up as a result. Maybe later you buy a bigger pool. Or you're just wiped out.

I'm not saying that commodity "investments" ought to be disallowed, or that prices should be fixed. I am just explaining, so people understand the truth. Once we know the truth we can make adjustments in our future strategies, correct?

On the other hand, every time there is a huge bubble there is fraud and corruption. Perhaps you remember Enron? Not only were ALL of the large investment banks involved as facilitators, but the large pension plans invested in these offshore corporate schemes (one was named "Chewbaca"). And of course, many large players invested in mortgage-backed securities. Some major losses resulted, with more on the way (Karma willing...)

It is possible to argue that capitalism requires boom and bust cycles. That's how the railroads got built. That's how the internet cables were laid. It just happens. But these days it happens much faster, in much bigger waves, with much more disruption, corruption and destruction.

This is the 21st Century: bubble followed by crash followed by bubble, etc. Get used to it. Think Different! Figure shit out. (If you don't you may end up eating People Chow and wearing government-issued paper jumpsuits -- and maybe your future home will be a government sponsored, corporate owned, tax-free "Hope Zone" in the Mojave Desert and you'll be assembling consumer goods for export to China...)

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