Leading Economist Warns of Food Riots → Washingtons Blog
Leading Economist Warns of Food Riots - Washingtons Blog

Friday, November 14, 2008

Leading Economist Warns of Food Riots

When top trend forecaster Gerald Calente predicted riots and revolution, many people shrugged and thought, "he's gone off the deep end".

But leading economist Nouriel Roubini is also now warning of food riots, and blaming it on the Fed and Treasury's policies and bank priorities:

We are now starting to see the contagion effects of the current liquidity crisis feed through to the real economy. ... Whether the zombie banks are kept on life support by the central banks and taxpayers of the world is highly relevant to whether the zombie bank executives pay themselves outsize bonuses and their zombie shareholders outsize dividends with taxpayer money. It appears sadly irrelevant to whether the banks perform their function of intermediating credit and commercial transactions in the real economy along the supply chain. The bailout cash and executive and shareholder priorities do not seem to reach so far.

***

The recent 93 percent collapse of the obscure Baltic Dry Index – an index of the cost of chartering bulk cargo vessels for goods like ore, cotton, grain or similar dry tonnage – has caused a bit of a stir among the financial cognoscenti.

***

The combination of the global interbank lending freeze with the collapse of the speculative, leveraged commodity price bubble have undermined both the confidence of banks in the ability of a far-flung peer bank to pay an obligation when due and confidence in the value of the dry cargo as security for the credit if liquidated on default. The result is that those with goods to export and those with goods to import, no matter how worthy and well capitalised, are left standing quayside without bank finance for trade.

***

Everyone along the supply chain should worry about their jobs. Many will lose their jobs sooner rather than later.

If cargo trade stops, the wheat doesn’t get exported. If the wheat doesn’t get exported, the mill has nothing to grind into flour. If there is no flour, the bakeries and food processors can’t produce bread and pasta and other foods. If there are no foods shipped from the bakeries and factories, there are no foods in the shops. If there are no foods in the shops, people go hungry. If people go hungry their children go hungry. When children go hungry, people riot and governments fall.

Everyone along the supply chain should worry about their children going hungry.

When that happens, everyone in governments should worry about the riots.

The above-quoted article is free to subscribers, and you can sign up for a free trial to Roubini's website. While I don't agree with all of Roubini's prescriptions, he is one of best economists anywhere in terms of diagnosing the severity of economic problems.

10 comments:

  1. Let's take it a step or two down the path of "for want of a nail, the kingdom was lost".

    Given our present government in the USA (new POTUS included):

    When the people riot, the government calls out the police, military, and mercenaries and either rounds everyone they can up for a trip to the recently-refurbished FEMA concentration camps, or shoots the citizens dead in the streets.

    When citizens are incarcerated or shot dead in the streets, other citizens who weren't there get angry and get out their guns, which give the mercenaries and army and police the excuse for house to house searches nationwide to seize all arms. Those who resist will be shot dead as object lessons.

    Shall I go on? Strangely enough, the one thing that would give the American people a chance, even at this late date, would be to turn off their TV and radio and not turn them on again. Think I'm kidding? Try doing it for a month. A single month might be long enough to go through withdrawals and come out the other side awake, but you can't do it. You can't do it. Too bad. You lose.

    ReplyDelete
  2. is it really going to get that bad? Should everyone run out and buy food storage? guns?

    ReplyDelete
  3. signes everywhere - the writing is on the wall - so it seems

    ReplyDelete
  4. The whispering of riots has been accelerating on the net for a long time. George Ure's Time Monks computer runs have been showing it for even longer and their time frame is summer 09. It's going to get tough but let's hope riots aren't part of it. We have a small chance of avoiding them if the Obama bunch keeps it's ears to the ground and starts throwing serious money around to get things going. Not war money please there's enough else to do.

    ReplyDelete
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  8. The result is that those with goods to export and those with goods to import, no matter how worthy and well capitalized, are left standing quayside without bank finance for trade.

    ReplyDelete

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