Thoughts on the Silent Tsunami:
Biofuels...Bah! Inflation... JA!

by Roger Bourke White Jr., copyright April 2009

News of the first half of 2008 is of rising food and fuel prices.

The latest cute catch phrase, coined by Josette Sheeran and the UN World Food Program, is to call this a "silent tsunami" and say that it is affecting 100 million of the world's poorest people.

The rising food prices are causing unrest and panic around the world.

Interestingly, biofuel production is being fingered as a candidate for causing the problem. Which means that in 2008, encouraging biofuel production has turned from "green" to "mean".

Equally interestingly, deliberate inflation is not being called out as a cause of the problem.

Roger's opinion: What we are witnessing here is a somewhat surprising result of fighting to keep the Subprime Mortgage Crisis from collapsing the US financial community.

God, I hate sounding like some kind of socialist, knee-jerk liberal, but here goes... The world's poorest people are "paying the dues" to protect the US financial system from collapse.

They are paying because The Fed is protecting the US banks and US economy by flooding the world with US dollars. Fed Chairman Bernake's goal: to get the US economy through this rough patch by keeping the banks from "freezing up" and causing a credit crunch.

Bernake's idea is a good idea, but... the dollar is a commodity, just like food, just like oil. As the SubPrime Mortgage Crisis has unfolded, and people have become scared of lending and borrowing money, the demand for the dollar has dropped... which is the same thing as saying prices have risen.

Bernake and the Fed have rolled the dollar printing presses just as demand has been dropping, so massive inflation is as surprising as the sun rising at dawn.

What is interesting... surprising... is the effect of distributing this new money. The banks got first call on the new money. They are using it to save themselves. Last on the list to get their share of this newly created money is the world's poor -- prices have risen, but their incomes have not.

This is the source of the Silent Tsunami. It's inflation, pure and simple, and it's the US banking system using it's control of the dollar which is causing the silent tsunami.

What's next?

This should be a transitory condition, it should not make much difference in this human condition. Food prices rise and food prices fall. Humans are very, very familiar with this.

But... rising food and fuel prices are human emotion hot buttons, and because in this case we have a condition where one group of people is being saved by inconveniencing another group, there is a high possibility for Panic and Blunder in this condition.

Cyreenik calls this a watchable Panic and Blunder condition.