History Is Coming

Mother Teresa once said, “If you can’t feed a hundred people, then just feed one.”  The way things are going, soon many people won’t only not be able to feed one person…they won’t be able to feed themselves.

According to the World Bank, 44 million people have been pushed into extreme poverty since June as food shortages lifted the UN food-price gauge.  In other words, food shortages and rising food costs are resulting in rapid increases in world poverty.  Unfortunately, this is a trend that may only have just begun.

Jeremy Grantham has a successful track record for identifying large market inflection points.  He warned of the 2008 financial crisis and technology stock market bubble well in advance of their meltdowns.  In his latest Quarterly Letter, Grantham offers several ominous warnings courtesy of the market…

“Mrs. Market is helping,” says Grantham, “and right now she is sending us the Mother of all price signals.  The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70 percent.  From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.

“Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.”

The Threat of WWIII

It has been hard not to miss the rapid increase in food prices.  Yet, the consequences of their rise are not equal.  So far the poorest of people are taking it the hardest…

“Prices are climbing, but the impact is not being felt equally at all,” says MarketWatch.  “For Americans, who spend less than one-tenth of their income in the supermarket, the soaring food prices we’ve seen so far this year are an annoyance, not a calamity.  But for the planet’s poorest 2 billion people, who spend 50 percent to 70 percent of their income on food, these soaring prices may mean going from two meals a day to one.

“Those who are barely hanging on to the lower rungs of the global economic ladder risk losing their grip entirely.  This can contribute — and it has — to revolutions and upheaval.

“Yes, it will get worse, far worse.  Global population is sky-rocketing, tripling from 3 billion to 9 billion between 1950 and 2050, as the Super Rich at the top will get richer, as poverty spreads, as more and more go to bed hungry in emerging and developing economies.  And revolutions and upheaval mean increased global wars over depleting hard assets.

“In the upside-down world view the Super Rich will soon have to deal more than that extra dime for a loaf of Walmart bread.  The cost of America’s denial will be trillions as the threat of WWIII grows exponentially.”

History Is Coming

Economic collapse, revolutions, upheavals, and world wars…these are not subjects for polite conversation.  It’s most certainly better to keep awareness of these matters to yourself when conversing with neighbors, lest they think you are some kind of lunatic.

But is it mad to consider possibilities that, while infrequent, are severely destructive?

By definition, world changing events always catch the world by surprise.  It isn’t until after the fact, reasons for their occurrence become obvious.

For example, when Archduke Franz Ferdinand of Austria was assassinated on June 28, 1914, even the most graphic minds could not have imagined the horrors to follow.  But, sure enough, a continent comprised of empires is an inflammable place.  All it took was a spark for the place to obliterate itself.

Right now, as we speak, the hot season is approaching…where the combination of hot weather, hot tempers, and empty stomachs can result in almost anything.  What’s more, the way the year’s going, something unexpected will likely happen.

Who’s to say something awful isn’t looming?  At the very least the stock market could collapse and interest rates could skyrocket.  Maybe the dollar will finally come undone.

We’re not making a prediction; rather, we’re considering the possibility…

Look around, listen, take in a deep breath, sip your coffee, let out a bellow, and reach for the sky.  History is coming.  You can practically feel it.

Sincerely,

MN Gordon
for Economic Prism

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