Grains Gone Wild
Article Tools Sponsored By By PAUL KRUGMAN Published: April 7, 2008
These days you hear a lot about the world financial crisis. But there¹s another world crisis under way ? and it¹s hurting a lot more people.
I¹m talking about the food crisis. Over the past few years the prices of wheat, corn, rice and other basic foodstuffs have doubled or tripled, with much of the increase taking place just in the last few months. High food prices dismay even relatively well-off Americans ? but they¹re truly devastating in poor countries, where food often accounts for more than half a family¹s spending.
There have already been food riots around the world. Food-supplying countries, from Ukraine to Argentina, have been limiting exports in an attempt to protect domestic consumers, leading to angry protests from farmers ? and making things even worse in countries that need to import food. . .
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Asian Inflation Begins to Sting U.S. Shoppers Justin Mott for The New York Times
. . . Developing countries have had bouts of inflation before. Indeed, some are famous for them, like Brazil, which experienced triple-digit inflation in the late 1980s and early 1990s. But two things make this time different, and together promise to send prices higher at Wal-Mart and supermarkets alike in the United States, just as the possibility of recession looms.
First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar.
That puts American consumers in a double bind, paying at least some of producers¹ higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries. . .
. . . And there are signs that the dollar could fall further if developing countries¹ central banks stopped supporting it, particularly in Asia.
Vietnam¹s central bank even had to order the country¹s commercial banks late last month to resume buying dollars within the tight range of exchange rates set by the government. Many banks had started betting on dollar depreciation and refusing to accept large sums in dollars, to the point that multinationals and exporters had trouble wiring money into the country to pay their employees¹ salaries.
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Make that garden as big as you can. Food = $