Yes, I know, Goldman repeats his lines. I'm hoping it's true.
Plus comments on the SPR Follies
The G-20 announces measures to stabilize the food prices. Central planning always works so well for everything else why not give a bunch of know-nothing bureaucrats control of the world's food supply? What could possibly go wrong?
As we have been saying, the upheaval in the Middle East is more about the skyrocketing price of staple grains than self-determination. This is a confirmation of the reality that food prices are destabilizing that region and possibly others -- including China. The world economic and political situation is capable of blowing like Mount St. Helens just about any day.
The dollar strengthened noticeably today as 60 million barrels of oil were released from the strategic reserve of the U.S. and other western nations. Gasoline might slip back below $3.00 at the pump in the next week. That, of course, is good news, but, again, it is indicative of the precarious state of the global economy.
I don't expect the actions of the G-20 to adversely impact food supplies in the States. I do expect it to impact food prices, which, as those of us who don't have Jeeves going to the market for us know, have been rising substantially -- up over 3% in May. I am not fooled by a smaller can of coffee selling for only slightly more money. I know how much coffee there is supposed to be in the can. Unfortunately, at this point, a temporary dump into the oil supply is not going to permanently bring down fuel prices, let alone food prices.
The only thing that will stabilize prices is a commitment by the Fed to not initiate further devaluation of the dollar. The federal government needs to rein in its fanciful expenditures and cut the deficit.