Rising food & fuel costs not just economic illusion

I had heard analysis recently suggesting that the current trends in fuel prices (oil steaming onward to $200 a barrel) and food prices (wheat, rice, etc.) are due more to speculators than anything else. However, a recent survey of economists done by the Wall Street Journal showed that the majority of them believe that the cause is more substantial and fundamental: “constrained supply and growing demand.”

That would mean that the problems are both less likely to go away any time soon and more likely to worsen.

That’s not to say that some of the problem isn’t caused by an investment bubble, but it does seem that the effect of speculators is not the biggest element.

Of course, you might feel, like many do, that in any group of economists a majority of them drink their bath water, but I would not be so quick to dismiss their opinion. Scarcity and famine is definitely prophesied before Christ’s return (Matthew 24:7, Revelation 6:5-6, Ezekiel 5:12, et al.), and the factors leading up to that state may involve a mixture of elements. It’s hard to imagine that environmental factors and greed will not be among those elements.

Whether this is the beginning of a continuous trend or only a temporary taste of things to come isn’t clear yet. But regardless, the solution cannot simply be “policy oriented” in its nature — it will have to involve national repentance (cf. 2 Chronicles 7:13-14).

6 thoughts on “Rising food & fuel costs not just economic illusion

  1. Alex

    Nice one Mr. Smith. 🙂

    This isn’t something that we can just wait for someone else to fix. It does take our own effort and self examination –> repentance.

    Luckily though God will do something about the issues, and solve the problem (read: us). God speed the day Christ’s feet stand on the earth.

    Have a great Sabbath!

  2. rakkav

    I found it fascinating indeed when a recent discussion of our economic woes (in the U.S.) started describing business cycles (related to debt) that reoccur at certain flexible but rather predictible lengths of time. Sorry I can’t relay the exact details (it was a program I was watching in passing on CNN in a restaurant), but given the periods involved, I immediately thought of the biblical Sabbatical and Jubilee Year cycles. While putting them into force would not be a panacea (they were designed to operate along with everything else in God’s way of life), how much things would improve if we would only do just that much!

  3. Maybe it’s time to bring back the “victory gardens.”

    Public radio’s Marketplace had a two-part report on that last night — how some people in the U.S. are starting them, and how some South Africans HAVE to do it out of necessity.

  4. Steve

    As I understand it, the price of commodities are rising because the demand is out stripping the supply.

    However, hedge fund managers (speculators) have been bidding up the price beyond what the market actually warrants.

    This creates a dangerous situation. Farmers and cattle ranchers sign contracts in advance of their future production. Consequently, they lose money when there’s a sudden spike in commodity prices. They suffer the increased costs of production without the benefit of rising prices. It’s a losing proposition.

    If (or when) the bubble market collapses, famers and cattle ranchers will face a credit crunch. They’ve already lost money in the current spike, and now they’re facing credit problems in future production. It means cutting back – and that will mean less food in the market place.

    Food prices will remain high for some time. We’ll probably see prices drop in the next year or so, but it will follow the same path as oil and gasoline. There will be a temporary drop, followed by another big spike.

  5. Steve

    Sorry for piling on, Mr Smith. I wasn’t contradicting your main point. In fact, I agree with you completely. There’s a shortfall of supply versus demand.

    Being familiar with the subject, I do worry about the bubble market, however. This could have a devastating impact on food producers. One problem added on top of another.

  6. Howdy, Steve, and I didn’t think you were piling on at all. I saw that you were agreeing with the point (which was not my point, but the WSJ’s): That demand is up, supply is down, and there is an influence from speculators, though it is very possibly not the main driver of prices at this time.

    Thanks for writing in.

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