It’s crazy out there
The FT reports that the craziness is not just in oil:
Rice prices hit the $1,000-a-tonne level for the first time on Thursday as panicking importers scrambled to secure supplies, exacerbating the tightness already provoked by export restrictions in Vietnam, India, Egypt, China and Cambodia. The jump came as the Philippines, the largest rice importer, failed for the fourth time to secure as much rice as it wanted. The unsuccessful tender followed Bangladesh’s inability to buy any rice at all this week…
Traders and analysts warned that rice demand was escalating in spite of prices rising to three times the level of a year ago…Vichai Sriprasert, president of Riceland International, a leading rice exporter in Bangkok, said several of its customers, including governments, were buying far more than they usually did amid fears about scarcity. “It is panic,” he said. “My customers are demanding double the usual volume. We would not have enough supplies for all the demand we are facing.”
Rice cost as little as $200 a ton or so just three years ago. Now it’s $1000. US natural gas prices have risen 93% since last August, and still “are as low as half the level of some overseas markets.” Where will it all end?
(We can’t say for sure, but we have the feeling that the huge accumulation of dollars in offshore hands, and not just the decline in US interest rates, has quite a bit to do with the current boom in commodities of all sorts. The US has relatively restrained domestic money supply growth, but there may be another factor at work. It is possible that reported money supply statistics have been distorted by the huge build up of unrecycled dollars in China and the oil exporting countries. We recall that the M3 series of money supply figures, which included some large offshore Eurodollar deposits, among other things, was discontinued by the Fed in 2005, a convenient time as it turns out, given the vast foreign accumulations of USD since then. We have a notion that M3 would show a level of expansion in recent years that appeared significantly higher than the 5-6% that the Fed reports as the M2 rate of growth over the past year. Since by and large the huge amounts of offshore dollars have not been recycled back into the US, as is necessary and proper, one consequence might be these odd and sudden bouts of inflation.)