Back then we highlighted the startling percentages of U.S. produce grown in California where an historic drought is ongoing. However, we've since realized that an equally devastating drought is occurring in Brazil; and as you can see below, the entire world could be catastrophically impacted. To wit, there's a reason mass social unrest pervades Brazil during what should be the nation's proudest moment, i.e. hosting the World Cup. And that reason is persistently high food prices.
When we wrote that article in mid-February, the BLS' U.S. Foodstuffs Index sat at 377. But take a look at what it's done since - rising a whopping 17% to 440 as the prices of beef, pork, chicken, eggs, shrimp and milk, among others have surged to all-time highs. And keep in mind, this is just the United States where the dollar's (soon-to-be-lost) "reserve currency" status has enabled price inflation to be relatively moderate.
It's Wednesday morning, just hours before another FOMC propaganda statement. Frankly our advice is to ignore Whirlybird Janet entirely as the Fed's job is to lie about everything from employment to inflation to their own policy actions, whilst its "traders" work with the PPT, ESF and gold Cartel to manage investor "expectations." To wit, yesterday's "mystery surge" in the 10-year Treasury yield to a more "comfortable" 2.65% from the 2.60% line in the sand we have written incessantly about; not to mention, the prototypical "dead ringer" algorithm on the "Dow Jones Propaganda Average" and DLITG or "Don't Let it Turn Green" algorithm capping gold. This morning, the litany of global "horrible headlines" is as violently PM-positive and equity negative as one could imagine; and when the history books are written, readers will beamazed at how TPTB were able to maintain "orderly markets" this long.
We want to return to today's extremely important topic as soon as possible, but would be remiss if we ignored said "horrible headlines" given how potentially cataclysmic their sum total could be. First off, to the "Eastern Front" whereas predicted the "domino effect" of Russia cutting off Ukraine's gas supply is already being felt. Just one day later, gas prices as far away as the UK are 8% higher, as Ukrainian pipeline operators "pass through" their troubles to Europe. And thus, we again remind you that nearly a third of all European gas is imported from Russia, half of which arrives via Ukrainian pipelines. So for those that believe Germany and the other European powers will "back" Obama and Kerry in their crusade to re-start the Cold War, we say think again.
Meanwhile, the Middle East crisis threatens to explode at any minute, with the U.S. actively discussing an Iranian "alliance" to quell ISIS's plans to take over Iraq and an escalating war of words between Iraq and another tenuous U.S. "ally" - Saudi Arabia. There's nothing like verbal, and very likely physical violence amongst the largest oil exporters to promote stability; particularly when the correlation between rising crude prices and plunging economic activity is essentially 100%. Not to mention, perhaps the most unbelievable news of all; i.e., the U.S. isagain antagonizing Syria with John Kerry claiming "raw data indicates recent use of chemical weapons by the Syrian government." I mean is there anyone we don't want to start a war with?
And finally, here in the United States of Economic Collapse, two data points that - in freely-traded markets - would have had precious metals soaring. That is an explosion in the current account deficit from $81 billion in 4Q13 to $111 billion in 1Q14, atop a 9% plunge in mortgage purchase applications last week, and a 13% implosion in refinance applications - amidst an environment of plummeting interest rates!
OK enough of such "trivialities;" as hey, as long as the stock market is higher - and precious metals lower - all's well, right? That is unless you're a real person with no job or savings but a persistent need to eat. You want to talk bubble, well how about this one of how the PPT-supported S&P 500 hasn't even budged compared to the growth in food stamps; which, what do you know took off in earnest in 1971 - "coincidentally," when the gold standard was abandoned.
Think about this carefully, and put on your "analyst cap" when doing so. Food prices arealready at or near record levels in both nominal and real terms; and again, for "emerging market" nations whose currencies have been decimated by inflation exported by the "reserve currency," the impact on the chart below has been far more pronounced.