Interesting article from a Mid-East Banker:
Agflation will change international politics, redefine economic models and trigger regime changes across the emerging markets. Far more than crude oil or even bullion, price rises in the supermarket trigger mass consumer inflation psychology. So central bankers at the Fed, the ECB, the Bank of Japan, RBI, PBOC and SAMA will be powerless to prevent food prices from accelerating the embryonic global inflation nightmare. Global warming, the destruction of the rain forest, carbon emissions and black swan (rare high impact events with fat statistical tail) events like Mad cow’s disease, avian flu and Australian droughts will make agflation as compelling a global issue, at Davos or the UN, as climate change.
As hedge funds speculate in coffee, the incomes of Brazilian farmers and Coorgi yuppies surge and the price of a Starbucks cappuccino became an inflation indicator in Ibn Batuta Mall. Stock exchange rumours swirl that Nestle and Kraft Food (owners of the Maxwell House brand) have not hedged their wholesale prices for robusta and arabica beans. I grew up in a world where the CRB, the world’s commodities index, correlated perfectly with global economic growth. The correlation, unfortunately, has broken down as the world flirts with recession even as food prices skyrocket. This is the stagflation and supply shock scenario, as in the 1970’s.
Agflation, I am convinced, will be world history’s next game changer, an ominous sword of Damocles over the poorest citizens of the global village.
More here:
http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/opinion/2008/April/opinion_April7.xml§ion=opinion&col=