Prices are on the move—permanently

produce

Basic food commodities are following oil’s exponential rise

It hasn’t made much impact on the news lately, but oil has been on a steady upward trend. That would’ve been big news if it hadn’t been for the even higher peak 3 or 4 years ago. It took a massive recession to deal to that.

The current glitch in the recovery has mitigated against the rise but chaos throughout the Middle East and speculation are nudging it up. Notwithstanding the outcome of political strife, growth in Brazil, China and India and the eventual US recovery are bound to force the price up.

OPEC could try pushing it down for their own ends but unless they can find some new substantial oil resources they won’t have much joy. Failing an unlikely agreement on meaningful and rapid action on tackling climate change sky-high oil is inevitable.

Unless the world economy collapses again, expect US$200 a barrel by 2015.

Good job too

Partly because of the cost of oil and partly because of increasing demand, other commodities are following suit. Brenda Cutress, New Zealand’s Food and Grocery Council executive director, estimated that between 25 and 30 percent of New Zealanders make their grocery choices on price alone.

“They are very, very price-driven, so that while you often hear about demands from some sectors for food labeling, or saying ‘do this’ or ‘do that’, there are some people who do not have the luxury of looking at labels. They buy on price, and it’s going to be really tough for them because they’ve cut their costs to the bone already.”

In other fortunate nations where people are affluent enough to buy groceries on a regular basis, I don’t imagine the situation is much different. Continue reading “Prices are on the move—permanently”

The Story of Stuff

Annie Leonard’s been thinking …

Click on the play button to watch Annie’s enlightening, entertaining and disturbing movie.

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The video which resulted from Annie’s deliberations is a must see for everyone who’d like to keep our planet viable. It’s a must-see even if you don’t give a stuff about the planet but you still need an excuse to get off the madcap consumer roller coaster.

How did big business create a system that puts consumer products on the shelf for a fraction of their actual cost? We’ve all wondered about it. Annie went to find out and it changed her life.

She will tell you how this obscene system started, how it functions, and why—one way or another—it cannot last. She’ll tell you the real cost of our addiction to stuff and why your grandchildren will pay for it tomorrow just as the world’s poor are paying for it right now.

Please visit Annie and The Story of Stuff

Click right here to go to the Story of Stuff website.

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Annie

So where to from here?

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The chickens are coming home to roostchickens

The IMF suggest that the world is in the worst economic downturn since the Great Depression. In the US and here in New Zealand we’re in election mode. What have our current governments and our would-be leaders had to say about:

  • how we got into this mess,
  • what they intend to do about it
  • and how we avoid the next meltdown?

Not very much.

Wait for the bang

Major US financial institutions are going to the wall with monotonous regularity; many innocent bystanders have lost their houses, their life’s savings, or both. Tens of billions, possibly hundreds of billions, of US federal funding (also known as tax-payers’ money) is going to be needed to bail major lenders out.

How’s that going to play out? Is foreign money going to continue to be invested in the US? A falling US dollar, reluctance to fix the fundamental problems and endemic bad debt may keep investors’ purses closed. One good thing. Maybe at last we’ll see a revolt against obscene executive salaries and bonuses, especially for those who preside over poorly performing businesses.

Housing is overpriced around the world. Bad debt is endemic, building and construction are in decline. The US Fed chief gets it all wrong or doesn’t know when to keep his mouth shut. “What housing crisis?” he said. And he predicted that no more financial organisations would collapse after Bear Stearns.

Things are going to get worse. You can’t have major structural woes in the US without worldwide problems.

Meanwhile, here in the sticks

We will feel their pain.

Here in New Zealand our banking sector is probably OK, but other financial institutions have been falling like ninepins and there has been lamentable corporate and regulatory oversight of the sector. We regulate productive businesses until they’re strangled, but we can’t enact simple regulation to force financial institutions to act responsibly.

We allow their unprincipled principals to scurry out the back door with tens of millions ensconced in family trusts.

As everybody knows, we have far too much debt. As individuals and as a nation. So the weakening of the labour market is, and will continue to be, a real problem for many. People who are up to their ears in debt—credit cards, hire purchase and mortgages on homes with falling market value—are going to be in deep strife when their overtime dries up or their jobs go down the gurgler.

We’ve actively encouraged people to go into hock for LCD TVs and holidays in Bali. We’ve begged them to max out their credit cards and refinance their homes to spend up large on consumer goods. How stupid is that? Great for Nokia, Chinese plastic junk-makers, BMW and Sony. It may even have produced a few low wage, low productivity jobs in retail, but it’s wrecked our economy.

It’s grim and getting grimmer

Per capita employment has been growing, but working hours have been falling. Have businesses been hoarding labour? What happens next?

It’s already started. Thousands of Kiwi jobs are being lost. 26,000 in the last year. Risk is being reassessed around the globe. Economies with heavy current account deficits are in the gun. Our current account deficit of $140 billion requires 8% of our GDP to service. That’s $14 billion in interest payments. Money that doesn’t get spent on reinvestment, wages and growth. Money that goes to overseas banks’ shareholders.

The investment chickens are eyeing up their home perches.

How much of your mortgage interest payments go to compensate the overseas banks because they’ve been lending billions to dodgy borrowers? If we’d been responsible with our fiscal policies and our personal spending habits your mortgage interest rate would be 5% or less.

Why have we crippled businesses (also known as job providers) with the highest interest rates in the developed world?

We’ve done it in an attempt to stop spending.

Has it worked?

No.

What should we do?

Stop institutions lending irresponsibly.

How?

For a start:

  1. kill no deposit hire purchase.
  2. stop hire purchase interest holidays.
  3. restrict mortgage lending to 80% of registered valuation.
  4. stop owners of second and subsequent houses from legally screwing the IRD.