Crash of the Commodites. Spoke around the globe on Sunday 23 to learn that the crash of the commodities markets has struck the most vulnerable countries and will push regions to instability. The clue started with Patrick Barta's report from Bangkok re the Banlung (below) region Ratanakiri Province, Cambodia. "These are 
hunter gatherers," he said, as this is the ancient land of unique native Mon-Khmer peoples; however in the last years the prices at the market have led to large plantings of rice and other crops, and the last two years have been a success. Then the market prices started declining in August, after a weird commodity spike in July, and the farmers are now in debt and despairing. Oddly the Cambodia warehouses are not full, and the issue of famine that started last summer with some food riots on Manila and Cairo has not gone away. But the farmers believe themselves abandoned by the worldwide price collapse. This commodities story continued oddly Sunday 23 re the Somalia pirates. I spoke with Robert Wright, Financial Times, in London about the shipping costs of the pirates, and the capture of the Saudi-owned oil tanker Sirius Star 400 nautical miles at sea, using a pirate mother ship. The twist on the story was that the shipping business has fallen so far that there are fewer ships moving dry goods (non-oil) to market, so the pirates are pushed to the boldness of hijacking oil tankers. The fall off of non oil shipping is the fall of farm prices and commodity prices, too -- no demand. The pirates on the Gulf of Aden were already damaging to the countries depending upon the Suez Canal for fees from shipping. But now there is a double bind: the pirates in the Gulf Of Aden, or a prohibitively expensive extra 20 days to go around the Cape of Good Hope to Europe. Shippers can't afford to lose a ship to pirates, can't afford the extra $50,000 a day for the Cape route. So shipping traffic is another casualty of the commodities collapse. This commodities story connects directly to the report
from Mary Kissel, Wall Street Journal, at Hong Kong that the unemployment rate among recent college graduates is at least 30% in China (right, a job fair for college graduates), that China needs at least 25 million new jobs a year just to keep up (unemployed migrants on the home page), and that the economy in China is in a death spiral. There is world-wide deflation. We can see the fall in the price of oil to under $50, back to where it was in May 2005; but we cannot see easily the collapse in the price of metals ore, rubber, food that the developing nations depend upon for a budget. The oil price decline rocks the dictatorships and rogue states of the Middle East. The low food prices rock the agrarian- based marginal states of Asia and South America. What is happening to Citi and the other global banks is a noisy colorful, loud, bold, melodramatic sensation. What is happening to the invisible billions of people who depend upon farm prices and mine prices and timber prices is a quiet invisible devastation. Chinese unemployment is a match. Asian farmers without markets is tinder.
Update 09:00 Tuesday 25 Wall Street Journal:
BHP Billiton abruptly broke off its 18-monthlong pursuit of rival miner Rio Tinto, saying the recent fall in commodity prices and worsening world economy made its $68 billion deal too risky to complete.
Update 13:39 Tuesday 25 Financial Times
Industrial activity in Beijing has slowed so quickly that demand for the versatile metal has ground to a halt, says one of the biggest miners in the Democratic Republic of Congo - Nov-25
The owners of the hijacked Saudi oil tanker face months of negotiations and may have little option but to pay, amid reports suggesting the Somali pirates might lower their $25m demand - Nov-25
For western diplomats and security officials watching lawlessness inside Somalia develop into threats to the outside world, the difficulty is that targeting one foe could strengthen the other - Nov-25
JB - one item on this topic from Bloomberg.com: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHwqWQnFqZLE
It appears to me the futures markets haven't picked up on this reduction in planting. Every contract has tanked. Do they see demand falling more/faster than planting is eliminated?
http://quotes.ino.com/chart/?s=NYBOT_KC.Z09.E&v=dmax
Is this deflation or contraction back to the big bang?
It still hasn't sunk in: When America pulls back in order to save the planet from itself (or for whatever reason); when Americans take to riding on scooters instead of in cars, much of the rest of the world will go back to using ox carts. Capitalism has developed to its present form organically. It is as much a part of our DNA as grammar is, without which there would be no language. Those who rail against it; indeed, those who seek to destroy it, can offer us no clear alternative.
The alternative, of course, is brutality. Those that are shown to be capable of the greatest atrocities will rule the roost. Witness the Taliban. Similarly, as the oceans rise, those living in coastal areas will be swamped while those having built their stake on higher ground will survive. The hierarchy of nations will remain fixed yet for some time to come.
Those who have built their lives on the selling of commodities (which we are said to exploit for our singular benefit) will be the first to suffer from our retrenchment. Their civilization will collapse as brutality rides rough-shod over every last vestige of refinement. Brutality cannot live with itself. In order to thrive, it needs to assassinate conscience. One thousand years of darkness is mildest assessment of what will happen should civilization fail.
And yet, the enemies of capitalism are everywhere. Not a day goes by when we do not abandon some part of it in an effort to appease them. And yet current academic vogue misses no opportunity to celebrate the West’s demise – as they once heralded Hitler’s rise to power – turning logic on its head; equating success with oppression. As Bret Stephens warns in his column on today’s Wall Street Journal op-ed page, “A society that erases the memory of how it overcame barbarism… inevitably loses sight of the meaning of civilization and (of) the means to sustain it.”
How is it that ivory tower extremophiles are lobbying so hard for what essentially amounts to the chaos of nihilism? Could it be that the fervor with which destruction is pursued in so many quarters (to them) projects the illusion of being alive?
Well said PK !
vsk
Yes Peter, Very well said.
"And could it be the pain,
slicing through them like a knife,
Was easier to bear,
than the emptiness of life,
Had a strange drama unfolded,
caught them in a role,
Or were they trying to cauterize
the cankers on their souls?"
(apologies to the late H.Chapin)
So much for the "class warfare" leveled always against the "ugly Americans", the "Yanqui go home mentality" prevalent worldwide.
Granted we are prone to excess and somewhat arrogant as exhibited by some citizens, the ones who reside in the ivory towers, crime-free, the SUV-shopping housewives with the limousine liberal mentalities, at times possessed by "white guilt", with Socialist leanings.
But....There always been the other side of the coin.....we are the most charitable country, whilst enduring the highest taxes.
While working the longest work week.
American capitalism is based upon an age old tenet:
"The Christian Work Ethic".
It has defined us and lifted the world upward.
American workers are truly the most productive.
None can compare to the American working man.
The American consumer.
The "Police force of the World".
When America sneezes.........
....the World catches a cold.
It was wild fluctuations in the commodities market, particularly rice, that gave rise to riots and aided the rise of the Locofocos and the more radical elements of the Democratic party back in the early 19th century U.S. It is interesting that Cambodia is approximately 170 years behind us, according to this measure.
"...Chinese unemployment is a match. Asian farmers without markets is tinder."
The consequences of the financial meltdown are terrifying. Starvation and Famine are more than probable. Farmers will conserve energy, water, and seed if commodity prices are low. Unlike North America, Farmers decide how much they can affordably grow.
Most of Asia is living on a few hundred calories a day. If prices suddenly drop or food disappears due to scarcity, the people will revolt.
They are already revolting ....
I don't know peter, I use a scooter...Ok, it's an 800 Lb motorcycle, but it does have two wheels. :) Ivory Tower types usually support socialism. Nihilism is left to disgruntled communists and anarchists.