Global Economy

The UK just announced a disturbing level of inflation for them (4%) and it is happening in a relatively tight monetary policy environment. Unlike the FED, the European and UK central banking authorities in general have been very cautious about lowering interest rates.

The prospect of labor strikes are everywhere including the recent strike by Shell fuel truck drivers demanding an increase in salary to about £36k per year. The current price of a gallon of gasoline in the UK is about £4.80 pounds. Diesel is £5.20/gallon Just to give you an idea about the flaccid purchasing power of the dollar largely driven by our loose money policy, that's about $10 a gallon if you were renting a car here and paying in greenbacks.

Say hello to inflation. There is no doubt that a wave of inflation is setting up to wash over the U.S. and global economies. So far, folks are hoping that declining growth and unemployment will offset the more dangerous levels of inflation as people begin to respond to massive increases in fuel and record increases in food prices. While it is sometimes noted that other elements of the CPI are not showing much inflation it is only because people have stopped buying things like cars and washing machines and second homes.

There is a set of important variables that all could impact the current situation of pork producers in the U.S. and worldwide. Keeping them all in view is a wise thing for you to do on a daily basis.

1. The Growth of Ethanol Distilleries and the resulting oversupply which is beginning to hit the market will have a big impact on the price of corn and really all grains, both directly and indirectly in the coming year. Will the government step in and up mandates and will all the players (like automobile companies) agree to 20% inclusion in unleaded gas? Some plants are already stopping production and others are stopping construction. It looks like lenders and outside investors are getting smarter about this. (http://www.sacbee.com/103/story/796178.html).

     I am going to make this as painless as possible but here is something to think about on a cold winter night when you are losing money.

     Capitalism is thought by socialists to inevitably lead to a redistribtution of wealth which is unjust.  Namely, capitalism inevitably leads to a concentration of wealth in the hands of a very few, the owners of capital.  Labor inevitably gets the short end of the stick.  Capitalism cannot survive long-term because it will lead to such an unjust outcome that revolution will displace it.

     In the United States, the development of scale and mass production in the early 1900s is typified in the invention of the assembly line by Henry Ford (OK some dispute he actually invented it but bear with me).  The adoption of scale across many industries led to a tremendous accumulation of wealth in the hands of a few and the beginning of modern day concentration (fewer firms) was under way.