The Crystal Ball is Opaque

     Unfortunately, we are at a time not only in the meat industry but also in the general U.S. and world economy when what little anyone had to make a forecast for the future has largely disappeared into an opaque soup of uncertainty.  There is little doubt that demand for meat, both in the United States and worldwide, is tied to among other things, per-capita income and a behavioral variable related to perceived and actual wealth (although there is some controvery about the wealth effect).  Both are down with rising unemployment and plummeting asset values. 

     Income changes positively in an economy when there is real (effective) investment.  Subsidies, stimulus, money printing and government spending are taking place at such volumes today, when will we know when real, long-term, sustainable investment has returned?  You can observe the opacity of the outlook by the way the stock market has moved radically up and down over the past year and continues the same today.  Not just the precipitous declines but the rallies and then the profit taking which often drive hundreds of percentage point changes in the indexes daily.  The effect of the short-term, unsustainable boosts are built into the market but the uncertainty comes from whether or not they will be a "flash in the pan" or an igniter of long-term investment.

     The fundamental issue is, we will expect to see demand for pork worldwide increase as real growth returns to the world economies.  Actually knowing when real growth returns will be very difficult to gauge.  Part of the problem is government policy actions which stimulate short-term demand, fade when the projects are completed.  The hope is that these "kick-starts" in stimulus will enable real, long-term investment which is sustainable to begin again.  Building a bridge, retrofitting local government buildings with more energy efficient windows etc. which are common projects of the stimulus, in the first case enable real investment but don't create it.  When the bridge is done, the bridge builders are done unless it enables commerce that would not have happened without it.  Otherwise, it is a bridge to nowhere regardless of how many people live on the other side.  In the second case, the retrofitting saves the local government money but actually decreases demand for energy, which may be a social good but it doesn't create real investment.  The money saved by the local government goes into more enabling but not creating of investment opportunites. 

     Subsidizing things like solar, wind energy and the production of ethanol, will create short term employment (due to the subsidy) but if these things don't catch fire and really either reduce the cost for energy by resulting in something new and permanent in terms of technological efficiency (which is very stimulative to the economy) then we are really up a creek.  Subsidies and stimulus in and of themselves are not sustainable long-term increases in productivity, and they muddy the water in the short term since they create, short-term increases in the key indicators people watch to see if real, long-term, sustainable investment is returning.  There really is no way to easily tease out the short-run and soon to end boost from the emergence of the longer-run, sustainable increases in investment needed to advance income and demand (for cars, houses, washing machines and pork chops etc.).  If they don't work, we are left with huge debt, inflation and stagnate growth. 

     The crystal ball looks a lot like a 16lb bowling ball, you pick your color of choice, but seeing through a bowling ball is just not possible.