speculation?

Is the food shortage for real or is it speculation? The same can be asked in the commodities and energy markets. Are we running out of goods and oil or is the shortage artificial? NYTimes editorial writer Paul Krugman answered this question recently by offering three alternatives. The first, that it was all due to speculation and investors driving prices sky high, mainly because other markets were performing so poorly. This apparently has happened before, but more about that later. The second was a combination of both speculation and some real shortages, while the third was outright and real shortage.

I think there is an answer that avoids a choice between these alternatives. Because in some sense they all play a role. Certainly food and commodities prices are high because of a fair amount of speculation. And we aren't really out of food (yet). The wave of obesity, which some call the epidemic is still in full swing. Clearly, many have too much to eat. So much so that they would prefer to use some of that corn to put into their SUVs and offset high oil prices.

Much of the speculation is also driven by future planning and by estimates of future yields. In the planning section we have the ambitious and voter-pleasing US plan to use more corn for ethanol to "reduce dependence on foreign oil." I have pointed out several times before that we are dependent on foreign oil because we choose to be wasteful, not because we need foreign oil. And no, we don't need to drill the Alaska wildlife refuge to handle this self-made problem. Secondly, we also choose to do so to prevent others from taking too much oil. I.e. we have a vested stake in making sure we use enough oil.

As for yields, there are the dire predictions of future shortages in almost anything of "real value." Food, oil, basic materials, etc. That is certainly true and worrisome, and if we keep on wasting stuff the way we do, we are bound to run out sooner rather than later. What is not mentioned here is that the pollution buildup from all that mining, oil-burning, and food producing activity will probably get us long before we run out of supplies.

Add to the planning and yield projections, the ability to make a quick buck, and the never ending greed of "investors." As has happened before in times of plenty, people are once again becoming unashamed of their unbridled greed. Some are so unashamed, they proudly display greed as a token of success. But as the good pope would remind them, greed is a deadly sin. What that really means apart from religion, is that the human experience over the centuries has shown that openly visible greed almost always leads to disaster. The disaster is then framed as god's punishment for human sins.

The truth is that we are awfully close to disaster. That too has happened before many times I might add, but NEVER on a planetary scale. That is what makes this looming disaster so much more worrisome than any previous one we have faced. And when we get closer to disaster, real and artificial shortages, and combinations of both will become more frequent. Initially, all will eventually dissipate and give the naysayers plenty of ammunition to scold those who worry, but in the end, shortages will become so frequent, with so little normal time in between that everyone will get the picture. Unfortunately, by then it will be too late to take effective measures and avoid a widespread and deep catastrophe.