Food Prices Call for Revaluation (Developing)

Zawya ^

[backtothestreets]

Dubai: Currency reforms are the key to fighting food prices in the UAE and other Gulf states where inflation is in double-digit territory and the rising cost of food imports is adding to imported inflation, according to economists.

"The rise in food prices is part of a global trend which has seen food price inflation over the last few years. The UAE is a net importer of food given its arid climate. It is a case of imported inflation; a problem that could be remedied through foreign exchange reform," said Marios Maratheftis, regional head of research, and Mary Nicola, an economist, at Standard Chartered Bank.

In the past, policymakers in the region often referred to inflation as core inflation that excludes food and energy prices. However, economists said it is time to keep tabs on headline inflation numbers. "During a period when food and energy prices have become a major force driving worldwide inflation, the wedge between core and headline inflation became too large to ignore, especially for households that have seen their cost of living rise quickly," said Marcela Meirelles, an economist with Societe Generale Asset Management.

Basic food prices in the UAE are up 36 per cent from last year. Prices of basic food items such as cooking oil surged 80 per cent, basmati rice, 50 per cent, sugar, 31 per cent and egg 19 per cent. The prices to a large extent have been impacted by the increased cost of imports owing to the decline in the purchasing power of the dirham due to its peg to the dollar.

[backtothestreets]

Our food prices are climbing in the US. My initial thought when reading this article was of poetic justice. Rising oil prices have had our nation turn to producing fuel from food, thus curtailing our production of foods for consumption and causing food prices to rise sharply. Now, let's see the Middle East states that keep oil production in check to inflate crude oil prices try to produce food from oil.

[underground]

Its not necessarily a good thing for us. The article suggests that their plan to fight it is to drop the peg to the dollar and allow their currency to appreciate by letting ours fall faster...

[backtothestreets]

Yeah, I choose to ignore that in my initial post, but you are absolutely correct. I have mixed feelings about the dollar devaluing further, and more rapidly. On the one hand, it would cause such hardship nationwide as I have never seen. On the other hand, it would make voters more aware of the repercussions of government deficit spending.

[txhurl]

‘free’ trade bump.

[underground]

Unfortunately I think the government likes currency devaluation because the majority of voters don’t understand its correlation to deficit spending. No one in the election is even talking about it because its not the type of “change” that makes a good sound byte. Conservatives still love tax cuts at least, but I’d love to see some more of that ambition transfer into government spending cuts. :)

[ari-freedom]

ah yes remember when conservatives were for balanced budgets...

[EBH]

This is a realm I don’t understand, but my first thoughts dealt with OPEC countries upping the price of oil.

Upping the price of oil in a country that imports foodstuffs is sort of like biting the hand(s) that feed you.

[Kay Ludlow]

The falling dollar is making American goods more attractive to the rest of the world, giving more opportunity to compete. The EU economy is really struggling from the low dollar, because with a strong dollar their high cost economy was reasonably competitive, but with the low dollar most of the world is buying comparable goods cheaper from the US. While many people think we don’t manufacture anything anymore, we actually do. A lot of specialty items are made in both EU and US, so that business has swung our way.

[CutePuppy]

ah yes remember when conservatives were for balanced budgets...

That went out of "fashion" when Gingrich stepped down and Danny Hastert and ["we don't spend enough"] Tom DeLay took over and could not spend enough, and Big Government "compassionate conservatism" mentality on domestic spending of Bush White House did not help any.

[kittymyrib]

Why should the USA send any of our food resources to the Middle East in this time of shortage, caused by their $100 oil? Let them grow their own food, just as we are having to grow our fuel now.

[backtothestreets]

"Why should the USA send any of our food resources to the Middle East in this time of shortage, caused by their $100 oil? Let them grow their own food, just as we are having to grow our fuel now."

Why indeed? Those artificially controlled oil prices have brought harm to our own population as we have had to resort to turning food crops into fuel. I'm more inclined to think it time we create a new multinational organization, OFEC (Organization of FOOD Exporting Countries) to turn the tables on OPEC. That admission goes against my objections to our nation being intertwined with other governments, free trade, and using food as an economic weapon, but such an organization is seeming plausible under current situations.

[quant5]

Good points gentleman. Now beyond all of this very pertinant detail is the policymakers of Washington which have not only allowed, but encouraged the global fleecing now occuring.

The real problem is that the fleecing ultimately comes at the expense of 300 M Americans (minus the 1,000 or so odd people becoming fantastically rich).

By the time most Americans will have truly realized what occured we will be in the worst recession of the last 40 years or perhaps a depression. The real bummer is that those who created this situation will be long gone sipping nice whiskey and and laughing their behinds off.

What’s a gentleman to do? Step in, take the reigns and begin cleaning house and finish doing it fast to restore global confidence in the U.S. dollar. This is going to be a five year recovery at the least from this monumental mess.