Economic Crisis: A Cyclical Event or Something More Sinister

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There are people, there's the millions being lifted out of poverty in China and Vietnam and the millions of people in Latin America enjoying, for the first time, a middle class existence. A lot of growth still needs to occur, but a definite change is occurring across the developing world which means that millions now have the realistic hope of a better life.

In fact, to be blunt, the current woes of the financial system aside, that's basically the problem. Poverty reduction has been hugely successful over the last few decades. Much of the world has liberalised, and moved towards less repressive regimes (often, admittedly, from a very low base), and the system is having much the same difficulties adjusting as ours has during our economic boom.

Kate P wrote:

What people forget is that our 'rich world' market has obligatory standards within which farmers have to work. So if the people of Europe decide that they no longer want food that's traceable farm to fork, that they can live with endemic foot and mouth and find that angeldust enhances the natural flavour of their beef, then we can drop all the restrictions that are currently on Irish and European farmers and open the gates.

Irish beef has only become traceable from farm to fork in the last 10 years, and we were using Angel Dust before Brazilians even heard of it.

How come the EU let us export beef to the Continent for so many years?

Anything to do with the fact that they knew we needed markets to bring our food up to standard?

BTW: the EU doesn't accept beef from regions where FMD is endemic and where there is evidence of angel dust. Brazil is a big country.

ibis wrote:

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There are people, there's the millions being lifted out of poverty in China and Vietnam and the millions of people in Latin America enjoying, for the first time, a middle class existence. A lot of growth still needs to occur, but a definite change is occurring across the developing world which means that millions now have the realistic hope of a better life.

In fact, to be blunt, the current woes of the financial system aside, that's basically the problem. Poverty reduction has been hugely successful over the last few decades. Much of the world has liberalised, and moved towards less repressive regimes (often, admittedly, from a very low base), and the system is having much the same difficulties adjusting as ours has during our economic boom.

Exactly ibis, these are the growth pangs of another Industrial Revolution. We only have to look to last one during the late 18th to 19th Century to see the severe dislocations which that caused. There was smog, child labour, TB, environmental devastation, social shock as people moved to the cities; but, by and large, it all worked out well in the end. Life expectancy took off, infant mortality plummeted, the rights of women and children were enhanced, millions were freed from the dependence on weather for agriculture since they worked in the towns and there was a huge out-burst of scientific knowledge.

We are witnessing the early, painful stages of that transition across the developing world to varying degrees. It is up to the West to act as a diligent and caring midwife to ensure successful delivery of the new era of affluence and achievement in what are now LDCs.

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BTW: the EU doesn't accept beef from regions where FAO is endemic and where there is evidence of angel dust. Brazil is a big country.

Not any more it doesn't any more than we're allowed to use growth promoters and excess antibiotics.

Brazil is a big country - with appalling border control, poor management and enforcement of tracability and a rotten record for the way gauchos are treated on ranches. In the face of damning evidence provided by the IFA after not one, but TWO trips to Brazil and (I think) Paraguay showing the negligence, our Minister for Agriculture still said she was happy to eat Brazilian beef. Fortunately for her, she ended up eating her words instead.

Do we need an ag thread for this?

Kate P wrote:

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Now that European farmers are earning good money from what they dobest—farming—there has never been a better time to reduce support. If the EU sticks to its offer in the Doha trade round, its farm-import tariffs would drop by just over half. Cutting them further would do more to ease hunger in poor countries than any foreign aid.

Yeah, I've never understood the argument why we should join the race to the bottom rather than support poorer nations to rise to the levels that European farmers are at.

Are all Economist articles as under-sourced as this is? I only ask because, taking sugar as an example this clearly has not been the case.

No Irish consumer goes to his local car dealership and says 'Show me the cheapest car you have.' That person doesn't go to his travel agent and say 'put me up in the cheapest hotel you have' or expect two for one every time he buys a pair of shoes, or 33% extra free when he buys a book.

Yet, you'll find that that is what people do about food all the time - we spend a smaller proportion of our household budget on food than ever before and still the consumer wants more for less.

When we sell lambs to factory we do so at the same price they were at 20 years ago - is there anyone else operating at the income of 20 years ago with the outgoings and overheads of 2008? No. Those people go to the wall.

If economics and the Economist say that we should decimate our chief natural resource (the one we've left), its workforce and the ancillary industries because it's going to make poor people richer, I beg to differ. It won't. It will make companies and middlemen richer and instead of having farmers working for nothing in the developing world alone, we'll have them doing the same in the once-developed world.

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It is terrible for poor-country farmers, who have long suffered from being shut out of rich-world markets, and having rich-world products dumped on them.

Agreed. But reducing Irish and European farmers to 'poor country' level is going to help who, exactly?

What people forget is that our 'rich world' market has obligatory standards within which farmers have to work. So if the people of Europe decide that they no longer want food that's traceable farm to fork, that they can live with endemic foot and mouth and find that angeldust enhances the natural flavour of their beef, then we can drop all the restrictions that are currently on Irish and European farmers and open the gates.

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This is bad news for European consumers and taxpayers, who were promised a proper debate on CAP
reform later this year. They will have to continue paying (€55 billion
last year) for this wasteful and wicked system. It is terrible for
poor-country farmers

The EU spent apparently between 60 and 80bn on arms last year and that hasn't improved my quality of life one whit. When are we planning to have that debate? I've heard the figure at a number of Lisbon discussions - no one has disputed it.

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Without public cash, they said, farmers would desert
the land, leaving meadows to brambly ruin. Now that the world is
running short of food, the farm lobby has deftly changed tack. Prices for many crops are at record highs, the new line goes, and rich countries need to protect their farmers in order to ensure that their people get fed.

I imagine that the argument was that without prices that reflect the EU standard of living, farmers would do something else with their land other than farm it, so for the sake of food security (which is what CAP was all about), we'll subvent farm incomes.

Prices for crops were high last year - prices for inputs this year are astronomical. Last year was a lucky year. This year our fertiliser cost 40 E a tonne more than last year. Diesel has gone up as has the cost of a pile of other inputs.

And Edo, apart from all that, it's a shit article. There's little sourcing and it's deliberately provocative and biased. It also ignores anything to do with, em, farming.

A - it was an Opinion piece - not an article

B) - The EU did not spend 60-80 billion on arms - the collective 27 countries in the EU possibly did - but the EU did not - it did spend 55 billion on farm subsidisation directly out of its own budget and that is on top of what each individual gov pays out - that is a total misrepresentation and you could withdraw that.

C) - Farmers still get the same prices at the farmgate as 20 years ago - tough tittes - and its all their own fault - they sold off the co-operatives which would have helped them get better prices through more control of their supplychain and would also have allowed them to buy in bulk or even produce in bulk the inputs required thus controlling their cost - they sold out for 30 pieces of easy money silver with absolutely no thought for the future - and you want my sympathy for that? - dream on - fecking eejits - I make a stragetic mistake - I lose my job and possibly others around me lose theirs too - the farmers ? - wha wha wha wha - we want more money we want more money , and no competition.

Sorry Kate - you dont like the tone of the opinion - well you gotta do better than calling it shite!

4% and falling of the EU's economy have no right to hold the rest of us over a barrel

I'll pay what I want to pay - if I believe the product is good enough and its a prestige and quality product - I will pay for it. I do not need to be told that Irish farm produce is top quality and we're not going to give you any choice in the matter - thats bollox -

If its good enough - you get your price - if its not - well you gotta do better - the farmers have got to get out this admittedly massively engrained mentality that the world owes them a living. Youdont see the farmers supporting the unemployed from other sectors do you? - more likely to giving out about the pitiful social welfare payments that unemployed get and how its too good for them - thats what the farmers do where I come from - hypocrites.


On this one thing I totally agree with Declan Ganley on.

Sorry Kate - I do come from the countryside and a thriving agricultural community is a boon for the whole country - but its needs to be able to stand on its own two feet and I think CAP has been a disaster in that regard.

Kate P wrote:

Do we need an ag thread for this?

Perhaps, but not tonight.

Edo wrote:

B) - The EU did not spend 60-80 billion on arms - the collective 27 countries in the EU possibly did - but the EU did not - it did spend 55 billion on farm subsidisation directly out of its own budget and that is on top of what each individual gov pays out - that is a total misrepresentation and you could withdraw that.

That's similar to the argument that the EU spends *only* 0.5% of EU GDP on CAP.

EU GDP was about €14trillion in 2007, or approximately 30% of the value of the entire worly economy.

I'm not going to quote as it would be getting very long and stringy. There are things I don't like about EU agriculture and fisheries policy, but there are problems with the WTO as well. The unhappy choice seems to be between Kate P's expensive but good/regulated quality food with low levels of additives, with dumping doing bad stuff to developing countries, or the US agribusiness model, with dreadful food, possibly cheaper. Differentiation is an issue not only in terms of a "nicer" quality of product but it is an issue in the biofuel situation, where the WTO prevents us from knowing where the biofuel comes from (possibly last years rainforest).

I am glad I am in the position to grow some of my own, but that isn't an option for most people.

Ard-Taoiseach wrote:

ibis wrote:

Quote :

There are people, there's the millions being lifted out of poverty in China and Vietnam and the millions of people in Latin America enjoying, for the first time, a middle class existence. A lot of growth still needs to occur, but a definite change is occurring across the developing world which means that millions now have the realistic hope of a better life.

In fact, to be blunt, the current woes of the financial system aside, that's basically the problem. Poverty reduction has been hugely successful over the last few decades. Much of the world has liberalised, and moved towards less repressive regimes (often, admittedly, from a very low base), and the system is having much the same difficulties adjusting as ours has during our economic boom.

Exactly ibis, these are the growth pangs of another Industrial Revolution. We only have to look to last one during the late 18th to 19th Century to see the severe dislocations which that caused. There was smog, child labour, TB, environmental devastation, social shock as people moved to the cities; but, by and large, it all worked out well in the end. Life expectancy took off, infant mortality plummeted, the rights of women and children were enhanced, millions were freed from the dependence on weather for agriculture since they worked in the towns and there was a huge out-burst of scientific knowledge.

We are witnessing the early, painful stages of that transition across the developing world to varying degrees. It is up to the West to act as a diligent and caring midwife to ensure successful delivery of the new era of affluence and achievement in what are now LDCs.

And to do so in the teeth of the fact that the growing wealth of the world's population is unsustainable at present levels of technology and material consumption.

ibis wrote:

And to do so in the teeth of the fact that the growing wealth of the world's population is unsustainable at present levels of technology and material consumption.

Well, they did miss the boat which Europe, the US, Australia, Japan and New Zealand caught but, with investments in things like carbon fibre, nanotechnology, hydrogen and nuclear fusion, we can build a whole new boat for the Global South!

seinfeld wrote:

Edo wrote:

B) - The EU did not spend 60-80 billion on arms - the collective 27 countries in the EU possibly did - but the EU did not - it did spend 55 billion on farm subsidisation directly out of its own budget and that is on top of what each individual gov pays out - that is a total misrepresentation and you could withdraw that.

That's similar to the argument that the EU spends *only* 0.5% of EU GDP on CAP.

EU GDP was about €14trillion in 2007, or approximately 30% of the value of the entire worly economy.

I would agree with Edo that that's a complete misrepresentation, not unlike claiming "the UN spent $1.2 trillion on arms last year". The entire EU budget for 2007 was €116 billion, spent as follows:

ibis wrote:

seinfeld wrote:

Edo wrote:

B) - The EU did not spend 60-80 billion on arms - the collective 27 countries in the EU possibly did - but the EU did not - it did spend 55 billion on farm subsidisation directly out of its own budget and that is on top of what each individual gov pays out - that is a total misrepresentation and you could withdraw that.

That's similar to the argument that the EU spends *only* 0.5% of EU GDP on CAP.

EU GDP was about €14trillion in 2007, or approximately 30% of the value of the entire worly economy.

I would agree with Edo that that's a complete misrepresentation, not unlike claiming "the UN spent $1.2 trillion on arms last year". The entire EU budget for 2007 was €116 billion, spent as follows:

"Internal Policies"?

Is that the New World Order stuff?

37% of 116 billion euro equals 42.92 billion.

The agricultural out-put of the EU-27 in 2007(as measured by Eurostat) was:

€151.126 billion

So for each euro spent by the EU on agriculture, there's 3 in out-put. Not bad. Similar to the billions governments spend on other things like health, education and social welfare for similar out-comes.

seinfeld wrote:

ibis wrote:

seinfeld wrote:

Edo wrote:

B) - The EU did not spend 60-80 billion on arms - the collective 27 countries in the EU possibly did - but the EU did not - it did spend 55 billion on farm subsidisation directly out of its own budget and that is on top of what each individual gov pays out - that is a total misrepresentation and you could withdraw that.

That's similar to the argument that the EU spends *only* 0.5% of EU GDP on CAP.

EU GDP was about €14trillion in 2007, or approximately 30% of the value of the entire worly economy.

I would agree with Edo that that's a complete misrepresentation, not unlike claiming "the UN spent $1.2 trillion on arms last year". The entire EU budget for 2007 was €116 billion, spent as follows:

"Internal Policies"?

Is that the New World Order stuff?

It's actually the money spent on all the EU legislation (including the operation of the Institutions) for all of its competences...€9.28 billion. Pro-rata by population, that's €79 million for Ireland. For comparison, the Oireachtas costs €295 million a year - Leinster House alone cost €93 million in 2004.

The New World Order is good value for money, anyway.

http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html

I don't know if any other posters listen to John Authors' daily video blog called the Short View. He tends to be a little pessimistic, but today's offering is for interesting re. oil and the Euro.

Up until now, the value of the Euro has pretty much tracked the value of oil, suggesting that the price of oil has as much to do with the weakness of the dollar as anything else.

However, in the last couple of weeks, there has been a decoupling; the value of the Euro is now heading south, while oil prices are continuing to rise.

Why?

Simply put, shortages.

This is very worrying. Up until now, we have been insulated from the massive jump in oil prices. That might be about to end, particularly if the ECB refuses to cut interest rates, which it must, given that EU inflation is now higher than at any time since the introduction of the Euro.

seinfeld wrote:

http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html

I don't know if any other posters listen to John Authors' daily video blog called the Short View. He tends to be a little pessimistic, but today's offering is for interesting re. oil and the Euro.

Up until now, the value of the Euro has pretty much tracked the value of oil, suggesting that the price of oil has as much to do with the weakness of the dollar as anything else.

However, in the last couple of weeks, there has been a decoupling; the value of the Euro is now heading south, while oil prices are continuing to rise.

Why?

Simply put, shortages.

This is very worrying. Up until now, we have been insulated from the massive jump in oil prices. That might be about to end, particularly if the ECB refuses to cut interest rates, which it must, given that EU inflation is now higher than at any time since the introduction of the Euro.

So anyway, the ECB has decided to leave rates at 4% and has signalled that the decline of the dollar is not in the EU interests.

What that means is that we will see a continuing decline in the value of the euro over coming weeks, while oil prices continue to rice (€124 per barrel of West Texas crude today).

None of this has gotten to the pumps yet, even though petrol and diesel ar already selling for €1.30 per litre.

I wouldn't be surprised if start seeing €2 per litre at the pumps by the end of the summer.

That would be 13 dollars a gallon. I hope there is an extra 2 dollars carbon tax put on it to bring it to a round 15 dollars a gallon. Just remember that the chairman of British Petrolium is spending his time getting ye to vote yes on Lisbon. What a lark.

seinfeld wrote:

Simply put, shortages.

This is very worrying. Up until now, we have been insulated from the massive jump in oil prices. That might be about to end, particularly if the ECB refuses to cut interest rates, which it must, given that EU inflation is now higher than at any time since the introduction of the Euro.

Just wondering (and I know this is a horrible horrible thought)...but does anyone have estimates for when huge chunks of the developing world get priced out of the energy market (or when half of the US decides driving the mobile home 1000 miles to Florida for the summer is too darned expensive) Because presumably when this actually happens, the price should plateau, or even drop temporarily as the speculators bail out for a bit.

on another thought, can anyone explain why the inflation rate has gone from 5% to 4.2%....

expat girl wrote:

on another thought, can anyone explain why the inflation rate has gone from 5% to 4.2%....

I don't think anyone knows exactly.

However, inflation tends to go up a little during the winter months due to higher consumption of fuel, foodstuff etc and settle back as we head into the summer.

The euro has was also very strong in March and April which would have had an effect on imported inflation.

Finally, economic activity is contracting, which also has an impact.

seinfeld wrote:

Finally, economic activity is contracting, which also has an impact.

uh oh.....

expat girl wrote:

on another thought, can anyone explain why the inflation rate has gone from 5% to 4.2%....

Retail spending on discretionary items has gone down - this puts a downward pressure on prices of the things we can do without.

I presume that house prices are included, although I can't confirm that.

Apparently average flight prices have come down.

The euro is strong and can buy more from the UK and US.

If we were to take a 'basket' of the essentials - food, heating, transport and look for the average inflation rate over the last three months my guess is that it would be closer to 10% than 5%.

If this is correct people who have no "discretionary" income: pensioners, people on social welfare, people on the minimum wage are having to reduce their spending on the essentials by 10%.

cactus flower wrote:

I presume that house prices are included, although I can't confirm that.

It does, and that's why I ignore that sham of a measure. I concentrate on the HICP measure which puts us at the EU average.

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Apparently average flight prices have come down.

Yep, there's competition between carriers to up alarmingly low load factors. Aer Lingus' are particularly dire.

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The euro is strong and can buy more from the UK and US.

If we were to take a 'basket' of the essentials - food, heating, transport and look for the average inflation rate over the last three months my guess is that it would be closer to 10% than 5%.

Ah, but they only account for a slice of overall consumption. That's why we have a weighted composite index in the CPI. You can of course create sub-indices within this CPI, but we must look at the overall figure in order to get the big picture.

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If this is correct people who have no "discretionary" income: pensioners, people on social welfare, people on the minimum wage are having to reduce their spending on the essentials by 10%.

No, they don't, they're Giffen goods so they have perverse demand curves. As prices for essentials like bread, milk and eggs rise, more is consumed of these goods. This is because people substitute consumption on essential goods for consumption on things like entertainment, home improvement and consumer electronics and so on.