Food and Gold

100 years ago, the average household spent up to 50% of its income on food. Today, that figure is nearer 10%, giving us all more disposable income for consumer goods, bigger mortgage repayments, and exotic holidays.  Food is cheap, almost too cheap, in fact.  As some farmers struggle to turn a profit and big supermarkets control the supply chain.

(Chart showing food prices as a proportion of income)

Of course, some of this is due to technological improvements in farming and manufacturing, but much of it is due to fiat currency inflation versus gold.  Perhaps it can’t last forever – we may well already be being prepared for future food shortages and increases in food prices. You may have already noticed shortages during the crisis or increases. On a personal level, visiting the supermarket regularly, a 20-25% increase in fruit, vegetables, and dairy products has occurred since March 2020, when Corona began. That’s interesting, as these products are all the ones with the shortest shelf life, that are most immediately impacted by price rises. Others, like dried, tinned and frozen goods, may be in huge stock at warehouses down the supply chain behind the supermarket facade, and price rises may take longer to feed through. Observe these headlines from recent times, as to what they may be planting the seed in your head to germinate for:-

“UK potato farmers fear another washout for this year’s crop. “

The Guardian, August 2020

“Bread price may rise after dire UK wheat Harvest.”

BBC News, August 2020

“Coronavirus: Meat shortage leaves US farmers with ‘mind-blowing’ choice.”

BBC News, May 2020

If you wonder how far food prices can rise during a monetary crisis, then here is an example of prices from “Fiat Money Inflation in France,” an excellent study of the hyperinflation that occurred there during the French revolutionary times, which coincide with the decline of the French empire before the handover to Great Britain.

Now, how well covered are you for those kinds of price rises in basic commodities, the essentials of life?

Inflation

Inflation is an awful thing. It increases the number of currency units in circulation, robbing and diluting the hard-earned savings of normal people.

Note, inflation is an increase in the number of currency units in circulation, not an increase in prices, despite media stories about increased prices being inflation. Even the Bank of England, perhaps accidentally, confuses the two. They often aim for an inflation ‘target’
of 2%, supposedly the centrally-decided ideal set of price increases for a Goldilocks, not too-warm, not too-cold, economy to function. However, when they refer to this inflation target, they mean an increase in prices. Normally, the amount of extra currency pumped into circulation yearly exceeds the 2% figure by a large margin.

The BBC too, it seems, has the same misconception as the Bank of England. Take this story UK inflation rises after Eat Out to Help Out ends, published on 21st October 2020, for example. Here we find an explanation of Inflation that is, at best, accidentally wrong and at worst, intentionally wrong.

What is inflation?

Inflation is the rate at which the prices for goods and services increase.

It affects everything from mortgages to the cost of our shopping and the price of train tickets.

It’s one of the key measures of financial well-being, because it affects what consumers can buy for their money. If there is inflation, money doesn’t go as far.

1971 Gold Window Closes

While the owning of gold was illegal for US citizens from 1933, the USA sat atop international trade after World War 2, allowing gold convertibility at the same price of 35 dollars an ounce for other nations. This was called the ‘Bretton Woods’ agreement, referring to the location where it was signed. However, partly due to the cost of paying for the Vietnam War, the number of dollars in circulation began rising in the 1950s and 1960s. Nations like France and West Germany seized their chance to exchange their devaluing dollars for the real thing, gold at $35 an ounce. In 1971, the window for exchanging gold was officially closed.

The Federal Reserve

As the current empire, the USA began 1900 with a strong, growing country, an economic powerhouse destined to lead the world, and best of all, their currency was all denominated in gold and silver.

The USA removed its link in gradual phases, but several major milestones stand out in history. The first of these was the creation of the Federal Reserve, in 1913, just before World War One, handing control of the US national currency to private banking interests. To emphasise the importance of this, remember Amschel Rothschild’s quote :-

“Give me control of a nation’s money, and I care not who makes the laws.”

― Amschel Rothschild

James Corbett’s superb “Century of Enslavement – History of the Federal Reserve” video and podcast documentary is highly recommended for the full history of how that happened.