The Rise, Fall, and Rise of Disaster

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The US Department of Agriculture may have some usefulness. Projecting future prices isn’t one of them. In 2005, it looked five years ahead and saw a bushel of wheat selling for $3.50. Last week, the price rose to more than twice that much.

Why? God himself is to blame. Not since 1880 has Russia been so dry. And not since Napoleon’s invasion has Moscow suffered so much soot. The government banned wheat exports and prices shot up to their highest point in 51 years. In the curious way that one thing lead to another, Napoleon’s Russian Campaign grew out of the French Revolution like a forest fire out of a careless barbecue. The revolution stirred up enemies on all France’s frontiers. When Napoleon had finished with them all, he had to reach farther – all the way to the banks of the Moskva River – to get his fingers burnt.

But the Revolution may never have happened without the summer of 1789. That was God’s work too. That summer was the opposite of the Russian summer of 2010. Europe was cold and rain-soaked, believed to be the result of the explosion of the volcano Laki in Iceland. The price of bread in Paris rose 67% in 1789. The average laborer only made about 20 sous a day, barely enough to buy a loaf of bread. The intellectuals may have been stirred by the Enlightenment. But it was high bread prices that gave the mob an appetite for revolution.

One of the awake observers of this period was a young Anglican clergyman named Thomas Malthus. While the rest of the intelligentsia imagined a world of industrial and social progress, Mr. Malthus peered down to the bottom of a dark well. Ten years after the French Revolution, he published his Essay on the Principle of Population. His point was simple, obvious and modest: populations can grow faster than food production. This led to the idea of a “surplus” of humanity, which was practically a Christian heresy. It presumes that God is a jackass, something that occurs to the average man about once a day, but which is a rare thought for a member of the clergy. Everything in nature is bounded by limits and hounded by failure. Trees don’t grow to the sky. Bull markets don’t last forever. And every step people take in life brings them closer to the grave. God told man to be fruitful and multiply. Was he just setting him up for catastrophe?

But the Malthusian limits keep getting pushed back. Even after nearly two centuries and 6 billion more people added to the human population, most people can still multiply without worrying about mass starvation.

Paul Ehrlich published his Population Bomb, in 1968. But his prediction was as big a bomb as Malthus’s. Populations didn’t outrun food supplies. Instead, output per acre doubled in the ‘green revolution’ that followed – rising faster than the number of people. If people starved, it wasn’t God’s fault. And now, Le Monde reports that obesity may be a bigger health threat to the poor than starvation.

Forty years ago, experts said the world was running out of oil, too, with only 40 years’ worth of reserves. They predicted disaster. But huge new discoveries of deep reserves have been made since then. Four decades later and the world still has 40 years’ of reserves. The only a disaster was for those who were counting on buying it at $10 a barrel.

And now, the alarmists are on to other worries. Water, for example. Not that there isn’t plenty. The seas and rivers are full of it. But getting the right kind of water to the right place is going to be expensive.

Peak water…peak oil…peak food…peak this, peak that. After so many alarms with so few fires, many people think they can put away the fire extinguishers. Higher prices draw forth more supply…and substitutes. The limits seem to recede forever.

But the threat of disaster hasn’t disappeared; it is just retreating in good order like the Tsar’s troops…waiting for the worst possible moment to strike. There is only so much arable land. There is only so much water. There is only so much energy to move food and water. Man has been growing food for 12,000 years. Surely, he’s reached capacity, no? Experts see disaster coming again. The undeveloped world is still multiplying – and with much larger numbers. The population of the earth is expected to add nearly 3 billion people by the middle of this century. On that basis alone we’d need another “green revolution” to keep up with it. But since the mid-90s there’s been little improvement in farm output. In fact, people have eaten more than they’ve produced for most of the last decade. And as people get richer, thy change their eating habits. Grain is fed to the cows and pigs; people want meat. China’s consumption of pork, for example, increased 45% between ’93 and 2005. The need for grain multiplies 5 times faster than the people they are meant to support; a calorie from grains takes only about 20% of the inputs needed to produce a calorie from meat.

Is the world running out of wheat? No. There will be plenty of wheat available. But probably not at $3.50 a bushel.

But every half-empty glass is also half-full. The summer of 1789 was a disaster for plants in Europe. But with so much volcanic ash in the air, the sunsets were uncommonly pretty.

Bill Bonner,
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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84 Comments on "The Rise, Fall, and Rise of Disaster"

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Ross
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Good article. The US gets cocky because its got the fix in and it works until it doesn’t for a while after a big event. When it doesn’t commodity prices move up at light speed. The fix on wheat is that the US industrial farmers want the market share and volume on world markets. They’ve got guaranteed profit on any volume that moves. They get the guaranteed subsidised price when the world price is low too. Their profit is equal to the difference between the subsidy developed for the US small block farmer to just survive, and the lower production… Read more »
john
Guest
Bill, Malthus’ limits have not been abolished – just postponed. And it only takes one essential resource to ‘peak’ to bring the whole production line to a grinding halt. What do you think the market will substitute for water? Australian cities have decided to substitute with electricity to drive desal plants. Probably not a long term solution given the growing consensus on greenhouse gasses. What will China substitute for coal when it chokes on the limits? Given China’s current growth rate , and the lock-step of economic growth and energy use, i would predict that we will see a very… Read more »
Ned S
Guest
Must ask an American mate of mine if she reckons her people are likely to revolt – My thought is that they’d only do that if their government and media couldn’t find them an alternative scapegoat? Although as Biker seems to suggest, a big reality check on their part could save us all some grief??? A general question: How does some mob that has 24% of the world’s GDP and 4% of it’s population go broke? Are their production costs too high?? Do they spend too much??? What really is their storey? (OK – I lied – That’s 4 questions… Read more »
Ned S
Guest

I’m torn – Should I work on growing a longer nose and dyeing my hair red? Or on continuing to let my head hair fall out whilst cultivating that on my chest? Damn it, this is Oz, we’re middle of the road, and have the loot to burn – I think I’ll do them all!!! :)

Ned S
Guest

“I think that we will all run out of money” … Yes John, I’m slowly getting my shed filled up with seashells and stones with holes in the middle of them. I reckon I’ll be alright! :)

Biker
Guest

I see Dr Karl is recommending bullet trains on today’s Sunrise, Ned! ;)
The Brains Trust also promoted the premise that with renewable energy adequately financed to 2020, we could be 100% self sufficient by 2020.
After that maintenance of equipment would be the only cost… .

Hard on that news comes a claim that our Liberal state government has conned purchasers of solar electricity panels. The price touted per unit was 47c.
It now appears that the true price may be 40c. Bound to be a state election issue with so many homes now erecting solar electricity systems!

Justin
Guest
The late economist Julian Simon had an answer for peak oil/water/population etc: he was generally optimistic about the benefits humans bring to the planet and about man’s prospects for the future. He felt that overpopulation wasn’t something that we had to worry about; his future outlook was that “…first, humanity’s condition will improve in just about every material way. Second, humans will continue to sit around complaining about everything getting worse.” How true. Simon’s central premise was that people are the ultimate resource, “…human beings are not just more mouths to feed, but are productive and inventive minds that help… Read more »
bearamundi
Guest
I can’t agree with you here Justin re un-ending progress and abundance as challenges are met by advances in technology. That guy Simon is exactly what he says he isn’t:-cornucopian. What about WW1 and WW2? Or highly civilised societies like UK and USA doing the most barberous things in the current conflicts. The idea of progress, economic expansion is dead. The human mund has become so narcissistic and crazy that there is no viable alternative or antidote to despair. You can attempt to help yourself and your family and friends, that’s about it. It is going to end very badly… Read more »
Macca
Guest
Justin The welfare state actually encourages the wrong type of population growth. Taking money from the mid to upper level earners and allocating it to unemployment breeders means that over time the populace gets dumber overall. There are plenty of educated working people who have trouble affording children, whereas if you are unemployment you actually get paid more for producing more kids. I read an article from the UK a while back where a family had about 8 kids, and both parents stayed at home on benefits of about GBP75k a year….now what sort of environment is that to raise… Read more »
Biker
Guest

“UK and USA doing the most barberous things in the current conflicts”

Agreed. Saw some dreadful haircuts last year…

Lachlan
Guest

Come on Bear. You’ve just finitisized Justins completely infinite concept before finally conceding it is infinite in your final sentence.
Fair dinkum Bear ;)

Biker
Guest

“The human mund has become so narcissistic and crazy that there is no viable alternative or antidote to despair.”

Nah!~ Cheer up, Bear. Ditch your sad tag, which is bringin’ ya down, son.
I suggest bullonfridai. Break out of hibernation, greet each day with a smile and a fresh coffee and embrace the possibility that technology may inexorably extract us from the excreta. It’s always darkest before the dawn, every cloud has a golden lining and like the feeenix we’ll rise from the one day series*.

Outa cliches. :(

* Or is that the Ashes?!~

bearamundi
Guest

You fella’s still got some hope eh? Okay, I did get a bit down today and maybe things did get on top of me. Saw a terrific film tonight with some mates. “Boy”. A kiwi film, multi-dimensional masterwork. Still thinking about the sh*t-sandwich but heaps better. Thanks dudes…:)

Ned S
Guest

I thought brandy with beer chasers worked for you Bear? :)

bearamundi
Guest

Hardcore, Ned!! :D

Lachlan
Guest

The Floydians understood that.

“There is no pain, you are receding
As distant ship’s smoke on the horizon
You are only coming through in waves
Your lips move but I cant hear what your saying
… yada yadda….dum de dum de dum
The dream is gone
I….. Have become comfortably numb”

Bear, let us laugh in the face of GFC doom :) :) …and consume alcohol, if we must ;)

Ross
Guest

Ned, they can’t go broke unless the USD loses the global reserve currency status. Technically no state with a printing press can either but Weimar tells you otherwise in practice, so don’t listen to the stories about governments getting first use out of what comes out of the printing press (it makes no difference on the ground), except in the peculiar case of the US that can export the inflation on its notes (and build asset bubbles for their bankster cronies and that allows them to clip the ticket of prices rising elsewhere in the world).

Bearamundi
Guest

Hanging on in quiet desperation is the aussie way…

Massive burn by David Gilmour… :)

Ag’s still hanging around and if inflation starts coming….

I think those ideas of progress arose out of the tremendous economic expansion following WW2. People were less confident after WW1.

Biker
Guest
Yes, the Filoydians were Filosophers of merit, but the Stonesians also got it right: “You can’t always get what you want…. but you just might get what you need… ” I see housing got a mention this morning, Ned: Joe: No bubble. Wayne: No bubble. Bet on: No change. Bear, your diet may be responsible for these lows. Try a change of reading material. Williams’ ‘the-greatest-depression-is-here’ perspective is just a _little_ too pessimistic. If this is the greatest depression I’ll experience in my lifetime, it feels pretty good. :D My other issue with Williams is his Obama-obsession. While it’s true… Read more »
bearamundi
Guest

Oh Dear. So now you’re reduced to quoting Joe and Wayne. Sleep on Biker, everything’s just Dandy!! :D

Biker
Guest

You definitely need that caffeine, Bear.
I know it’s winter, but your hibernation has to end some day!~ ;)

Great to see you’re smiling today, anyway… . :D

Lachlan
Guest

This’l perk you up Bear.

http://www.caseyresearch.com/displayCdd.php?id=509

Check out “The Best Gold Interview of 2010”. Some good points about silver in there for you.

Biker
Guest

Very interesting article, Lachlan. While it starts out referencing the gold _supply,_ a much stronger point is its focus on increasing _demand._

I’ve no idea where gold will go, but there’s no question that demand is increasing.

Bearamundi
Guest

Good read Lachlan, thanks. Appreciating an up-beat Biker too. :)

Biker
Guest

HaHaHaHa!~

I’m sure you’d prefer a beat-up Biker, Bear! :D

Ned S
Guest
If you have a nice secure job you should be OK regardless of most nasties that could come is my hunch. Maybe not as well off as you had hoped – But pretty OK regardless. As for the interest rates might go to 20% pa and/or house prices might crash 50% yarns – Well, maybe they’re possible??? – But no bank will be foreclosing on your mortgage in such circumstances – So you’ll have a roof over your head to boot. And even if things got a bit sticky then my gut feeling is that Oz would still be looking… Read more »
peterg
Guest
“The population of the earth is expected to add nearly 3 billion people by the middle of this century.”.. and according to UN predictions, taper off after that. the richer people get, and the more social security they are afforded from the surpluses of the Great Machine (thats the one where machines to the work of a thousand manual laborors), the less children they have. women have more choices, people dont need to expect their children to work the farm (turning it into desert by subdividing for all the kids )and they dont overproduce to allow for infant mortality (half… Read more »
Ned S
Guest
“The welfare state actually encourages the wrong type of population growth” – I must admit that I DO agree with you Macca! – Problem is if we looked at it logically we may well decide that there isn’t much to be said for Aussies breeding fullstop? … Because in most cases we presumably could get way better quality product cheaper from overseas – Providing we are choosy of course. And, according to lots of smarties, there’s plenty of people in the world already anyway – So it doesn’t seem logical [to me?] to make more when we can just relocate… Read more »
Ned S
Guest
I reckon it’s all those Sydneysiders and Melburnians who’ve buggered up Oz house prices myself? – It simply isn’t fair that because I was born in the boondocks and bought housing here that all those do nothing wasters from down south can come up north and retire with all their spare cash after selling off their highly valued properties in the big smoke – I’m cranky – How’s this for an idea – All 1 bedroom properties in Oz are worth $100K, 2 BRs $200K, 3 BRs $300K – Regardless of where they are! And if you own a ‘bigger… Read more »
Ned S
Guest

“they can’t go broke unless the USD loses the global reserve currency status” – They’re broke Ross. Even I know that.

Steve
Guest

“Buying an asset that’s over-priced never ends well,”

Ned S
Guest

Then please buy one in your preferred US state by all means.

Biker
Guest
Bill: “It was loony to think you could finance your retirement out of the increases in your house’s value. Who were you going to sell the house to? Boomers were the biggest buyers of houses. When they turned into the biggest sellers, it was sure to cause trouble.” Timing, or is Australia different? Friends just sold their family home for three times its purchase price 15 years ago… and rolled the tax-free gain straight into Super. They needed to do that… caught out in $hares AND $uper, both still down around 30%. Ned is right, Steven. Instead of Steve’s Weakly… Read more »
Ned S
Guest

Is DRA falling down on the job – Or have I just gotten bored enough with reading ALL the prognosications of doom I’ve bypassed some of theirs? (as I’m sure I do) – A. The Chinese have $1 t effectively hiding in ‘black money’ – ‘under their matresses’ – Sneaky little devils! (Doom for whom?) And B. China’s population policy has resulted in it having 100 m young males it doesn’t especially need – Yoo Hoo – Want to Bang Heads Boys? :)

Ned S
Guest

What exactly SHOULD a bloke tell his family in a developing country??? – Nah, don’t hurry over here – As poor little Stevie hasn’t bought his house yet – ‘Cause he’s waiting for the crash! Ha Ha Ha! Ho Ho Ho! You really DO make me laugh mate … :)

Ross
Guest
Ned, when I was a kid, our high school had a handy man, mainly fixing and restoring desks and that sort of thing. He’d been there decades and was in his late 80’s I think when I was about 15. He was just called ‘Pop’. He had this cave of a lock up with no natural light. The lights were those caged one’s and the corridor was like on that 70’s TV show called Callan with Edward Woodward that was popular at the time. And his one pleasure in life was having a cup of tea with biscuits, and he… Read more »
Biker
Guest

“Now your lips are touching my sleep….

…and every morning my mind
rolls over you… and out of bed… .”

I think there’s a book in every one of us, Ross.
Look forward to buying yours one day.

Biker
Guest

JEEZ, I didn’t mean _you_, Steve!!~ :)

Lachlan
Guest
Ross I’m sure you’ll write a a fine book…. judging on your description of Pop anyhow. Actually I enjoy observing how the regulars here express themselves in writing. Also how some mingling of expressive forms has taken place over time. Possibly adapting so as to communicate more efficiently within the group. Hmm an evolution of group speak/language. Anyhow Ross I must inform you that my poem was actually not mine but an extract from the song “Comfortably Numb” by the band Pink Floyd (the Floydians)…just clowning around with boys back there …..about the use of intoxicants to escape sad realities/perceptions… Read more »
bearamundi
Guest

Lachlan, where was Ross when the Floyd ruled?
“There is no dark side of the moon really. Matter of fact, it’s all dark”
Appreciating a gay Biker. :)

Ross
Guest

Bear, I just heard Dark Side of the Moon the other day. Sorry I’m not as good with the recall on the lyric. cheers all

bearamundi
Guest
…you were probably reading the History of Civilisation at the time :D I was into Van (the Man) Morrison, being an auditory type. I still have my $30,000+ (most pieces are second hand too and it still cost this much) stereo although I never get to play it much with young kids, and a wife who says it sounds “good”. I said, oh, common one, my illuminated one. Oh my high in the art of sufferin’ one. Take a walk with me Take a walk with me down by Avalon Oh, my common one with the coat so old And… Read more »
Biker
Guest

“Appreciating a gay Biker. :)”

I had figured _you_ would, Bear. ;)
Sorry to disappoint you, son.

You’ll have to “…get…past..the…wife :D…” with someone else, Bear…

Ross
Guest

Bear, when I was being reflective I was more bent toward Richard Clapton “Sitting out on the Palm Beach Road, I’m so drunk and the car won’t go”, probably sitting with some girl from Max Merritt’s “Slipping Away” at the time.

Horn bands, and soul, and even Rose Tattoo at the Manzil Room in the Cross in the late late hours might be for more regular mahem. There was this girl with yellow lipstick there once ….. I had mainly local tastes after getting through a Mark Bolan phase.

And reading came after sport, boozing and girls in that order.

Biker
Guest

Wonder whatever happened to Stewie, Max’s drummer? He was at least my age now, when I was a kid… :)

Ross
Guest

Not sure Biker, he might have been playing the last time I saw Max. It was at a show at the Sydney Entertainment Centre where Max was the support for Ray Charles. It was just before Ray died in 2004. Big night!

Ned S
Guest
“Boredom or “waiting for something to happen”.” – Very accurate call Ross. Exacerbated by thoughts like should something happen, it mightn’t be nice. Which means there’s an underlying tension to the waiting. And frustration over things like some of the problems seem pretty obvious but no-one in the mainstream seems at all keen to even acknowledge them let alone start thinking and chatting about how they might be fixed. Albeit longterm even. And the almost certain thought that even if the best possible solutions could be found, then lots of us are going to scream Not good enough! Interesting times… Read more »
bearamundi
Guest

Hi Ross. I’m a big fan of Richard Clapton too, his not so popular stuff is great. I always wondered why he wasn’t more esteemed, can’t fault the guy. Just having you an about reading, you seem to know so much about what is really going on so I concluded you must have read a huge amount.

Ned S
Guest

Eric Bogle is ‘da man’ Bear – It’s been my preferred music to slit my wrists by for decades now! ;) Then when the soul needs some soothing Noirin Ni Riain’s not bad. Plus Russkie pop is great when I want to boogey!!! Never really got into some of the Asian stuff though – All those discordant bangs ‘n bells can be offputting? But then what do I know – I actually even like didge ‘n clapsticks??? … :)

Biker
Guest

“It was just before Ray died in 2004. Big night!”

Last time I saw them was the early nineties at a Murray Street (Perth) pub.
A lot of their tracks are still available online, Ross. It sure takes me back!~ :D

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