What an overvalued currency does to consumption
In the United States:
· Americans constitute 5% of the world's population but consume 24% of the world's energy.
· On average, one American consumes as much energy as
o 2 Japanese
o 6 Mexicans
o 13 Chinese
o 31 Indians
o 128 Bangladeshis
o 307 Tanzanians
o 370 Ethiopians
China spends almost 45 percent of household income on food and India almost 50 percent. When the yuan appreciates, China's 1.3 billion people will suck up the world food like the US sucked up the world's oil.
gdp of "High-income countries"
Global food consumption
Foodandsocietyfellows.org reports about cheap food that isn't.
Purchasing Power Impacts Affordability
Where do the poor countries of the world fit in this scheme, in particular those countries where hunger is endemic? These tend to be tropical countries with good to excellent agricultural capacities and low relative food costs. For example, households in Zimbabwe buy food with less than a quarter of the actual dollars that their U. S. counterparts spend; Bangladeshis spend 16 percent, and Ethiopians only 13 percent (about the same as Mexican, Brazilian and Indian households.) Interestingly, while the three countries with the greater food expenditures in this list do not currently produce sufficient food to meet their population's requirements, the last three, with the lower food expenditures, produce more than enough. All the same, hunger is rampant in all six. What can be drawn from this information? One central fact is that the purchasing power of a population must be taken into account when making any claim about the affordability of food. This point is readily understood in households that experience hunger within the U. S. itself. Such a household might consist of two children and a single mother earning less than the poverty threshold of $14,494 per year. This household must devote at least 30 percent of its income for food, in effect having similar economic access to food as the average household in Mexico or Zimbabwe. In the United States, 11 percent of the population experiences such circumstances, or 11.5 million households—summing to 31 million people, about the population of countries such as Canada, Kenya and Morocco.
Any valid comparison of absolute food costs must be based on common standards, for example: dollars per person per year to satisfy a specific dietary requirement. This is because currencies have different values against one another, household sizes vary around the world, and some countries produce much more food than necessary to meet the dietary requirements of their population while others don't produce enough. Using such adjustments, comparisons among countries draw an even starker picture. Consider the Indian example: households in India must feed three more persons than the average U. S. household (5.6 vs. 2.6 persons, respectively.) In spite of being one of the world's major hot spots for hunger, India produces sufficient food to provide 113 percent of the minimum caloric requirement for its entire population (it is the world's 7th largest exporter of wheat and 5th largest exporter of rice.) The absolute cost of food per capita in India (to meet the Food and Agriculture Organization's minimum caloric specifications), is $81 per year, compared with $1,274 in the United States. In other words the Indian food system can provide an equivalent level of nutrition at 6.4 percent the cost of the U. S. food system. The same is true for Mexico. The figure for Brazil is 9 percent, for South Korea 4 percent and for Vietnam 0.8 percent; all countries with national food sufficiency. What accounts for this? To answer this question, we must delve into the issues of how food is produced, processed, distributed and consumed.
What Do You Buy When You Buy Food?
In absolute terms industrial food is expensive and becoming more so with time. On average in the U. S., a unit of food that cost $1 seventy years ago, now costs $38 and ERS projects that per capita food expenditure will rise by another 7.1 percent over the next 20 years. This is readily understandable when you consider what you now are buying. The actual food is the least of it, on average accounting for only 20 percent of the final retail cost of the purchased good. Ultimately you are paying for the freedom to be unconcerned about where your next meal is coming from, and increasingly about how it will be prepared and by whom (today about half of our meals are taken outside the home.)
Within minutes of thinking of it, in almost any part of the U. S., you can have any food you desire, whether it is produced in your region or not, whether it is in season or not, and whether you have time to prepare it yourself or not. The vast and powerful infrastructure that the U. S. economy has assembled to make this possible is what makes your industrial food so expensive...
... the basic obstacle to food access for the poor is lack of purchasing power... [An obstacle which will be greatly diminished with the fall of the dollar]
"the poorest of the world are subsidizing the wealthiest in the world."
"The world's poor spend most of their income on food"
My reaction: Look at the chart below taken from AmberWaves's Fluctuating Food Commodity Prices.
Impact of higher food commodity prices on consumers' food budgets*
Low-income food-deficit countries
I. Base scenario
Food costs as percent of income
Staples as percent of total food spending
Expenditures on staples
Expenditures on nonstaples
What effect do you think the dollar's collapse will have on these numbers?
Consider the following:
Countries where currencies will appreciate (Africa, Asia):
75% of the world's population
High amount of income spend on food.
Countries where currencies will depreciate (North America, Japan, parts of Europe):
20% of the world's population
Low amount of income spent on food
Right now global food consumption is around 10% of world gdp. After the dollars collapse, this number will be somewhere between 20% and 30%. This is because people in Western "developed" nations will be spending a much bigger (50%?) of there income on food as a result of their loss of purchasing power. The price of food will probably be boosted by at least a factor of two as Asia start consuming most of the world's food. This makes an investment in agriculture equally attractive to gold, which is why I am setting up a fund to invest in Russian agriculture.
The good news is the dollar's collapse will do a lot to end world hunger by redistributing purchasing power to the developing world. The bad news that a lot more of the world's hungry will be living in Western "developed" nations...