Source: Monty Guild and Tony Danaher | Guild Investment Management

Food inflation as we have mentioned is here to stay. Corn prices may be peaking as the Mississippi river crests, but we see higher prices for other substitutable grains. A decline in food prices could happen temporarily in the autumn if the U.S. Government and others end set their aside programs and other countries start to develop underdeveloped farmland. This will not lead to a large increase in food production worldwide initially but in the long term production will rise.

The problem is that consumption is also rising at a rapid rate. While worldwide production will not go up by a huge amount, the main effect will be psychological. As people come to the conclusion that supplies may increase, speculators will exit positions. Over the longer term, global food stocks will be rebuilt as they are way too low. This rebuilding of inventories will keep prices firm.

As we have mentioned in the past, global food inventories have fallen in 7 of the last 8 years. These inventories must be rebuilt for many years before prices can really start to fall. The fact is, global food prices are lower in inflation adjusted dollars than they were decades ago. Even in the most optimistic case, inflation adjusted corn, wheat, soybeans, and other foods must rise for years to come just to get back to their inflation adjusted prices of 50 years ago.

An aside…developed country consumers spend less of their budget on food compared to consumers in other countries. We believe that this will change. Consumers in developed countries will be spending more of their total income on food as well. Read the rest of this entry »

The situation was already out of control to begin with. Now it is SEVERELY spiraling out of control. Whenever the counter-parties of these transactions fails to pay, it means the FED has to print up more money to bail them out. If they aren’t bailed out, then the whole charade crumbles to the ground, taking the rest of us with it as the economy swirls down the toilet bowl.

This is a situation that has no reasonable solution except, imo, to scale down these derivative positions. They are going to have to be made illegal, but the people that have them already have to be grandfathered in so that the system doesn’t collapse.

Total Notional Value Of Derivatives Outstanding Surpasses One Quadrillion

Jim Sinclair | JSMineSet.com

Dear CIGAs,

The notional value of all outstanding derivatives now totals approximately $1.144 QUADRILLION.

This appears to be Bank of International Settlement Spin to announce the largest gain in derivatives outstanding since they started to report. As of the last report it appeared that both listed and OTC derivatives was under $600 trillion. Now listed credit derivatives alone stood at $548 Trillion. The OTC derivatives are shown as $596 billion notional value, as of December 2007. One can only imagine what number they are at now.

Well we hit a QUADRILLION. We have more than $1000 trillion dollars in all derivatives outstanding. That is simply NUTS because notional value becomes real value when either counterparty to the OTC derivative goes bankrupt. $548 trillion plus $596 trillion means $1.144 quadrillion. Read the rest of this entry »