November 28, 2008

Creating Crises, Shortages and a Police State

Financial Crisis Could Trigger Social Unrest, Warns UN Chief

Gulf Times
November 30, 2008

The global financial crisis has brought an abrupt end to a long era of economic growth, and if not handled properly it could result in social unrest and political instability, according to the United Nations.

Seeking additional emergency financing from the International Monetary Fund (IMF) and the central banks of the advanced countries, the UN Secretary General Ban Ki-moon suggested a six-point agenda to set the world economy in order.

“If not handled, today’s financial crisis will become tomorrow’s human crisis. Social unrest and political instability will grow, exacerbating all other problems,” he said, declaring open the Follow-up International Conference on Financing for Development. The ultimate danger would be a cascading series of crises, each building on the other, with potentially “devastating” consequences for all, he said.

He welcomed the fiscal and monetary rescue packages and stimulus plans launched by major economies, but said that probably more needed to be done since the vast sums committed to bail-out “dwarfed” overseas development assistance, which remains a crucial pillar of development finance for many countries.

Elaborating on the six-point agenda, he said there was a need to address the liquidity needs, especially for the developing countries. He said that the wealthiest nations had moved to keep credits flowing at home, and added that credit flows must be ensured to developing countries as well. Their (wealthy nations’) currencies were not reserve currencies; their foreign reserves, often large, were not sufficient to withstand the threat coming from today’s crisis, Ban Ki-moon said.

“We, therefore, need additional emergency financing from the IMF and the central banks of the advanced countries. Without it, the credit crisis will spread to emerging economies,” he said. In this process, growth would stall, hurting them and the world as a whole, he said. Suggesting that an increase in grants and long-term lending from the development banks should be a part of the globally co-ordinated approach, he said reducing aid to the poorest nations under current circumstances would have devastating consequences...

Food Prices Will Rise, Causing Export Bans, Riots

November 28, 2008

Food prices will rise next year, prompting a revival of protectionism from food-growing nations and risking a renewed bout of rioting, according to Jochen Hitzfeld, an analyst at UniCredit SpA in Munich.

“Agricultural commodities will outperform the broad commodity indices in 2009,” Hitzfeld wrote in a research note this week. “If key crop-producing countries then impose export bans again and speculators drive up prices via physical stockpiling and futures contracts, new food unrest is even conceivable in the second half of 2009.”

The CHART OF THE DAY shows food prices for the past 10 years as measured by an index compiled by UBS AG and Bloomberg that tracks at least 13 foodstuffs, including wheat, soybeans, sugar, cocoa and coffee. The index has declined 35 percent since peaking in July.

“The prices of many agricultural commodities are now clearly below their production costs,” Hitzfeld wrote. “We expect the coming year to bring a cutback in area under cultivation as well as a decline in the yield per hectare.”

To contact the reporter on this story: Mark Gilbert in London at

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