John wrote:From the point of view of Generational Dynamics, what we're seeing is what I call the "Malthus effect," a continuing increase in the price of food as the population grows faster than the supply of food. (See "Food: Green revolution v Malthus effect.")
As you can see from the above graph, food prices were steady or declining until 2002. Since 2002, food prices have been surging must faster than inflation.
Over the 20 year period on your graph the percentage rise in CPI and food is not that different. Food is more volatile. This graph does not really support the Malthus effect theory. Unless there was evidence the population went down in the first 12 years and up in the last 8 years, which I don't think is the case.
I think the real problem we are seeing is that food is one of the first things reacting to the new money being printed. At these new higher prices the world spends about $1 trillion per year importing food. Bernanke prints about $1 trillion each year.
Commodity prices like wheat, rice, corn, etc have less impact in the first world than in the developing world for several reasons. The food that developed countries buy tends to have raw commodities as only a small component of the price. For example people buy Corn Flakes while in the developing world they would buy more raw commodities, like corn. Next, the developing world spends a much larger fraction of its budget on food. If you spend 60% of your family budget on food and the price of food doubles, you are in trouble.
Much of Bernanke's $1 trillion per year is flowing into the developing world. With the US government the way it is, you are better off investing in many other countries around the world than the US. When huge amounts of money flows into small economies where food is a huge part of the economy, food prices go up.http://blogs.wsj.com/marketbeat/2010/11 ... tupid/tab/