Documents obtained under the Freedom of Information Act show BP officials openly discussing how to influence the work of scientists supported by the fund, which was created by the oil company in May last year.

Russell Putt, a BP environmental expert, wrote in an email to colleagues on 24 June 2010: “Can we ‘direct’ GRI [Gulf of Mexico Research Initiative] funding to a specific study (as we now see the governor’s offices trying to do)? What influence do we have over the vessels/equipment driving the studies vs the questions?”.

The email was obtained by Greenpeace and shared with the Guardian.

The documents are expected to reinforce fears voiced by scientists that BP has too much leverage over studies into the impact of last year’s oil disaster.

Those concerns go far beyond academic interest into the impact of the spill. BP faces billions in fines and penalties, and possible criminal charges arising from the disaster. Its total liability will depend in part on a final account produced by scientists on how much oil entered the gulf from its blown-out well, and the damage done to marine life and coastal areas in Louisiana, Mississippi and Alabama. The oil company disputes the government estimate that 4.1m barrels of oil entered the gulf.

There is no evidence in the emails that BP officials were successful in directing research. The fund has since established procedures to protect its independence.
Other documents obtained by Greenpeace suggest that the politics of oil spill science was not confined to BP. The White House clashed with officials from the National Oceanic and Atmospheric Administration (NOAA) and the Environmental Protection Agency (EPA) last summer when drafting the administration’s account of what has happened to the spilled oil.

On 4 August, Jane Lubchenco, the NOAA administrator, demanded that the White House issue a correction after it claimed that the “vast majority” of BP oil was gone from the Gulf.
A few days earlier, Lisa Jackson, the head of the EPA, and her deputy, Bob Perciasepe, had also objected to the White House estimates of the amount of oil dispersed in the gulf. “These calculations are extremely rough estimates yet when they are put into the press, which we want to happen, they will take on a life of their own,” Perciasepe wrote.
Commenting on BP’s email discussions about directing research, a spokeswoman for the oil company said: “BP appointed an independent research board to construct the long-term research programme.”

But Kert Davies, Greenpeace US research director, said the oil company had crossed a line. “It’s outrageous to see these BP executives discussing how they might manipulate the science programme,” Davies said. “Their motivation last summer is abundantly clear. They wanted control of the science.”

The $500m fund, which is to be awarded over the next decade, is by far the biggest potential source of support to scientists hoping to establish what happened to the oil.

A number of scientists had earlier expressed concerns that BP would attempt to point scientists to convenient areas of study – or try to suppress research that did not suit its business.
The first round of funds were awarded last May to a consortium of gulf coast researchers. “The rest we are all waiting with bated breath,” said Ajit Subramaniam, a marine scientist at the Lamont Doherty Earth Observatory. “A lot of the funds might be for understanding future spills. It is also unclear what kind of strings will be attached with that money.”

Another email, written by Karen Ragoonanan-Jalim, a BP environmental officer based in Trinidad, contains minutes of a meeting in Houma, Louisiana, in which officials discussed what kind of studies might best serve the oil company’s interests.

Under agenda item two, she writes: “Discussions around GRI and whether or not BP can influence this long-term research programme ($500m) to undertake the studies we believe will be useful in terms of understanding the fate and effects of the oil on the environment, eg can we steer the research in support of restoration ecology?”

Ragoonanan-Jalim acknowledges that BP may not have that degree of control. “It may be possible for us to suggest the direction of the studies but without guarantee that they will be done.”

The email goes on: “How do we determine what biological/ecological studies we (BP) will need to do in order to satisfy specific requirements (legislative/litigation, informing the response and remediation/restoration strategies).”

Suzanne Goldenberg, US environment correspondent
guardian.co.uk, Friday 15 April 2011 11.46 BST

The area of ocean 65 miles south of New Orleans would normally be occupied by fishermen, shrimpers and oystermen, but it has been deserted since the BP spill began. The abandoned wellhead burst in the early hours of Tuesday morning after being hit by a tug boat that was pushing a dredge barge.

The wellhead is discharging a mist of orange and brown oil about 100 feet in air but the Coast Guard does not have a specific flow rate for the well determined yet, although there have been early reports that there is natural gas and mud mixed in with oil coming from the well. The well, which was once owned by Cedyco Corporation, was abandoned in November 2008.

Americans (and for that matter the rest of the world) were warned by USA President Eisenhower that corporations and the military were positioning themselves to take over, however, the relief of the war ending probably made people less concerned, the lessor of to evils.

But ‘world hegemony’ is not new, where tribes expanded and took over new territories.

The way the Americans did it was by a) disbanding the League of Nations and funding the United Nations, which basically was a group who drew new lines and divided the world up amongst themselves and as the USA was the major funder, the US% became the world’s reserve currency, the measuring stick and for every transaction, they took their cut.

However, greed being what it is, the new found wealth meant they could ‘afford’ more (usually at other people’s and countries expense as the USA has less than 5% of the world’s population yet uses over 25% of the world’s resources); as the population grew, so too did the need for more income to pay for the additional hangers-on.

But reality is that everything is finite; there is only so much potable water on the planet, arable soil and the energy and materials to make fertilizers; growth or more importantly population growth is required to drive demand and as more money was created by various schemes in America, this soon outstripped the real money; people no longer are able or willing to borrow from their future to buy stuff today.

So what does someone do if they can’t get the money they need to keep the system going … well in the USA’s situation, they just borrow more and if they can’t borrow it, they just print more and of course others looked away, but the doubt is there.

The Arab states were looking to the ‘Gulf’ as a new / replacement currency similar to the Euro; China – now the most affluent country – is looking for ways to have the Yuan as a more stable reserve currency and we see various fluctuations where we compare the AUS$ to the US$ but more importantly the Yen and the Euro; the English £ will soon follow the US$.

Banks look for trends or better still emerging opportunities where they can make money, regardless of the ramifications. One must wonder what backdoor deals are being done, the ‘you scratch my back and I’ll scratch yours’, the secret little clubs. Waring bells rang for me when the National Australia Bank invested heavily this year in an already collapsed American financial institution.

David Bloom (the HSBC bank’s currency chief) obviously believe the US$ is about to lose favour as the world’s reserve currency.

The global credit boom is bust but the financial crisis temporarily masked the effect; but as new markets emerge, non-productive countries like the US, UK and other old world orders will fall behind, Australia’s only saving grace at present is resources, we now import more food and other goods than we grow or manufacture.

The loss of relative wealth and economic power of the old guard is slipping irreversibly; the Euro, Yen, £ and Swiss franc and more ‘established’ currencies will be relegated along with the US$ as the world economy re-balances and China, Brazil or Latin America compete.

So what could go wrong?

Well the Yen is lent out less the 1% and the US$ is even less, China is using its money (a lot of it actually US$’s) to buy ownership in resource companies around the world, so where does the investment $ head, Europe is struggling with lower demands of goods, so Australia looks like the next best bet, problem is though, as experience shows all to clearly, when you have access to more money than you need, the value of things loses proportion and eventually that artificial growth ends and those at the end of the currency ‘chain mail’ pay, so we continue to boom, but eventually this bubble will also burst.

With much of our arable land under dams (to wash dust from our cars), or dozed aside to extract more coal and no income from resources, what will our children’s children be left with other than an even bigger dust bowl than it is today … only then will we rue the day …

The company runs the second-largest field there, in the U.S. called Thunder Horse and operates the largest U.S. oilfield, Alaska’s Prudhoe Bay.

The Tiber discovery, which could hold more than 3 billion barrels of oil equivalent, follows another massive nearby find in the Kaskida field in 2006 and if both are developed, they could boost BP’s output in the Gulf to around 650,000 barrels of oil equivalent day during the next 15 years.

Globally, BP produced about 4.1 million barrels a day in the second quarter (2009).

In 2010, about 14% of crude oil production in the lower 48 American states will come from four deepwater Gulf of Mexico oil fields, two of which (Atlantis and Thunder Horse,) are operated by BP, says the U.S. EIA (Energy Information Administration). These discoveries will boost the relative importance of BP’s North American portfolio, which already represents about 40% of BP’s global business, which co-incidentally is also what the USA uses of the total world oil production.

BP has had a chequered past in the USA not always so triumphant in these waters. The company has taken a few hits, with the Thunder Horse field delayed by three years before starting in 2008 and Atlantis was also postponed.

A 2005 explosion at BP’s Texas City refinery killed 15 workers and the company agreed to plead guilty to criminal environmental charges related to the blast.

Then in 2006 the U.S. regulators sued BP for manipulating the propane market and later that year, BP was forced to shut down a bulk of the oil output at Prudhoe Bay following the discovery of corrosion in some pipelines.

BP’s latest discovery is one of the deepest oil fields ever drilled. The Gulf of Mexico holds its own as considering the first well out of sight of land was drilled in 1947. Bob Fryklund (a consultant with HIS), claims the Gulf – thanks to deeper areas made exploitable by new technology – is part of the offshore “Golden Triangle,” that also comprises West Africa and Brazil.

Brazilian offshore finds are the largest – Petroleo Brasileiro’s Tupi field is estimated to contain some 8 billion barrels of oil equivalent or 93 days (based on the worlds consumption of 85.7 million barrels a day) and while the Brazil government is quite stable, the continuity is not as assured as the Gulf of Mexico as they look to follow the lead of other resource-rich countries such as Russia and Venezuela by proposing new laws that put the state-owned oil company in the driver’s seat of development of newly discovered reserves.

Given the financial quagmire of the USA and the highly questionable value of the US$, it is a question of how the Americans can actually pay for their addiction on energy; with less than 5% of the worlds population but using almost 40% of the worlds oil and no real industry or agricultural exports to pay for it, sooner or later someone will turn the tap off.

Just as Kevin Rudd is weighing up borrowing more money to pump into the economy to make it look like its business as usual, so too is China wondering how much more money to pump into the American economy to buy Chinese manufactured goods.

And before China it was the Japanese and Saudis and many other punters looking for a quick $.

So what comes first, the chicken or the egg when the cost of buying all these consumer goods kept climbing, was it due to rising energy costs and competition for other resources?

An interesting and perhaps telling indicator is that Saudi Arabia was one of the biggest oil exporters and funders to the USA; however, as their oil well ability to meet demand has been slipping (at almost the same percentage rate as the North Sea supplies to the UK, which is also in financial turmoil) so too has their cash injections into the American economy.

There would be quite a few of concerned Saudi princes these days as the USA’s ability or commitment to support the regime is increasingly questionable.

Canada is the biggest supplier to the USA followed by Venezuela, and although America consumes less due to a collapsed financial system (some $9 trillion in debt), people selling to the USA must be wondering what the real dollar value is of the currency the Americans are paying with.

Based on figures posted on the U.S. Department of Energy Web site, Venezuelan exports to the U.S. fell 5.4 percent to 1.39 million barrels a day in the second quarter and jumped to second place from third, leapfrogging Saudi Arabia, which shipped 32 percent less fuel.

Venezuela continues to send the bulk of its oil exports to the U.S., five years after President Hugo Chavez started seeking to diversify his nation’s customer base away from the country he calls “the empire.”

So, if you need to sell your oil to an *‘enemy’ to keep a constant income stream to support your social policies to prevent local unrest, what do you – that is Canada, *Venezuela, Saudi Arabia – do when the value of the payment is no longer there … can you afford to dig for, extract and refine a product that eventually you will never effectively be paid for ?

Nobody seem to be willing to admit the emperor has no clothes and the cost of finding oil (all the major oil finds are long gone) is going up while the public can only afford to pay so much.

Peak Oil has arrived and this concentrated energy source is no longer abundant and tighten belts we must.

Since the agricultural environment is in long term decline we have definitely exceeded our long term carrying capacity – yet our politicians at the behest of corporations AKA corporate government – are adding over 300,000 people a year to our population.

By: Eric_deCarbonnel

February 10, 2009 “Market  Oracle” — After reading about the droughts in two major agricultural countries, China and Argentina, I decided to research the extent other food producing nations were also experiencing droughts. This project ended up taking a lot longer than I thought. 2009 looks to be a humanitarian disaster around much of the world

To understand the depth of the food Catastrophe that faces the world this year, consider the graphic below depicting countries by USD value of their agricultural output, as of 2006.

Now, consider the same graphic with the countries experiencing droughts highlighted.

The countries that make up two thirds of the world’s agricultural output are experiencing drought conditions. Whether you watch a video of the drought in China, Australia, Africa, South America, or the US , the scene will be the same: misery, ruined crop, and dying cattle.

China

The drought in Northern China, the worst in 50 years, is worsening, and summer harvest is now threatened. The area of affected crops has expanded to 161 million mu (was 141 million last week), and 4.37 million people and 2.1 million livestock are facing drinking water shortage. The scarcity of rain in some parts of the north and central provinces is the worst in recorded history.

The drought which started in November threatens over half the wheat crop in eight provinces – Hebei, Shanxi, Anhui, Jiangsu, Henan, Shandong, Shaanxi and Gansu.

Henan
China’s largest crop producing province, Henan, has issued the highest-level drought warning. Henan has received an average rainfall of 10.5 millimetres since November 2008, almost 80 percent less than in the same period in the previous years. The Henan drought, which began in November, is the most severe since 1951.

Anhui
Anhui Province issued a red drought alert, with more than 60 percent of the crops north of the Huaihe River plagued by a major drought.

Shanxi
Shanxi Province was put on orange drought alert on Jan. 21, with one million people and 160,000 heads of livestock are facing water shortage.

Jiangsu
Jiangsu province has already lost over one fifth of the wheat crops affected by drought. Local agricultural departments are diverting water from nearby rivers in an emergency effort to save the rest.

Hebei
Over 100 million cubic meters of water has been channelled in from outside the province to fight Hebei’s drought.

Shaanxi
1.34 million acres of crops across the bone-dry Shanxi province are affected by the worsening drought.

Shandong
Since last November, Shandong province has experienced 73 percent less rain than the same period in previous years, with little rainfall forecast for the future.

Relief efforts are under way. The Chinese government has allocated 86.7 billion yuan (about $12.69 billion) to drought-hit areas. Authorities have also resorted to cloud-seeding, and some areas received a sprinkling of rain after clouds were hit with 2,392 rockets and 409 cannon shells loaded with chemicals. However, there is a limit to what can be done in the face of such widespread water shortage.

As I have previously written, China is facing hyperinflation , and this record drought will make things worse. China produces 18% of the world’s grain each year.

Australia

Australia has been experiencing an unrelenting drought since 2004, and 41 percent of Australia’s agriculture continues to suffer from the worst drought in 117 years of record-keeping. The drought has been so severe that rivers stopped flowing, lakes turned toxic, and farmers abandoned their land in frustration:

A) The Murray River stopped flowing at its terminal point, and its mouth has closed up.
B) Australia’s lower lakes are evaporating, and they are now a meter (3.2 feet) below sea level. If these lakes evaporate any further, the soil and the mud system below the water is going to be exposed to the air. The mud will then acidify, releasing sulphuric acid and a whole range of heavy metals. After this occurs, those lower lake systems will essentially become a toxic swamp which will never be able to be recovered. The Australian government’s only options to prevent this are to allow salt water in, creating a dead sea, or to pray for rain.

For some reason, the debate over climate change is essentially over in Australia.

The United States

California
California is facing its worst drought in recorded history . The drought is predicted to be the most severe in modern times, worse than those in 1977 and 1991. Thousands of acres of row crops already have been fallowed, with more to follow. The snow pack in the Northern Sierra, home to some of the state’s most important reservoirs, proved to be just 49 percent of average. Water agencies throughout the state are scrambling to adopt conservation mandates.

Texas
The Texan drought is reaching historic proportion . Dry conditions near Austin and San Antonio have been exceeded only once before the drought of 1917-18. 88 percent of Texas is experiencing abnormally dry conditions, and 18 percent of the state is in either extreme or exceptional drought conditions. The drought areas have been expanding almost every month. Conditions in Texas are so bad cattle are keeling over in parched pastures and dying. Lack of rainfall has left pastures barren, and cattle producers have resorted to feeding animals hay. Irreversible damage has been done to winter wheat crops in Texas. Both short and long-term forecasts don’t call for much rain at all, which means the Texas drought is set to get worse.

Augusta Region (Georgia, South Carolina, North Carolina)
The Augusta region has been suffering from a worsening two year drought. Augusta’s rainfall deficit is already approaching 2 inches so far in 2009, with January being the driest since 1989.

Florida
Florida has been hard hit by winter drought, damaging crops, and half of state is in some level of a drought.

La Niña likely to make matters worse
Enough water a couple of degrees cooler than normal has accumulated in the eastern part of the Pacific to create a La Niña, a weather pattern expected to linger until at least the spring. La Niña generally means dry weather for Southern states, which is exactly what the US doesn’t need right now.

South America

Argentina
The worst drought in half a century has turned Argentina’s once-fertile soil to dust and pushed the country into a state of emergency. Cow carcasses litter the prairie fields, and sun-scorched soy plants wither under the South American summer sun. Argentina’s food production is set to go down a minimum of 50 percent, maybe more. The country’s wheat yield for 2009 will be 8.7 million metric tons, down from 16.3 million in 2008. Concern with domestic shortages (domestic wheat consumption being approximately 6.7 million metric ton), Argentina has granted no new export applications since mid January .

Brazil
Brazil has cut its outlook for the crops and will do so again after assessing damage to plants from desiccation in drought-stricken regions. Brazil is the world’s second-biggest exporter of soybeans and third-largest for corn.

Brazil’s numbers for corn harvesting:

Harvested in 2008: 58.7 million tons
January 8 forecast: 52.3 million tons
February 6 forecast: 50.3 metric tons (optimistic)
Harvested in 2009: ???

Paraguay
Severe drought affecting Paraguay’s economy has pushed the government to declare agricultural emergency. Crops that have direct impact on cattle food are ruined, and the soy plantations have been almost totally lost in some areas.

Uruguay
Uruguay declared an “agriculture emergency” last month, due to the worst drought in decades which is threatening crops, livestock and the provision of fresh produce.
The a worsening drought is pushing up food and beverage costs causing Uruguay’s consumer prices to rise at the fastest annual pace in more than four years in January.

Bolivia
There hasn’t been a drop of rain in Bolivia in nearly a year. Cattle dying, crops ruined, etc…

Chile
The severe drought affecting Chile has caused an agricultural emergency in 50 rural districts, and large sectors of the economy are concerned about possible electricity rationing in March. The countries woes stem from the “La Niña” climate phenomenon which has over half of Chile dangling by a thread: persistently cold water in the Pacific ocean along with high atmospheric pressure are preventing rain-bearing fronts from entering central and southern areas of the country. As a result, the water levels at hydroelectric dams and other reservoirs are at all-time lows.

Horn of Africa

Africa faces food shortages and famine . Food production across the Horn of Africa has suffered because of the lack of rainfall. Also, half the agricultural soil has lost nutrients necessary to grow plant, and the declining soil fertility across Africa is exacerbating drought related crop losses.

Kenya
Kenya is the worst hit nation in the region, having been without rainfall for 18 months. Kenya needs to import food to bridge a shortfall and keep 10 million of its people from starvation. Kenya’s drought suffering neighbours will be of little help.

Tanzania
A poor harvest due to drought has prompted Tanzania to stop issuing food export permits. Tanzania has also intensified security at the border posts to monitor and prevent the export of food. There are 240,000 people in need of immediate relief food in Tanzania.

Burundi
Crops in the north of Burundi have withered, leaving the tiny East African country facing a severe food shortage

Uganda
Severe drought in north-eastern Uganda’s Karamoja region has the left the country on the brink of a humanitarian catastrophe. The dry conditions and acute food shortages, which have left Karamoja near starvation, are unlikely to improve before October when the next harvest is due.

South Africa
South Africa faces a potential crop shortage after wheat farmers in the eastern part of the Free State grain belt said they were likely to produce their lowest crop in 30 years this year. South Africans are “extremely angry” that food prices continue to rise.

Other African nations suffering from drought in 2009 are: Malawi, Zambia, Swaziland, Somalia, Zimbabwe, Mozambique, Tunisia, Angola, and Ethiopia.

Middle East and Central Asia

The Middle East and Central Asia are suffering from the worst droughts in recent history , and food grain production has dropped to some of the lowest levels in decades. Total wheat production in the wider drought-affected region is currently estimated to have declined by at least 22 percent in 2009. Owing to the drought’s severity and region-wide scope, irrigation supplies from reservoirs, rivers, and groundwater have been critically reduced. Major reservoirs in Turkey, Iran, Iraq, and Syria are all at low levels requiring restrictions on usage. Given the severity of crop losses in the region, a major shortage of planting seed for the 2010 crop is expected.

Iraq
In Iraq during the winter grain growing period, there was essentially no measurable rainfall in many regions, and large swaths of rain-fed fields across northern Iraq simply went unplanted. These primarily rain-fed regions in northern Iraq are described as an agricultural disaster area this year, with wheat production falling 80-98 percent from normal levels. The USDA estimates total wheat production in Iraq in 2009 at 1.3 million tons, down 45 percent from last year.

Syria
Syria is experienced its worst drought in the past 18 years, and the USDA estimates total wheat production in Syria in 2009 at 2.0 million tons, down 50 percent from last year. Last summer, the taps ran dry in many neighbourhoods of Damascus and residents of the capital city were forced to buy water on the black market. The severe lack of rain this winter has exacerbated the problem.

Afghanistan
Lack of rainfall has led Afghanistan to the worst drought conditions in the past 10 years. The USDA estimates 2008/09 wheat production in Afghanistan at 1.5 million tons, down 2.3 million or 60 percent from last year. Afghanistan normally produces 3.5-4.0 million tons of wheat annually.

Jordan
Jordan’s persistent drought has grown worse, with almost no rain falling on the kingdom this year. The Jordanian government has stopped pumping water to farms to preserve the water for drinking purposes.

Other Middle Eastern and Central Asian nations suffering from drought in 2009 are: The Palestinian Territories, Lebanon, Israel, Bangladesh, Myanmar, India, Tajikistan, Turkmenistan, Thailand, Nepal, Pakistan, Turkey, Kyrgyzstan, Uzbekistan, Cyprus, and Iran.

Lack of credit will worsen food shortage

A lack of credit for farmers curbed their ability to buy seeds and fertilizers in 2008/2009 and will limit production around the world. The effects of droughts worldwide will also be amplified by the smaller amount of seeds and fertilizers used to grow crops.

Low commodity prices will worsen food shortage

The low prices at the end of 2008 discouraged the planting of new crops in 2009. In Kansas for example, farmers seeded nine million acres, the smallest planting for half a century. Wheat plantings this year are down about 4 million acres across the US and about 1.1 million acres in Canada. So even discounting drought related losses, the US, Canada, and other food producing nations are facing lower agricultural output in 2009.

Europe will not make up for the food shortfall

Europe, the only big agricultural region relatively unaffected by drought, is set for a big drop in food production. Due to the combination of a late plantings, poorer soil conditions, reduced inputs, and light rainfall, Europe’s agricultural output is likely to fall by 10 to 15 percent.

Stocks of foodstuff are dangerously low

Low stocks of foodstuff make the world’s falling agriculture output particularly worrisome. The combined averaged of the ending stock levels of the major trading countries of Australia, Canada, United States, and the European Union have been declining steadily in the last few years:

2002-2005: 47.4 million tons
2007: 37.6 million tons
2008: 27.4 million tons

These inventory numbers are dangerously low, especially considering the horrifying possibility that China’s 60 million tons of grain reserves doesn’t actually exists .

Global food Catastrophe

The world is heading for a drop in agricultural production of 20 to 40 percent, depending on the severity and length of the current global droughts. Food producing nations are imposing food export restrictions. Food prices will soar, and, in poor countries with food deficits, millions will starve.

The deflation debate should end now

The droughts plaguing the world’s biggest agricultural regions should end the debate about deflation in 2009. The demand for agricultural commodities is relatively immune to developments in the business cycles (at least compared to that of energy or base metals), and, with a 20 to 40 percent decline in world production, already rising food prices are headed significantly higher.

In fact, agricultural commodities NEED to head higher and soon, to prevent even greater food shortages and famine. The price of wheat, corn, soybeans, etc must rise to a level which encourages the planting of every available acre with the best possible fertilizers. Otherwise, if food prices stay at their current levels, production will continue to fall, sentencing millions more to starvation.

Competitive currency appreciation

Some observers are anticipating “competitive currency devaluations” in addition to deflation for 2009 (nations devalue their currencies to help their export sector). The coming global food shortage makes this highly unlikely. Depreciating their currency in the current environment will produce the unwanted consequence of boosting exports of food. Even with export restrictions like those in China, currency depreciation would cause the outflow of significant quantities of grain via the black market.

Instead of “competitive currency devaluations”, spiking food prices will likely cause competitive currency appreciation in 2009. Foreign exchange reserves exist for just this type of emergency . Central banks around the world will lower domestic food prices by either directly selling off their reserves to appreciate their currencies or by using them to purchase grain on the world market.

Appreciating a currency is the fastest way to control food inflation. A more valuable currency allows a nation to monopolize more global resources (i.e.: the overvalued dollar allows the US to consume 25% of the world’s oil despite having only 4% of the world’s population). If China were to sell off its US reserves, its enormous population would start sucking up the world’s food supply like the US has been doing with oil.

On the flip side, when a nation appreciates its currency and starts consuming more of the world’s resources, it leaves less for everyone else. So when china appreciates the yuan, food shortages worldwide will increase and prices everywhere else will jump upwards. As there is nothing that breeds social unrest like soaring food prices, nations around the world, from Russia, to the EU, to Saudi Arabia, to India, will sell off their foreign reserves to appreciate their currencies and reduce the cost of food imports. In response to this, China will sell even more of its reserves and so on. That is competitive currency appreciation.

When faced with competitive currency appreciation, you do NOT want to be the world’s reserve currency. The dollar is likely to do very poorly as central banks liquidate trillions in US holdings to buy food and appreciate their currencies.

By Eric deCarbonnel
http://www.marketskeptics.com

Eric is the Editor of Market Sceptics

© 2009 Copyright Eric deCarbonnel – All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.