People Of Earth: Prepare For Economic Disaster

March 7, 2011

It is not just the United States that is headed for an economic collapse.  The truth is that the entire world is heading for a massive economic meltdown and the people of earth need to be warned about the coming economic disaster that is going to sweep the globe.  The current world financial system is based on debt, and there are alarming signs that the gigantic global debt bubble is getting ready to burst.  In addition, global prices for the key resources that the major economies of the planet depend on are rising very rapidly.  Despite all of our advanced technology, the truth is that human civilization simply cannot function without oil and food.  But now the price of oil and the price of food are both increasing dramatically.  So how is the current global economy supposed to keep functioning properly if it soon costs much more to ship products between continents?  How are the billions of people that are just barely surviving today supposed to feed themselves if the price of food goes up another 30 or 40 percent?  For decades, most of the major economies around the globe have been able to take for granted that massive amounts of cheap oil and massive amounts of cheap food will always be there.  So what happens when that paradigm changes?

At last check, the price of U.S. crude was over 104 dollars a barrel and the price of Brent crude was over 115 dollars a barrel.  Many analysts fear that if the crisis in Libya escalates or if the chaos in the Middle East spreads that we could see the all-time record of 147 dollars a barrel broken by the end of the year.  That would be absolutely disastrous for the global economy.

But it isn’t just the chaos in the Middle East that is driving oil prices.  The truth is that oil prices have been moving upwards for months.  The recent revolutions in the Middle East have only accelerated the trend.

Let’s just hope that the “day of rage” being called for in Saudi Arabia later this month does not turn into a full-blown revolution like we have seen in other Middle Eastern countries.  The Saudis keep a pretty tight grip on their people, but at this point anything is possible.  A true revolution in Saudi Arabia would send oil prices into unprecedented territory very quickly.

But even without all of the trouble in the Middle East the world was already heading for an oil crunch.  The global demand for oil is rising at a very vigorous pace.  For example, last year Chinese demand for oil increased by almost 1 million barrels per day.  That is absolutely staggering.  The Chinese are now buying more new cars every year than Americans are, and so Chinese demand for oil is only going to continue to increase.

Read more here

 

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Ethiopian government price ceiling to be readjusted?

February 14, 2011

Ethiopia has been hit by an acute shortage of basic commodities following a recently imposed price ceiling. To study the cause of this shortage, the government, last week, met with local entrepreneurs.

In a move to halt runaway prices of basic commodities and also curb a double digit inflation in Ethiopia, the Horn of Africa country’s government moved to set a price ceiling for 18 types of basic commodities in the first week of January, 2011.

The government had accused some of the country’s major businesses for exploiting the market illegally by raising commodity prices at over 100 per cent without any respect for market principles.

But a few weeks after the introduction of the government controlled prices the desired market stabilization has been questioned as many of the targeted commodities, including flour, palm oil, sugar, beer, powder milk, soap, continue to disappear from the market, thus, creating a more difficult situation for consumers.

According to local entrepreneurs who met with officials of the Trade Ministry for extensive discussions last week, the government had failed to make a detailed assessment regarding production and importation costs before imposing price limits.

The local Reporter Newspaper argues that the 600 birr maximum price per 100 kg of flour, for example, is not compatible with the real market price, given that 100 kg of wheat, the raw material, is sold at about 545 birr. Continuing production with the extra production cost, therefore, means that both producers and traders would be running at a loss. The same arguments have been forwarded by palm oil importers, among others.

In what concerns the shortage of beer on the Ethiopian market, traders explain that while the 7.10 birr maximum retailing price for a single bottle of beer would only assure marginal profits for the Addis Ababa market, supplying the product at the same price outside the capital is not acceptable as it would incur other costs, including transportation, which would in turn make them run at a loss.

Following the arguments forwarded by local entrepreneurs at the meeting, the Trade Ministry ordered the various traders to submit their production and importation costs by the end of last week, promising that, if accurate, the government would use the information as a yardstick to readjust prices.

Macroeconomic analysts have questioned the government’s decision to adjust prices to counter a so-called illegal exploitation of the market by traders and argued that the root cause of the price hikes is linked with the shortage of commodities. A situation they say was due to the country’s speedy growth and last year’s sharp devaluation of the local currency, the birr.

Source: Afrik.News

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Price Controls Cause Chaos in Ethiopian Markets


Price Controls Cause Chaos in Ethiopian Markets

January 27, 2011

Peter Heinlein, VOA | Addis Ababa, Ethiopia
Price controls on many staple food items ordered by Ethiopia’s government early this month have reduced grocery bills for many low-income families. But now shopkeepers are upset and some basic items are disappearing from store shelves. Economists are concerned about the long-term effect of the government’s price-fixing strategy.
Confusion has been the order of the day at shops and markets across the Ethiopian capital this month. The government surprised businesses on January 6, the Ethiopian Christmas Eve, by announcing price caps on such items as meat, bread, rice, sugar, powdered milk and cooking oil.
Prime Minister Meles Zenawi said the caps were a response to price gouging by merchants taking advantage of global price hikes. He vowed to put a stop to what he called “market disorder.”
Ethiopian Consumers respond
The news was seen as a Christmas gift by many cash-strapped consumers, who had seen food prices jump after the government devalued the local currency, the Birr, by 17 percent in September.
In the first days after the price controls went into effect, Shenkut Teshome was among shoppers who rushed to markets to scoop up goods at newly lowered prices. He applauded government intervention as the only way to save impoverished Ethiopians from starvation.
“People are hoping they can buy with their salary a fair material at a fair price,” said Shenkut. “[Prices] were exaggerated and people cannot afford to buy with their salary and live at the same time, paying rent, this and that. The main thing is that they have enough food for their children.”
The price controls, however, have triggered chaos and tension in the local marketplace. Arguments, even occasional fistfights have been reported between irate shoppers and business operators as price controlled goods, such as cooking oil and oranges, have disappeared from shelves.
One customer at a local shop, who spoke on condition of anonymity, quipped that the net effect of the price controls is that nothing has changed. He said that earlier, goods on the shelves were too expensive to buy. Now the prices are lower, but the goods have disappeared.
Ethiopian Shopkeepers discouraged
Business owners said the past few weeks have been unbearable. Customers are unhappy, some products they bought before the price caps must be sold below cost, and neighborhood government representatives drop by several times a day to check that they are in compliance.
Shopkeepers contacted for this report all said they were afraid to give their names, but one who agreed to speak anonymously said she was ready to give up.
She said, “This is way too much for us. We are small traders. We don’t make much money. We get everything on credit, so when this stock is gone, we are closing up shop.”
Ethiopian Government defends
Representatives of Ethiopia’s Trade Ministry did not respond to numerous interview requests for this report. But government officials have been quoted as saying price controls were needed because retailers had raised prices blaming global price increases and the devaluation, although such factors had had no influence on the availability of their products.
In addition, four economists not affiliated with the government, all of whom have previously spoken to VOA on the record, declined to be quoted this time, saying the subject was too sensitive. But all four privately predicted that price fixing would not help in solving Ethiopia’s deep-rooted economic problems.
Temesgen Zewdie, finance chairman of one of Ethiopia’s main opposition parties and a former Member of Parliament, called the price controls a step toward a Communist-style command economy.
In a free market economy, the preferred way of doing this is to increase the supply and increase competition,” said Temesgen. “But the government did not do that. Instead they went directly to the producers and retailers, telling them to reduce prices and supply these products. These practices happen in Communist states, not in western democracies.”
Critics warn
Retired opposition leader Bulcha Dimeksa is a former deputy finance minister and also a former World Bank director. He said history has proven time and again the folly of price controls.
“This government is doing exactly what all the classical dictators in the past have done and have failed,” said Bulcha. “I do not understand how people do not learn. It does not work. Price control never worked. It will not work. It does not work. It may work for one month, but what’s that? The farmer is discouraged, the producer is discouraged, the retailer is discouraged.”
Despite the uproar, government officials are hoping their experiment in price-fixing will help to curb inflation. Recently released figures show the inflation rate jumped from 10.2 percent in November to 14.5 percent last month.
Ethiopia is among the world’s poorest countries. The CIA World Factbook lists per capita purchasing power of $1,000 a year.


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