From Volume 38, Issue 2 of EIR Online, Published Jan. 14, 2011

Global Economic News

World Food Prices at Historic High; Speculators Cash in

Jan. 5 (EIRNS)—The world average food price has skyrocketed past the historic high from the 2008 food crisis which sparked deadly riots around the world. The UN's FAO released its monthly Food Price Index on Jan. 5, an index of 55 food commodities, which showed the sixth straight month of staggering increases. The chart in the report shows prices in 2006 hovering at about 120 in the FAO index, with prices rising steadily through 2007, peaking at 213.5 in June of 2008, then falling back. That year-long increase has been matched and surpassed this year, at 214.7, in a mere six months, and is still climbing.

The FAO notes that prices are not about to slow down, but points only to supply and demand as the cause. While there are indeed real supply problems, the price spikes are entirely due to the hyperinflation driven by crazy Obama's bailout money flooding the world with liquidity, while production is being gutted outside of Asia.

Wheat prices are one of the leading drivers of the price increase. Although the price of rice, the other primary grain together with wheat, has remained fairly stable, the world's leading rice exporter, Vietnam, has just announced that it will have to cut exports by a massive 1.3 million tons—20% of its 2010 exports—due to dwindling supplies.

Spanish Government Throws Unemployed to the Wolves

Jan. 5 (EIRNS)—On Feb. 15, Spain's Zapatero government will terminate a program providing subsidies of EU426 to the long-term unemployed—in order to "reduce the government budget deficit," so as to have sufficient billions to keep paying tribute to London's Inter-Alpha banking empire.

That subsidy is often the only thing still standing between millions of desperately unemployed people, and outright destitution and hunger. Spain has the highest official unemployment rate in Europe, at 21% and rising, with youth unemployment at a staggering 43%. Of the total 4.1 million officially unemployed, about 75% today receive either unemployment benefits or, after these run out, the mentioned government subsidy, known as the PRODI program.

Unemployment benefits and PRODI, combined, cost the government EU15 billion back in 2007, or about 1.5% of GDP at the time; by 2010, that total had more than doubled, to about 33 billion—simply because unemployment has skyrocketed. So London wants this government expenditure axed: thus, the end of the PRODI on Feb. 15, if not yet of all unemployment benefits.

Zapatero, who a year ago promised he would extend the PRODI for as long as unemployment was over 17%, has now reversed himself, on British orders, proclaiming that in 2011 "there are going to be greater opportunities for finding a job"—so who needs the PRODI?

As Ambrose Evans-Pritchard noted in the Jan. 3 London Daily Telegraph: "The dog that hasn't barked yet is the jobless army in Spain, the 43% of youths without work. Bark it will when the 420 dole extension expires in February."

Euro Blowout: Today, Tomorrow, Next Week?

Jan. 3 (EIRNS)—Lyndon LaRouche has been warning about it for months: the British Empire's eurozone is on a short fuse to blow out entirely, and bring the U.S. down with it. In mid-December, he specified that the year-end period and the first days and weeks of 2011 were the critical inflection point when the "dead man walking" would crumble into dust.

Now, you can almost hear financial circles muttering in dismay: "Uh-oh. Looks like LaRouche was right again."

For example: The London-based Centre for Economics and Business Research (CEBR) issued a Dec. 31 release which states: "So here are our top ten predictions for 2011: 1) Yet another eurozone crisis in the spring if not before, when Spain and Italy have to refinance in aggregate over EU400 billion of bonds. The euro might break up at this point." The CEBR is headed by Douglas McWilliams, and made headlines in 2010 when it urged Greece to default and pull-out of the euro system, in its capacity as adviser to the Greek government.

Or take the case of blogger Colin Barr, who warns: "Is a bank run about to bring Europe to its knees? Some market watchers say yes, pointing ominously to the torrents of money pouring out of Ireland"—a fact documented by the LaRouche movement weeks ago. Barr quotes Scott Minerd, chief investment officer at Guggenheim Partners, who asks: "If there is a wholesale run on the Irish banking system, then what stops the same scenario from cascading into Portugal, Greece, Italy, and most importantly Spain?" Minerd concludes: "A broader crisis in Europe appears to be imminent in 2011."

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