peak cheap

PEAK CHEAP

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The end of cheap everything, and not just because of Peak Oil and the collapse of the petrodollar, but because of the end of American colonialism.  Okay, the three are related and intertwined, but I’ve usually focused on inflation as the reason our affordable consumer items will not last forever ( you know, those cool consumer items like ammunition and wheat berries, firearms and warm weather clothes ) and today I’d like to focus more on the less covered aspect.  American colonialism and free commodities for business is nothing new.  The Marines were sent in to keep bananas cheap long before imported oil or our central bank.  What is new(er) is the global aspect of our trade.

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We all know that as soon as the petrodollar is rejected by the last country in a Straw That Broke The Camel’s Back moment ( it doesn’t have to be rejected by all, just by enough ) we lose all our imports and inflation and shortages go de rigeur.  Since we print money ( in the form of government bonds ) as debt and foreigners need dollars to buy oil, in effect we have oil backed currency.  The fact that nobody is buying our bonds anymore has more to do with the rejection of that petrodollar system than it does with our unsound deficit ( which most everyone emulates anyway ). 

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But there is another component to this.  It isn’t as important, nor will it be as devastating, but it will severely impact a certain sector of consumerism.  It is the grain for commodity trade.  Here is how it works in simplified terms.  Take any third world country that grows commodities.  Coffee, chocolate, sugar, cooking oil, spices.  The workers, sharecroppers mostly, are paid enough to eat, and not much more.  Then, because they mostly don’t own the land, they can only grow that export crop and must buy their food at the market.  This food can usually be American grains.

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Most peasants cannot compete with American grain.  Which is usually grown at a loss ( until the corporate welfare check from the government is cashed ).  Besides industrialization, there is government subsidies.  You are feeding a working with like a nickels worth of grain, for that days labor.  In exchange you are getting nearly free export crops ( coffee, spices, cocoa, oil ).  You don’t need to buy land ( it is cheaper to bribe the politician to do Land Use to your benefit ), nor wait the seven years it takes the coffee plant to grow, you just pay a peasant nearly nothing to harvest.  All this transportation ( grain to overseas, overseas crop back to America ) was once again somewhat government subsidized for dirt cheap costs.

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The whole point of a colony is to get nearly free commodities.  British sugar went a long ways feeding factory workers ( besides being profitable in its own right ).  Southern cotton to Yankee pig bankers and industrialists.  Columbian cocaine through US intelligence agencies.  Brazilian coffee.  We do the same with mining.  If a third world worker gets a buck fifty in wages a day, then spends a buck buying your wheat for his family ( because the local grain is far more expensive to produce organically than we can do it mechanically with carbon fuel inputs, and with corporate low interest rate loans from free money from the petrodollar ) which cost you fifteen or twenty cents, the produced commodity is dirt cheap to you.

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This doesn’t necessarily have to be a direct trade.  The country we import from might buy the cheap grain from us, then sell it to the worker even cheaper than they paid for it, for social stability.  Either way, the corporation buying the commodity was allowed to pay in extremely low wages.  Think about a cheap can of coffee at $6.  That is $3 a pound, retail.  The store cost was $1.50 and the company got .75cents a pound for it ( again, I‘m simplifying ).  That includes all their local costs such as the can and distribution and American workers at the warehouse.  How much do you actually think they pay for that coffee on the plantation?

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Since very few corporations control almost all our food, would you like to bet that the same company both grows the grain and imports the product the grain bought?  The company doesn’t make obscene profits.  More than likely, they are at that profit margin of 5% just like the grocery store selling the final product.  My point here is that the true cost is hidden by both government subsidy and centralized monopolies ( in this case, relatively speaking, mostly benign ), both of which are a product of nearly free oil.

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And no, the free oil doesn’t end with the petrodollar.  It was already gone up in price excessively by nothing other than our free conventional oil being mostly replaced by poor net energy fuels.  The days of cheap oil are long gone.  And yet the consumer still sees heavily subsidized gasoline and import crop foods.  Just like Mexico feeding all her poor who get fifty percent of their calories by corn, by selling the corn below cost to them, Americans are also bribed with cheaper commodities.  You might not believe me, but prior to the ethanol fiasco, most Americans were bloated daily with under priced corn.  Try growing your own chicken, even at the retail cost.  No way you can do it.

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When corn was dirt cheap, it came back to the American eating public as cheap soda, cheap meat and cheap snacks.  Most of your calories were corn ( and probably still are, even at double the price ).  Our gasoline is cheap due to our military patrolling the trade routes ( we still get a minimum of half our oil from overseas ).  Corporations profit handsomely at low mark-ups, because they receive government subsidized raw material.  If effect, the government goes into debt to bribe corporations to sell food and fuel at low, low prices.  

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You are spoiled and think prices are too high, but Americans pay some of the cheapest food prices in the world.  Mostly because of free oil, but also by exploiting labor and land in a colonial arrangement.  If you haven’t stocked up on all these commodities that are heavily subsidized, you are not preparing adequately.  It might only be black pepper and coffee ( most likely your sugar is domestic beet sugar ), perhaps some chocolate, and are not strictly necessary ( although I would argue that life without coffee is brutish and short ), but they are so damn cheap it is criminal to not stockpile them.

END ( today's related link https://amzn.to/2K5T6W7 )

 

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