If you didn’t have ethanol, you would not have the prices we have today

The globe’s worst food crisis in a generation emerged as a blip on the big boards and computer screens of America’s great grain exchanges. As prices rise, major grain producers including Argentina and Ukraine, battling inflation caused in part by soaring oil bills, were moving to bar exports on a range of crops to control costs at home. It meant less supply on world markets even as global demand entered a fundamentally new phase.

At the same time, food was becoming the new gold. Investors fleeing Wall Street’s mortgage-related strife plowed hundreds of millions of dollars into grain futures, driving prices up even more. By Christmas, a global panic was building. With fewer places to turn, and tempted by the weaker dollar, nations staged a run on the American wheat harvest.

Foreign buyers, who typically seek to purchase one or two months’ supply of wheat at a time, suddenly began to stockpile. They put in orders on U.S. grain exchanges two to three times larger than normal as food riots began to erupt worldwide.

The food price shock now roiling world markets is destabilizing governments, igniting street riots and threatening to send a new wave of hunger rippling through the world’s poorest nations. It is outpacing even the Soviet grain emergency of 1972-75, when world food prices rose 78%. By comparison, from the beginning of 2005 to early 2008, prices leapt 80%. Much of the increase is being absorbed by middle men — distributors, processors, even governments.

At least 14 countries have been racked by food-related violence.The crisis, it fears, will plunge more than 100 million of the world’s poorest people deeper into poverty, forced to spend more and more of their income on skyrocketing food bills.

People worldwide are coping in different ways. Although China has tried to calm its people by announcing reserve grain holdings of 30 to 40% of annual production, a number that had been a state secret, anxiety is still running high. In India, the government recently scrapped all import duties on cooking oils and banned exports of non-basmati rice. Even wealthy nations are being forced to adjust to a new normal. In Japan, a country with a distinct cultural aversion to cheaper, genetically modified grains, manufacturers are risking public backlash by importing them for use in processed foods for the first time.

In the United States, experts say consumers are scaling down on quality and scaling up on quantity if it means a better unit price. In the meat aisles of major grocery stores, steaks are giving way to chopped beef and people used to buying fresh blueberries are moving to frozen. Some are even trying to grow their own vegetables.

A big reason for higher wheat prices, for instance, is the multiyear drought in Australia, something that scientists say may become persistent because of global warming. But wheat prices are also rising because U.S. farmers have been planting less of it, or moving wheat to less fertile ground. That is partly because they are planting more corn to capitalize on the biofuel frenzy. If market forces had played a larger role in food trade, some now argue, the world would have had more time to adjust to more gradually rising prices.

 Wherever you turn, the rise of Asia is making its impact felt on our existence.

To many Victorians, British supremacy was a simple matter of racial supremacy - Europeans, and the English in particular, were fated to be the masters. The truth is that they are masters of the world no more.  The global power shift from the West to the East is no longer just a matter of debate confined to learned journals and newspaper columns - it is a reality that is beginning to have a huge impact on our daily lives.

Napoleon III compared China to a sleeping giant and warned: “When China awakes, she will shake the world.” After a long hibernation, China, and her 1.3 billion people (twice the population of the U.S. and EU combined) is awaking almost overnight. And not just China. The world’s second most populous country, India, is industrialising at a historically unprecedented pace.

Like anything, there are downsides that are becoming more apparent. Unskilled workers in the West have become unsettled by the threat to their jobs as production moves East. The most vulnerable Western workers have found their wages stagnate as they struggle to compete in an increasingly global market place. And competition for raw materials is pitting East against West.

Europeans have, for half a millennium, been unchallenged as the global colonisers, but last month the respected Economist magazine dubbed the Chinese “The New Colonists“.  The dire warnings from the International Monetary Fund this week that the West now faces the largest financial shock since the Great Depression, while the Asian economies are still powering ahead, simply underlines our vulnerability in this new world order.

There is an infectious confidence in Bollywood, and the price of Chinese antiques is rocketing as the newly rich Chinese decide they want a slice of their history.

Asian countries are not just buying up foreign raw materials, but as their companies try to become global leaders, they are buying up Western companies. From Kazakhstan to Indonesia to Latin America, Chinese firms are gobbling up oil, gas, coal and metals. Canadian authorities were recently alarmed to find the Chinese interested in exploring the Arctic Ocean, in a bid to get a share of the minerals beneath the thawing icecap.

 And Western governments are concerned that the rules of the game are changing. Most worryingly, as China’s brutal suppression of the once independent Tibet shows, this is not a superpower that respects Western standards on human rights. Western attitudes of superiority to China and the rest of the East will also subside, as Westerners realise they are no longer the masters of the world.

The New Economics of Outsourcing

Companies that traditionally rely on India for offshore IT services have been looking for that something beyond India for years, citing such reasons as high employee turnover and unreliable communications. But the search has taken on added urgency recently, especially for U.S. companies, as a weakening dollar has boosted the cost of IT services priced in India’s rupee. Over the past five years the dollar has declined about 16% against the rupee. High real estate costs and expectations for tax increases also have diminished India’s allure.

As outsourcing to India becomes more expensive, North American companies are more inclined to “nearsource,” keeping work in the Western Hemisphere, where they can operate in a closer time zone. In years past a company could save 40% to 50% by hiring Indian firms to handle IT and other services. Should the U.S. dollar continue its descent, that differential would shrink to 10% to 20%.

How much longer the world’s companies will have financial incentive to outsource to India is a matter of lively debate. India’s “advantage as an offshore location is fast eroding—its attractiveness takes a hit with each passing day,” analysts at Forrester Research wrote in a January, 2008, report. Forrester catalogued some of the well-known challenges, such as increasing staffing costs, turnover and strained infrastructure.

The benefit of doing business, from a labor-cost point of view, in such locales as Bangalore, India, will disappear for some companies in three to four years. Indeed, while costs are increasing in India, the country is generally less expensive than Latin America and most other locations, especially for companies that don’t require high-end software developers. The average annual salary for an IT worker in the U.S. is about $75,000. In India it’s about $7,779 and in Argentina, it’s slightly higher at $9,478. In Brazil, the annual wage jumps to $13,163, and in Mexico it climbs to $17,899.

Increasingly, companies want a provider that can nimbly shift tasks and labor among its own global network of work centers. The dollar’s decline aside, even Brazilian firms are benefiting as companies spread their outsourcing around. The real question, if you’re going to sign onto somebody for five to seven years, is do they have a vision for how they’re going to move work around the network.

This billboard and press campaign is now running in Mexico, is a colorful map depicting what the Americas might look like in an “Absolut” — i.e., perfect — world. The U.S.-Mexico border lies where it was before the Mexican-American war of 1848 when California, as we now know it, was Mexican territory and known as Alta California.

The campaign taps into the national pride of Mexicans, according to Favio Ucedo, creative director of leading Latino advertising agency Grupo Gallegos in the U.S. Ucedo, who is from Argentina, said: “Mexicans talk about how the Americans stole their land, so this is their way of reclaiming it. It’s very relevant and the Mexicans will love the idea.”

The U.S. is the largest importer of Absolut in the world, so I’m perplexed that it concluded there could be a net gain by this ad campaign. Absolut really blew it by uncorking this one. Perhaps it has consumed too much of its own product. They’ll have plenty of surplus stock to drown in though. But don’t worry, folks. This is in no way a threat to our national sovereignty.

Families moving out of apartment complexes, schools reporting enrollment drops, business owners complaining about fewer clients. What’s going on?

While it is too early to know for certain, a consensus is developing among economists, business people and immigration groups that the weakening economy coupled with recent curbs on illegal immigration are steering Hispanic immigrants out of the state. The state has enacted one of the country’s toughest laws to punish employers who hire illegal immigrants, and the county sheriff here in Phoenix has been enforcing federal immigration laws by rounding up people living here illegally.

State Representative Russell K. Pearce, a Republican from Mesa and leading advocate of the crackdown on illegal immigration, takes reports of unauthorized workers leaving as a sign of success. An estimated one in 10 workers in Arizona are Hispanic immigrants, both legal and illegal, twice the national average.

Although prosecutors in the state do not plan to begin enforcing the sanctions against employers until next month, several employers have reportedly already dismissed workers whose legal authorization to work could not be proved, as required by the law. Property managers report that families have uprooted overnight, with little or no notice. The Cartwright Elementary School District in west Phoenix, for instance, reported a loss of 525 students this school year. Maybe this is another reason why.

7 Countries Saying Bye Bye To The US Dollars

1. Saudi Arabia:  Saudi Arabia has refused to cut interest rates along with the US Federal Reserve. This is seen as a signal that a break from the dollar currency peg is imminent.
2. South Korea:  In 2005, Korea announced its intention to shift its investments to currencies of countries other than the US. There are whispers that the Bank of Korea is planning on selling $1 billion US bonds in the near future, after a $100 million sale this past August.
3.  China:  China is threatening a “nuclear option” of huge dollar liquidation in response to possible trade sanctions intended to force a yuan revaluation.
4. Venezuela:  In September, Chavez instructed Venezuela’s state oil company Petroleos de Venezuela SA to change its dollar investments to euros and other currencies in order to mitigate risk.
5. Sudan:   Sudan is, once again, planning to convert its dollar holdings to the euro and other currencies. Additionally, they’ve recommended to commercial banks, government departments, and private businesses to do the same.
6. Iran:  Iran is perhaps the most likely candidate for an imminent abandonment of the dollar. Recently, Iran requested that its shipments to Japan be traded for yen instead of dollars.
7. Russia:  They’ve discussed pricing oil in euros, a move that could provide a large shift away from the dollar and towards the euro, as Russia is the world’s second-largest oil exporter.

Why The Weak Dollar?  First, there’s the difference between the interest rate in the United States (the one the Federal Reserve just dropped) and the interest rates of other central banks around the world. When the United States dropped its rate, other banks did not follow. Now the spread between the interest rate at the European Central Bank and the Federal Reserve is smaller than it has traditionally been, and that has weakened the value of the dollar against the euro.

Second, central banks around the world have been diversifying their holdings away from dollars to euros, British pounds and so on. That means there are more dollars out there in currency markets available to purchase. More dollars floating around means diminished value.

What’s This All Mean?   Many of them want to protect their financial interests, and a number of them want to end the US oversight that comes with using the dollar. Although it’s not clear how many of these countries will actually follow through on an abandonment of the dollar, it is clear that its status as a world currency is in trouble. The dollar’s status as a cheaply-produced US export is a vital part of our economy. Losing this status could rock the financial lives of both Americans and the worldwide economy.

And we thought the French were the worst. The tourism slump is blamed on the shabby welcome many foreigners feel from Americans.

The number of foreign visitors to the United States has plummeted since the September 11, 2001 attacks on New York and Washington because foreigners don’t feel welcome. Since September 11, 2001, the United States has experienced a 17% decline in overseas travel, costing America 94 billion dollars in lost visitor spending, nearly 200,000 jobs and 16 billion dollars in lost tax revenue.

It’s clear what’s keeping people away in the post-9/11 environment: it is the perception around the world that travelers aren’t welcome. Travelers around the world feel the US entry experience is among the world’s worst. Do yourself a favor and be cordial to visitors. You’ll need the karma when you’re abroad.

Make Sure Your Prepared For Everything. Yes! Anything Can Happen to YOU

Only 40% of American companies have any type of travel risk-management program in place to help employees deal with medical emergencies, kidnapping and extortion threats or any of the other problems that can occur when traveling abroad, said Craig Banikowski, chairman of the global risk-management committee for the National Business Travel Association. The numbers are even more dismal when it comes to small business or the sole proprietor who travels. “People are under the impression that nothing bad can happen to them,” Mr. Banikowski said. “And if something does, they believe the embassy is going to step in and make everything right.” Truth is… “embassies can only do so much,” said Randy Spivey, executive director of the Safe Travel Institute, which provides survival training and travel risk-reduction training to companies like Wal-Mart and Boeing. “Business travelers have to take some responsibility to help themselves.” Small businesses and entrepreneurs do not have the resources of large corporations, but they can still mitigate risks. For example, experts suggest that you check out State Department warnings and advisories at travel.state.gov. The site also provides comprehensive information on other travel-related matters, including the role that United States embassies play when a traveler gets into trouble. They advise registering your trip with the State Department at http://travelregistration.state.gov/. Save those two sites for future travel.

• Make copies of all important documents, like a passport, credit cards, driver’s license and medical information and leaving a copy with a colleague or family member. Consider scanning and e-mailing these documents to yourself.
• Before going abroad for business/pleasure, find out if your medical policy covers sickness and injuries overseas. Even if policies do promise reimbursement, travelers probably will have to pay any costs upfront for medical care. Most insurance policies do not cover medical evacuation, which can easily run into the six figures.
• Purchase international health insurance. Some, for example, could range from a 10-day program for $80, which includes access to its 28 global alarm centers, medical assistance and evacuation, etc., to $4 to $6 a day for medical evacuation and cashless access to its worldwide network of 4,000 English-speaking doctors and 750 hospitals.

Strong Demand For Homes in Brazil

Brazil’s newfound economic stability and changes in lending laws are for the first time making it possible for the country’s working poor to buy their own homes. And using money that has been pouring in from foreigners who sense a lucrative investment — $4.8 billion since September 2005 — the country’s construction and real estate companies are building as fast as they can. Although changes are sweeping through the industry, the biggest are evident in the market for houses and apartments intended for Brazilians earning up to five times the monthly minimum wage of 380 reais ($198). For years, Brazil’s poor had little access to credit. And even if they could get credit, they could not hope to meet interest rates that were frequently among the highest in the world. That, combined with unemployment and underemployment, low pay and the instability brought on by regular economic crises, explain the explosion of favelas, the shantytowns scattered in and around Brazil’s urban centers.

Since Luiz Inácio Lula da Silva became president in 2003, interest rates have tumbled to 12% from 25% and appear set to continue falling. Inflation was 3.1% last year and is well under control. And both the minimum wage and workers’ salaries are rising at rates exceeding the cost of living, according to government figures, meaning workers have more disposable income. Buying a small home is finally a real possibility for many Brazilians. Brazil’s construction firms are using the huge new investment by foreigners to help meet the growing demand. The country’s biggest mortgage financier, the government-run Caixa Econômica Federal, estimates that Brazil needs 7.9 million new homes.