The Financial Jigsaw Part 2 - FOOD CRISIS! -A Threat to Social Stability

I am writing Part 2 of my book 'The Financial Jigsaw' now and posting significant extracts as I go. Part 2 is a Handbook for Surviving and Prospering in the 'New Emergent Economy'.

"Diesel prices are not only a function of the oil price – they are distillates which depend on refining capacity as well as oil supplies – this is what is changing in 2022." What if the Trucks stop running? Here's a 2 minute video to set the scene:  

An essay by Jeff Thomas – https://internationalman.com/articles/authors/jeff-thomas/ appeared at APPENDIX IV in my book: The Financial Jigsaw - Part 1

UPDATE: October 2022: "The weekly US Energy Information Administration data is showing little difference between the East Coast and the full country, just $5.341 a gallon nationally versus $5.379 a gallon on the East Coast, as of Monday, October 24. The East Coast numbers are embedded in the national ones:  https://www.freightwaves.com/news/east-coast-retail-diesel-prices-moving-significantly-higher-than-overall-us-hikes

Here is a full analysis of how our supply chains are failing and the likely consequences:  https://www.nakedcapitalism.com/2022/10/satyajit-das-a-disordered-world-part-2-susceptibilities.html

FOOD CRISIS: THE GREATEST THREAT TO SOCIAL STABILITY

In 2012, President Barrack Obama signed an executive order entitled, “National Defence Resources Preparedness" – the order gives the US government the authority to seize and redistribute food, should a state of “national emergency” exist. In 2015, Jeff reported on a similar, current crisis in Venezuela (nine meals from anarchy) that provided further insight into what could happen if and when the US faces an economic crisis in the future.

I believe that Jeff's 2011 essay describes the likely course of events, without undue exaggeration, which we will face in the coming months.  This essay is designed to encourage you to prepare – not to scare you witless. Sometimes we need to be frightened in order to invoke action – complacency is a fail.  Here's Jeff Thomas in 2011:

Anecdote:  Recently, I was in a pharmacy and overheard the pharmacist say to someone,

“There’s so much unpleasantness on the news these days. I’ve stopped watching.” The pharmacist has my sympathy as I would love to be able to ignore the deterioration of our Western world.  It is, as it turns out, tedious, depressing, disturbing and infuriating.

Unfortunately, we’re now passing through what, before it’s over, will be the most life-altering period in our lifetimes.

As much as we’d like to behave like ostriches right now, we’d better keep our heads out of the sand and be as honest with ourselves as we can be, if we’re going to lessen the impact that these events will have on us. I stated in a recent article, “I cannot emphasize too strongly the importance of this (a possible shortage of food).

History is filled with examples of cultures that would endure most anything and still behave responsibly. Nothing will cause greater, more unpredictable nor more violent behaviour in a people than a lack of food.  Interesting to note that, whenever I converse with people on the finer points of the 'Great Unravelling', when I mention the words “famine” or ‘food riots”, even those who are otherwise quite comfortable discussing the subject, tend to want to discount the possibility that these will be aspects of the troubles that are headed our way.  For this very reason, I believe that we should shine a light on this eventuality.

The present state of the 'Just-in-Time ' industry:  In America, the food industry is not in good shape. Normally, the food industry relies on a low profit / high volume basis, leaving little room for error. Add to this fact that, many business owners and managers in the food industry have given in to the temptation to build up debt over the years. Following the 2008 crash, many have been struggling to get on top of that debt. Inflation has made that task especially difficult. Some have been keeping their noses above water; others have gone under.

Hyperinflation:  In future years, [following initial disinflation], dramatic inflation is a near-certainty.  Those businesses in OECD countries that are already on the ragged edge will find that when they’re paid, they cannot buy the same volume of goods for the same amount of dollars. This will be true throughout the entire food-supply chain.

Of course, little inflationary blips are the norm in business and businesses adjust to them. The problem comes when there are large increases that continue steadily over a period of months.  When this occurs, we’ll see a greater frequency of food-supply businesses going belly-up.

In a normal business climate, the failure of some businesses would aid the competition, as they would have new customers to take on, but if the remaining businesses are already having trouble, they will not be in a condition to expand. The disappearance of large numbers of providers will result in a failure of delivery to the next business down the chain. Nationwide, distribution will become inadequate.

This, of course, will not be uniform. Some areas will suffer worse than others. Those types of areas that are already chronically problematic will be hit hardest. Those who are the most likely to go down the earliest will be those that have the highest overheads and the lowest volume. Typically, these are the small stores – the ones on street corners in every city.

These 'mom & pop' stores are crucial to the well-being of any economy. If a supermarket in the suburbs experiences a shortage, purchasers may drive across town to another supermarket. Not so in the city. If a corner store has empty shelves, or worse, closes completely, the purchasers in that neighbourhood must walk to the next neighbourhood to buy, and they might not be welcome there if the people in that neighbourhood are already having problems with supply at their local store.

Worse, should the second store also close, the number of purchasers is redoubled. When the shoppers from two stores arrive at the third store, physical conflict between shoppers is a near-certainty.

Panic sets in:  Food panic doesn’t necessarily occur if a retailer carefully assesses his increased market and rations sales so that everybody gets a slightly lesser share. In fact, I’ve personally seen this work well in the event of a natural disaster in my home country. The panic does occur when the availability suddenly becomes non-existent (even for a brief time) and the shoppers are unsure when it will be resumed. In an inner city, this is exacerbated by three factors:

·         Shipments from suppliers become erratic and insufficient

·         A significant increase in the number of shoppers cleans out the store

·         Individual shoppers become unreasonably demanding.

This last factor, in any inner-city situation, is almost always responsible for the chaos that evolves into a riot. It works like this: A mother complains that there is no bread for her children to have a sandwich. Her husband becomes angry at the problem and goes down to the corner store, demanding a loaf of bread. The store manager says that he cannot release the bread until the next morning, when the neighbourhood knows they can each come and buy one loaf only. The man, becoming angrier, goes in the back and takes a loaf of bread. The manager resists and is shot. The man, on his way out, grabs a carton of cigarettes and a couple of six packs of beer for good measure.

The store, now unmanaged, is looted. Those shoppers who are normally peaceful people begin to panic and realize that it’s time to grab what you can. In these situations the food stores are generally cleaned out quickly. In a very short period of time, a full-scale riot may be in play. In most inner-city riots, the liquor stores are hit early on, then the appliance stores and so on down the line.

But this is no ordinary riot. Unlike a riot triggered by, say, a TV news clip of some policeman beating a seemingly innocent man, the trigger is ongoing and, more importantly, it is not, at its heart, anger-based, it is fear-based. And it is self-perpetuating. Shipments are not resumed to a store that has no one running it. Worse, additional store owners close for fear that they’re next. The situation escalates very fast.

Enter the Cavalry:  While the US and Europe has seen many riot situations and we can therefore study how they play out, a series of self-perpetuating riots has not taken place before. It’s likely that, within weeks, a national emergency would be declared, and rightly so. But, how do we to deal with it?  Certainly, the President and State Governors would quickly begin to work with wholesalers to assure that food got to the cities (and any other locations that are also troubled). Needless to say, suppliers will all respond by stating that, in such a situation, they cannot get paid for any food that they deliver.

Truckers will state that they cannot accept the danger to which their drivers will be exposed. Politicians, feeling the pressure from their constituencies, will want to act decisively, even if their decisions prove ineffectual. In such cases, those politicians who are more conservative may decide to send in truckloads of food to be handed out for free, with the control of the Department of Homeland Security to (hopefully) keep order.

Those politicians who are more liberal will believe that the right solution is to nationalise food supply in their states (and possibly nationally) – to take over the control of delivery. As can be imagined, the results will vary from suburban situations in which the store [personnel] is still in place and the provision of food at the retail level remains orderly, to inner-city situations in which trucks will be routinely ransacked.

The evening news will show a clip of a “shopper” running down the street with a case of boxes of cornflakes, while heads of lettuce roll on the pavement, some to be picked up; others to be trampled. Meanwhile, at the other end of the supply chain, the wholesaler is trying to explain to the politicians that, if he’s not paid in some way for the food he sends out, he simply cannot continue.

Politicians (especially the more liberal ones), not understanding the workings of business, regard the businessmen as simply being greedy and fail to understand that, without an orderly flow of money, business stops. The politicians place a temporary ban on all food containers being shipped overseas (even though the overseas customers may be the only truly reliable payers).

The politicians advise the wholesalers that they will be paid “eventually.” If the money does not exist in the state treasury, some politicians may even promise future tax credits as payment. As a result, the supply of food would break down on a major scale.

How it all shakes out:  Historically, there’s nothing as chaotic as famine. As long as people have a crust of bread and as long as it arrives regularly, there’s a chance that events may be controlled. It’s the very unpredictability of supply that causes panic and the greater the concentration of potential recipients, the greater the panic. Small wonder that, when I speak to friends and associates about the 'Great Unravelling', this one facet often makes them recoil in a desire to avoid the subject entirely.

Once this particular house of cards begins to fall, it will fall much faster than the economy in general and the results will be unquestionably extreme. If the politicians are unlikely to affect a workable solution (at least in the short term), how does this all play out?

After all, no famine lasts forever:  What historically happens is that chaos ensues for a period of time. Some people are killed in attempting to take food from the authorities who control the distribution. Others are killed on their way home by others who want the food they are carrying. Others are killed in their homes, when raided by those who are hungry. Still others die of starvation.

It’s horrific to say, but, after a time, in such situations, famine becomes “the new norm” and, as illogical as it would seem, this is the turning point.  Chaos eventually devolves into hopelessness and listlessness and the panic disappears.  Then, at some point, the lines of supply are slowly restructured, generally on a more limited scale than before. Is there a timeline for the above to occur?

This is for the reader to decide. Each of us will have some general picture in our heads regarding the likelihood and timing of a second crash in the stock market, the rapidity and degree of inflation and the many other aspects that make up the 'Great Unravelling' of the western economies.

Therefore, those who accept that harder times are looming, but would rather not consider the likelihood of food riots and famine, would be advised to read the above article a second time and then to begin to plan. Those who do not presently have “back door” situations in place may wish to set the wheels in motion and to internationalise themselves. One thing is certain: once riot situations begin, there will not be enough time to plan.

Remember, Jeff wrote his essay 11 years ago and in that time his predictions haven't happened. "How did you go bankrupt?” Bill asked. “Two ways,” Mike said: “Gradually, then, suddenly.”   These lines, from Ernest Hemingway's novel 'The Sun Also Rises', reveal a lot about the human experience when it comes to success and failure.

AP asks: "Have you got your Plan B?"

PROGRESSING PLAN B – A Quarterly Review from Professor Jem Bendell which matches the UBUNTU Model