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Supply v Demand – Does It Always Work?

QUESTION: Mr. Armstrong, You say that wheat fell during the Great Depression during the Dust Bowl when supply would have declined. This makes no sense. Would you address that question?

KL

ANSWER: Your problem is typical in analysis. It appears that 99% of the people always try to reduce some event to a single cause and effect. Everything is connected like a line of dominoes. You are not just pushing over a single one. The action has a ripple effect that moves through the entire world economy and is not even restricted to a single nation.

I do not make stuff up to try to prove a point. I have been curious to discover how things really work. When I say we have the largest database in the world, I am not joking. Just as I have been a collector of various things, that includes data. It is easy to find a yearly chart of wheat, but not daily or weekly during that period. Here is how wheat responded during the Great Depression on a weekly basis. Note that it peaked about 4 weeks before the stock market. Then you see a huge gap down in 1931.

This was caused by the wholesale defaults of just about every nation. Some went into a moratorium and suspended payments on their debt like Britain. But most outright defaulted and you can buy their bonds usually on eBay.

Here is the impact of the 1931 Sovereign Debt Crisis. The dollar soared on our index from roughly the 112 level to nearly 160. That was high which exceeded even World War I levels. That illustrates just how high the dollar rallied. Because wheat was priced in dollars, it fell in terms of dollars while rising in terms of other currencies because of their defaults.

 

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Population: what’s the problem?

Population: what’s the problem?

Apologies for the clickbait-y title. My question isn’t a rhetorical one intended to suggest that human population levels aren’t a problem. I don’t doubt they are. But it seems to me much less clear than a lot of people seem to think exactly what kind of problem they are, and what – if anything – could or should be done about it, which is what I want to aim at in this post. I raised these issues in my last post of 2017, which prompted some lively debate. But neither the post itself nor the comments under it quite nailed the issue for me, so here goes with another attempt.

1. Of proximal and underlying causation

In a recent article by the evergreen George Monbiot bemoaning plastic pollution in the oceans, the first comment under the line had this to say: “Two answers – population control and capitalism control – but no takers…not even George!”

It strikes me that this response is spot on…and also entirely misses the point. It’s spot on because although plastic pollution in the oceans is an immediate problem, it has deeper underlying causes which are summarily encapsulated by the words ‘population’ and ‘capitalism’ about as well as by any others. I think it’s a bit unfair to accuse George of not being a ‘taker’, since part of the point of his article was to suggest that self-fuelling economic growth – ‘capitalism’ by another name – is intrinsically destructive of the environment. Still, it’s surely true that without large global populations subject to the forces of capitalist commodification, the problem of plastic in the ocean would be very much less severe than it presently is.

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Olduvai IV: Courage
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Olduvai II: Exodus
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