Music transcends culture. Listen to these guy totally cook on their Shamisens a traditional Japanese instrument.
If you are reading this you probably live in the rich world and imagine yourself immune to famine. This is due to a human trait called the recency bias. Because you haven't directly or indirectly experienced famine you don't anticipate it in the future. You bias the future based on the present and recent past.
Did you know that the US experienced 3 epidemics in the 20th century. One could argue that in any given year the US is 3% at risk. Perhaps I am a dismal scientist after all.
Many people who have experienced economic growth over the last few years may not be so lucky going forward. A growing economy, relative economic stability and +10 years of growth can lead many to believe that a "new era" is unfolding. Unfortunately cycles of history repeat. World grain prices and basic commodities are at highs, the pressures are mounting in a few countries already. Argentina is raising tariffs on exports, Thailand the leading rice exporter is considering the same, Egypt is facing riots due to wheat and my guess is Mexico is feeling the price of Corn prices in the southern regions. Rice hoarding is now an economic crime in the Phillipines.
For those in the western world, New York is reporting 25 year lows in it food bank.
I was speaking with some Sr. people from the UNDP who say the World Food Program WFP is very nervous about the coming year.
The recency bias we have is that widespread famine is a part of the past or something "over there". The fact is that the world has shrunk and that govts. will rise and fall due to the global food crisis issue of 08-09, this will impact the developed world a lot more than most think.
On a positive note, my favorite economist, Amaryta Sen has pointed out there has never been a widespread famine in a functioning multi-party democracy. Sadly many large and politically strategic countries such as China and Russia do not fit that bill.
For the hedge fund traders out there please, put this in your risk model. If you can't, then please stop trading as the Black Swans will eat your lunch and you are a destroyer of value.
a freindly comment on my blog asked for a housing update. I posted that I predicted home could decrease >20% resulting in $6.6 Trillion paper losses last summer. Nick posted a comment below and I have adjusted the income by the CPI. Pretty poor on my part to have not caught that the first time. This chart is now updated. The average ratio of HH income to Home value is 2.95:1. As of Feb 2008 we are roughly at 4:1, sadly we could have 25% more price declines if we return to historical norms.
Unfortunately we are only half way there. I have visited the securitisation forum, watched the ratings agencies and a few of the other crazy activities that lead to this very predictable bubble. Everybody liked free money and value on the way up, right. It was a glorious sanctimonious ride.
All along the way few pointed to the obvious housing indicator affordability. something is only worth what people can pay for it. Supply and demand are bogus concepts as housing is very elastic, think of the 4-6 people that lived in the average 1,000 Sqf US home in 1950 vs. the 2.3 residents of today average 2,300 sqft
McMansion Barn. Please note my architectural sensibilities leave me with little love for the contemporary US home. My wife puts up with my complaining about it all the time. Give me a great modern scandinavian home anytime over some jumped piece of wooden sticks wrapped in Tyvek and plastic siding. Most of the post 1970's US housing stock is utter junk.
Anyway here is an update of the affordability data, the spread sheet and the source material. Make up your own mind. I am but an opinion in the wild and just here to spice things up a bit. I was very disappointed to make my data more robust. I used household income instead of individual income. If I have made a mistake here please point it out. The picture is worse than I thought.
Here is the Median US house price end of year. Here is the number of houses. Median household income pg. 37. I made a generous estimate of median income increases of 2% for 07 and 08. please note the use of median instead of average as it is a better way of describing the "most common experience" of the affected. Unfortunately the news is worse.
I have included household income instead of individual incomes. This adjusts for the 2 income household which was scarce in 1968, but common today. Also please consider the average number of residents per household are fewer. We are working harder for bigger emptier homes. I hope everyone has fuller lives.
here is a horrific data table. And for those who like to do there own homework, here is the updated Download realestate1.1xls.xls spreadsheet. If have made a mistake i.e. non-inflation adjusted figures etc. help me out here.