How Bush Screwed Our Thanksgiving

There is a compelling article in yesterday's New York Daily News by Pulitzer Prize winner William Sherman.

Sherman shows that there is not much for us to be thankful for in terms of the cost of food we put on the table this week.

Consumers are getting slammed with the biggest increase in food prices in a decade -- fueled by a perfect storm of rising grain prices and a falling dollar.

Poultry -- including your Thanksgiving Turkey -- along with dairy products have risen the most. A glass of milk costs New Yorkers up to 42% more than last holiday season.

The wholesale price of eggs has soared 86% compared to last fall, at one point.

"I'm spending $50 to $80 more a week on food than last year", according to one Harlem shopper.

The surge is driven by a ripple effect -- the Iraq war, the rise in oil prices, the growing deficits -- and a confluence of factors beginning with corn and wheat crops diverted to ethanol production, according to economists.

Demand for ethanol, caused by the surging price of oil, drives up the price of feed grain. High oil prices also affect the cost of running tractors and combines and transportation.

In the food chain -- from the corn fed hens and cattle to the meal on the dinner table -- just about every menu is affected. Pizza prices in New York are up 15% since last year. Filet mignon has jumped 10% in the last two months. Striped bass, according to one luxury restaurant owner, has gone up from $3 per pound to $8 per pound in one year. The average turkey is up 15% since last year.

Another prime factor in food price increases has been the steady decline of the US dollar relative to other currencies. The price of imported olive oil is up 25%. The weak US dollar allows foreign countries to buy US foodstuffs for less than American buyers. Increased foreign demand raises domestic prices.

In the first nine months of this year, writes Sherman, US food, feed and beverage exports were up $12 billion over last year. China has been a big buyer of poultry and pork.

This may be good for the farmers, but horrible for everyone else.

The implications of all this are:

Every time the Federal Reserve cuts interest rates to provide a temporary boost to a weakening economy, the dollar goes down, the price of oil goes up and the price of food skyrockets for ordinary people.

Looks like the chickens, and turkeys, are coming home to roost as the doomsayers have been predicting for years. In the past decades world confidence in the U.S. economy created a very favorable global business climate and powered much of the U.S. political and economic clout. Perception is everything.

But with a humongous trade deficit -- $700 billion last year -- and a $150 billion annual Iraq war bill, it could all come apart.... very quickly.

America's powerhouse economy depends on global confidence in the stability of the dollar which has traditionally attracted the world's surplus savings. But with the rapid fall of the dollar, other nations are increasingly indicating that they will invest in other currencies. Confidence in the US greenback is waning among foreign businessmen, a finding that in itself may be a self-fulfilling prophecy.

The U.S. exports 70 cents worth of goods for every dollar it imports. The U.S. has borrowed more than $3 trillion in the last six years. Money moves across markets with the push of a button.

If foreigners lose confidence in the U.S. economy, they will want their money back, the dollar will fall, and foreign investments will tumble, triggering an even weaker dollar. To an amazing extent, the U.S. economy has relied "on the kindness of strangers" to fuel its domestic and international investments and the recent real estate boom.

The consequences for our American Empire may be disastrous and swift, if the "kindness" and confidence of global investors is shaken. Will America succumb to the same imperial overstretch as the Roman, Dutch, Spanish, Soviet, and British? Hubris does not allow us to see much in the future. Every empire thinks that it is different, but....?