Relief chief in denial over falling dollar's effect on food shortages

By Peter Duveen

PETER'S NEW YORK, April 24, 2008--The president of a major relief organization said today that the current global  food shortages had little do to with currency and banking problems that have rocked the world of late.

"I would be hard pressed to find a connection" between the banking crisis and the food crisis, said Raymond Offenheiser of Oxfam America, in an appearance on C-SPAN's morning program, Washington Journal.

But by the time the second or third caller phoned into the show mentioning banking woes and a weak dollar as the real culprits behind the alleged food shortage, Offenheiser changed his tune about the elephant in the room, which it appeared he had hoped to keep locked up in a glass closet.

"It's a tougher analytical link to make" than with other factors such as higher oil prices and hoarding, he told the C-SPAN audience. "There are things where the direct causality is pretty simple." he said, later adding, "I don't know if we have the data yet" to draw conclusions regarding the effect of currency swings on food prices.

The world has been beset by a credit crunch ostensibly triggered by the bursting of an investment bubble in the real estate market. The collapse of this market, so the explanation goes, cascaded into more widespread troubles in the financial sector, resulting in the failure of Bear, Stearns, a major investment bank, and the posting of billions of dollars in losses by some of the world's largest banks.

The question is whether rising food prices are a monetary or a supply phenomenon. If the blame is to be assigned to the former, then antidotes targeting the latter are likely to be ineffective.

The value of the dollar has fallen steeply over the past year. Many less-developed countries, whose economies are dependent on dollar remittances from United States, have seen the total value of these remittances plunge with the dollar.  In some cases these countries have been forced to devalue their currencies in order to restore the price advantage their own goods have enjoyed in the U.S. market, as well as halt the erosion of dollar earnings as translated into their own currencies. By doing so, they have imported American inflation. The rising prices in their own countries have led to apparent food shortages and riots.

Whether Mr. Offenheiser was oblivious to this fact, or was just trying to hide it so as not to embarrass his handlers, is hard to say, but one would think it was the latter. Nobody can be that foolish, as listeners to the program were quick to point out.