how price hikes of rice destroyed Singapore?

I’ve always wondered to myself why the price of basic necessities such as rice, flour, wheat, sugar and cooking oil surges – conventional wisdom suggest market forces may be furiously at work i.e the laws of demand and supply. However, this still doesn’t explain why surges in demand so often outstrip the supply that makes a nonsense of the shortfall – to put it another way, why does the price of let’s say wheat go up by over 40% if the Ukraine only accounts for less than 15% of the global wheat production ?
Makes no sense right? I am sure. No correction, I am certain speculation plays a dominant role in price surges – but what’s less certain is how when governments don’t take firm steps to allay the fears of consumers; all too often this triggers run away train price hikes.

Let me explain how the dooms day scenario pans out, there are essentially five stages:

1) Let’s take the case of rice (since Thailand is now transformed into the Venice of the East) – when most housewife’s hear about price hikes of rice – they’re probably going to brush it off as a kink in the global supply – most would probably switch temporarily to wheat based noodles or perhaps congee – the general attitude is, “ the price of rice has gone through the roof; I am going to switch to alternatives like bread and wheat based noodles to take the edge off till these prices normalize.”

2) One morning when both husband and wife and kiddies are dinning on mud cakes for breakfast – they read in our beloved daily rag that government isn’t really worried about these expected price hikes – why? Because the solution seems to be linked to GDP and the whole idea of earning more to off set these price hikes – hubby turns to wifey, he’s not so sure that he can make up the shortfall – his pessimism is based on the crushing reality, his salary hasn’t risen for the last 2 years and he doesn’t see this trend changing – since government has decided to leave the whole matter of price setting to the free market economy. It dawns on both husband and wife that it’s everyman for himself – hubby turns to wifey, his tone is unusual serious and that surprises her – “Get an extra sack of rice today, no get two, better still three.” Wifey exclaims, “ why?” Hubby replies, “there is no running away from rice, besides the price of rice is going to go up.”

3) When wifey is standing in line at NTUC, she notices everyone seems to be buying two or more packs of rice – the shelves look threadbare and even the staff aren’t sure when her favorite carbs are going to be replenish – that’s really the tipping point – when sufficient people believe that everyone is rushing to hoard more and more rice. People don’t hold back on their spending. They actually buy more to warehouse for the future when the prices will be even higher. Somewhere in the island, seated in some obscure cubicle – a bean counter, notices a funny trend forming in his computer terminal – the demand of money seems to be dropping and demand of products is rising. He’s not sure what’s happening, maybe it’s a computer glitch – he runs through the numbers again – and this time, he’s so certain that he barges into his bosses office – his boss, a man who has cultivated the fine art of playing Soduku secretly at work while being able to draw a comfy salary at the same time doesn’t want to be labeled a dead wood. Besides this is hot potato and he would be happiest to see the back end of this disturbing report – he escalates the matter to the treasury. Somewhere in the labyrinth of the treasury where human existence has been reduced to tabula data and faceless statistics, a scholar suggest, the cabinet should consider relieving the money shortage – the scholar summarises, it’s a no brainer the treasury isn’t printing enough money that must be the reason why the demand for money seems to be dropping. They print more money – soon a critical tipping point is breached where people start to realize that their money doesn’t seem to go a very long way. Infact, it’s getting smaller and smaller.

(4) During dinner when both wifey, hubby and baby are munching on frog congee – wifey turns to hubby, she recounts how the lamentable tale of how her grocery allowances doesn’t seem to be able to cover all the cracks that’s fast showing up – hubby who reads reckons he’s an economist and mathematician reasons – “our money is getting smaller and smaller, you should I buy anything now–just get rid of money because the longer we hold on to it the faster it’s going to depreciates.”

(5) Somewhere in the state machinery – the supply of money skyrockets, the demand plummets and price rises like a helium balloon. Production falls sharply, as more and more people try to get rid of their “valueless” money. By this stage red flags are showing up like mushrooms – the monetary system has broken down completely. This stage is also called Hyper-inflation and to put it another way, we have reached the cold and tepid landscape of a place called the empire of the bones.

Epilogue:

Why are we all in this shit hole? It’s because some brainless wonder believes the greatest way to solve food hikes is by earning more and boosting GDP.
End of story boys and girls, anyone for second helpings of tree bark congee and mud cakes?

Darkness 2011