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Nine Meals from Anarchy

Scorpio

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#1
Nine Meals from Anarchy

Jeff Thomas
email: jeff.thomas1066@gmail.com
Posted Apr 23, 2016



In 1906, Alfred Henry Lewis stated, “There are only nine meals between mankind and anarchy.” Since then, his observation has been echoed by people as disparate as Robert Heinlein and Leon Trotsky.

The key here is that, unlike all other commodities, food is the one essential that cannot be postponed. If there were a shortage of, say, shoes, we could make do for months or even years. A shortage of gasoline would be worse, but we could survive it, through mass transport, or even walking, if necessary.

But food is different. If there were an interruption in the supply of food, fear would set in immediately. And, if the resumption of the food supply were uncertain, the fear would become pronounced. After only nine missed meals, it’s not unlikely that we’d panic and be prepared to commit a crime to acquire food. If we were to see our neighbour with a loaf of bread, and we owned a gun, we might well say, “I’m sorry, you’re a good neighbour and we’ve been friends for years, but my children haven’t eaten today – I have to have that bread – even if I have to shoot you.”

But surely, there’s no need to speculate on this concern. There’s nothing on the evening news to suggest that such a problem even might be on the horizon. So, let’s have a closer look at the actual food distribution industry, compare it to the present direction of the economy and see whether there might be reason for concern.

The food industry typically operates on very small margins – often below 2%. Traditionally wholesalers and retailers have relied on a two-week turnaround of supply and anywhere up to a 30-day payment plan. But an increasing tightening of the economic system for the last eight years has resulted in a turnaround time of just three days for both supply and payment for many in the industry. This a system that’s still fully operative, but with no further wiggle room, should it take a significant further hit.

If there was a month where significant inflation took place (say, 3%), all profits would be lost for the month, for both suppliers and retailers, but goods could still be replaced and sold for a higher price next month. But, if there were three or more consecutive months of inflation, the industry would be unable to bridge the gap, even if better conditions were expected to develop in future months. A failure to pay in full for several months would mean smaller orders by those who could not pay. That would mean fewer goods on the shelves. The longer the inflationary trend continued, the more quickly prices would rise to hopefully offset the inflation. And ever-fewer items on the shelves.

From Germany in 1922, to Argentina in 2000, to Venezuela in 2016, this has been the pattern, whenever inflation has become systemic, rather than sporadic. Each month, some stores close, beginning with those that are the most poorly-capitalised.

In good economic times, this would mean more business for those stores that were still solvent, but, in an inflationary situation, they would be in no position to take on more unprofitable business. The result is that the volume of food on offer at retailers would decrease at a pace with the severity of the inflation.

However, the demand for food would not decrease by a single loaf of bread. Store closings would be felt most immediately in inner cities, when one closing would send customers to the next neighbourhood, seeking food. The real danger would come when that store had also closed and both neighbour hoods descended on a third store in yet another neighbourhood. That’s when one loaf of bread for every three potential purchasers would become worth killing over. Virtually no one would tolerate seeing their children go without food because others had “invaded” his local supermarket.

In addition to retailers, the entire industry would be impacted and, as retailers disappeared, so would suppliers, and so on, up the food chain. This would not occur in an orderly fashion, or in one specific area. The problem would be a national one. Closures would be all over the map, seemingly at random, affecting all areas. Food riots would take place, first in the inner cities, then spread to other communities. Buyers, fearful of shortages, would clean out the shelves.

Importantly, it’s the very unpredictability of food delivery that increases fear, creating panic and violence. And, again, none of the above is speculation; it’s an historical pattern – a reaction based upon human nature whenever systemic inflation occurs.

Then…unfortunately… the cavalry arrives

At that point it would be very likely that the central government would step in and issue controls to the food industry that served political needs, rather than business needs, greatly exacerbating the problem. Suppliers would be ordered to deliver to those neighbourhoods where the riots were the worst, even if those retailers were unable to pay. This would increase the number of closings of suppliers.

Along the way, truckers would begin to refuse to enter troubled neighbourhoods and the military might well be brought in to force deliveries to take place.

But, why worry about the above? After all, inflation is contained at present and, although governments fudge the numbers, the present level of inflation is not sufficient to create the above scenario, as it has in so many other countries.

So what would it take for the above to occur? Well, historically, it has always begun with excessive debt. We know that the debt level is now the highest it has ever been in world history. In addition, the stock and bond markets are in bubbles of historic proportions. They will most certainly pop, but will that happen in a year? Six months? Next week?

With a crash in the markets, deflation always follows, as people try to unload assets to cover for their losses. The Federal Reserve (and other central banks) has stated that it will unquestionably print as much money as it takes to counter deflation. Unfortunately, inflation has a far greater effect on the price of commodities than assets. Therefore, the prices of commodities will rise dramatically, further squeezing the purchasing power of the consumer, thereby decreasing the likelihood that he will buy assets, even if they’re bargain-priced. Therefore, asset-holders will drop their prices repeatedly, as they become more desperate. The Fed then prints more to counter the deeper deflation and we enter a period when deflation and inflation are increasing concurrently.

Historically, when this point has been reached, no government has ever done the right thing. They have, instead, done the very opposite – keep printing. A bi-product of this conundrum is reflected in the photo above. Food still exists, but retailers shut down because they cannot pay for goods. Suppliers shut down because they’re not receiving payments from retailers. Producers cut production because sales are plummeting.

In every country that has passed through such a period, the government has eventually gotten out of the way, and the free market has prevailed, re-energizing the industry and creating a return to normal. The question is not whether civilization will come to an end. (It will not.) The question is the liveability of a society that is experiencing a food crisis, as even the best of people are likely to panic and become a potential threat to anyone who is known to store a case of soup in his cellar.

Fear of starvation is fundamentally different from other fears of shortages. Even good people panic. In such times, it’s advantageous to be living in a rural setting, as far from the centre of panic as possible. It’s also advantageous to store food in advance that will last for several months, if necessary. However, even these measures are no guarantee, as, today, modern highways and efficient cars make it easy for anyone to travel quickly to where the goods are. The ideal is to be prepared to sit out the crisis in a country that will be less likely to be impacted by dramatic inflation – where the likelihood of a food crisis is low and basic safety is more assured.

###

Jeff Thomas
email: jeff.thomas1066@gmail.com

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. Although he spent his career creating and developing businesses, for eight years, he penned a weekly newspaper column on the theme of limiting government. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion. He is now a regular feature writer for Casey Research’s International Man and Strategic Wealth Preservation in the Cayman Islands.

321gold Ltd

http://www.321gold.com/editorials/thomas/thomas042316.html
 

the_shootist

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#2
Those who aren't already prepared had better get going. Time is running out
 

Alric

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#3
If the business can just pass on the increased prices to the customers and the customers are still buying, then businesses shouldn't have any problems with inflation. They simply adjust their prices according to the inflation and pass it off to the customers. As long as the customers can afford to buy the food the shelves will be full.

There is two obvious points where this becomes a problem. If the people can't afford the food anymore(because for example their pay doesn't upkeep with inflation so they are poorer every week), that will cause demand to drop because as much as they want the stuff they can't afford it. The other big sticking point is when the government tries to pass price controls. Because if they lock the prices in the business can't pass the inflated prices to customers, so they really will stop ordering stuff as it is a pure loss.
 

Someone_else

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#4

Unca Walt

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#5
I never knew that "nine meals" thing. But I believe it. It's hard to accept, but after three days, if you catch a cricket, you'll savor it before crunching it up.
 

Ishkabibble

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#6
The food industry typically operates on very small margins – often below 2%. Traditionally wholesalers and retailers have relied on a two-week turnaround of supply and anywhere up to a 30-day payment plan. But an increasing tightening of the economic system for the last eight years has resulted in a turnaround time of just three days for both supply and payment for many in the industry. This a system that’s still fully operative, but with no further wiggle room, should it take a significant further hit.

If there was a month where significant inflation took place (say, 3%), all profits would be lost for the month, for both suppliers and retailers, but goods could still be replaced and sold for a higher price next month. But, if there were three or more consecutive months of inflation, the industry would be unable to bridge the gap, even if better conditions were expected to develop in future months.
This conclusion is untrue. I operate in this industry. Fresh meat and produce experience shifts of this nature on a very regular basis. The margins are there to address it (2-3% my ass).

Prices adjust and the losses do not mount as suggested. If a supplier loses anything, it's built into the next week's pricing. A rolling price system is not susceptible to the problems outlined. Now you might not much like exponential price increases, but you can bet on stocked shelves. For all those who can't pay, there will be those who can.
 

Unca Walt

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#7
This conclusion is untrue. I operate in this industry. Fresh meat and produce experience shifts of this nature on a very regular basis. The margins are there to address it (2-3% my ass).

Prices adjust and the losses do not mount as suggested. If a supplier loses anything, it's built into the next week's pricing. A rolling price system is not susceptible to the problems outlined. Now you might not much like exponential price increases, but you can bet on stocked shelves. For all those who can't pay, there will be those who can.
Well Gawd bless my soul.

We have such a compendium of savvy, talented, and exceptional people on this forum. I am continually RE-amazed.
 

bb28

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#8
I don't think I understand the economic premise.

Food is the only item people can't do without. I agree with that.

Therefore, if the supply is limited, prices will be increased indefinitely until the last remaining people are fighting over the last few specs of food.

The retailers and food producers will increase prices until they are able to sustain their business model. If the government steps in and tries to fix it, a black market will establish overnight. Supply and demand will come together and the free market is very efficient at arranging for this, although it may not necessarily include WalMart or EBT.

bb
 

Agavegirl1

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#9
My most expensive stockpile is ...food. I have an exensive collection of #10p cans of freeze dried food as well as the "normal" stuff that I rotate like cans of tuna, beans, chicken, veggies, fruit etc. I originally set out to have a years supply but quickly realized this was a huge advantage for bartering. Oh, I don't take EBT. Gold, Silver, tools, ammo....yeah...that will work. Also, do you know how valuable flavoring the not so tasty water will be? Lemonade mix is great.
 

mtnclimberjim

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#10
If the folks haven't figured it out by now, they will be the ones eating each other. I'm blessed in that I live on a river where fish and wildlife are abundant. Lots of open range too, wink, wink. On the other hand that makes me a target, hence my other goodies.
 

Professur

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#11
I've got more than 9 meals worth of food just here in my desk at work. Not the best of food (jerky, chips, cookies, chocolate, etc) but more than enough calories for 3 days. Couldn't say what might be in the car's trunk .. I really should check that.
 

Mujahideen

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#12
My most expensive stockpile is ...food. I have an exensive collection of #10p cans of freeze dried food as well as the "normal" stuff that I rotate like cans of tuna, beans, chicken, veggies, fruit etc. I originally set out to have a years supply but quickly realized this was a huge advantage for bartering. Oh, I don't take EBT. Gold, Silver, tools, ammo....yeah...that will work. Also, do you know how valuable flavoring the not so tasty water will be? Lemonade mix is great.
If things get so bad that people are turning to you to get food, they aren't gonna be bartering for it.

If you think you are safe in the country, I hope you are somewhere very remote. There are hundreds of millions of people who will assume that you have food and you can only shoot so many and be on guard for so long.
 

FunnyMoney

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#13
The typical grocery store throws away enough food (still edible food btw) every day to cover a lot more than 9 meals. The other members posted already how the article didn't do its homework. That said, maybe one day the gov't will halt food stamps and the world will stop using fiat money, maybe WWIII will be the beginning of that and food will become a major issue. Until then, PMs are better for stacking than can goods, not that having an emergency supply that you rotate through isn't a good idea, it actually is, not just for protection from a rouge event but also to purchase products at lower prices (on sale and so forth,,,).
 

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#14
If the folks haven't figured it out by now, they will be the ones eating each other. I'm blessed in that I live on a river where fish and wildlife are abundant. Lots of open range too, wink, wink. On the other hand that makes me a target, hence my other goodies.
Smiling because the tiny lake I live on in nowhere midwest is bordered on all sides by retired military veterans with a gun safe and a tacit agreement to protect the property of those around them if need be. At our most recent Independence Day Party, while discussing the latest veteran funeral they planned to attend, we got into this discussion a bit. I am mostly talking about bartering with my near neighbors and people in the tiny town nearby with which we do business. A lot of resources there. We are also protected by our own gun safe and my husband, a former marine and range instructor for officers.

We are also protectected geographically. It's all about the network. And your own preps. And the knowledge and experience to make it work. Oddly, this was a topic on the 4th of July.
 

Ishkabibble

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#15
FunnyMoney is right about waste at most grocers. It's shameful. The majority of food is simply discarded once it looks visually less appealing, even if it's still good. It could be discounted, but rarely is.

There's no genuine food shortage if this type of waste is taking place. Long before we see empty shelves due to a lack of available product, we'll see a shift from fresh to primarily frozen, canned, and dried.

It's long proven that frozen produce is superior to 'fresh' because it's frozen at it's premium, whereas the 'fresh' is picked long before it is ready. The best solution is to eat fresh ripened from your garden, and your next best is either frozen or dried. Canned fruit and veggies have the least amount of retained nutrition, right alongside those that are picked before they're ripe. It's ironic that our present food system is actually compromising nutrition to bring us 'fresh' foods.
 

BUILT TO LAST

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#16
Fortunately or unfortunately (Depending on how you look at it) I keep much more then 9 days of food supply around my mid section. :refer:I will need water! After that, a cyanide pill. I don't want to be around when the water runs out. You can have my share of what I have left. . . . :tied up:
 

Unca Walt

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#17
FunnyMoney is right about waste at most grocers. It's shameful. The majority of food is simply discarded once it looks visually less appealing, even if it's still good. It could be discounted, but rarely is.

There's no genuine food shortage if this type of waste is taking place. Long before we see empty shelves due to a lack of available product, we'll see a shift from fresh to primarily frozen, canned, and dried.

It's long proven that frozen produce is superior to 'fresh' because it's frozen at it's premium, whereas the 'fresh' is picked long before it is ready. The best solution is to eat fresh ripened from your garden, and your next best is either frozen or dried. Canned fruit and veggies have the least amount of retained nutrition, right alongside those that are picked before they're ripe. It's ironic that our present food system is actually compromising nutrition to bring us 'fresh' foods.
Ishkabibble -- Just like you instructed about the delivery stuff... I can add a correction about the waste of good food.

The supermarkets HAVE NO CHOICE.

The gummint makes the rules. My son has a farm. Fulla weird and kewl animobiles like cassowaries, mini-horses, mini-goats, etc.

He has a "gentlemans' agreement" with the local major chain store: Every day he backs up his truck to load the outdated stuff... it goes to the animals.

Yup, and I've seen beautiful strawberries, perfect bananas, bread, grapes, yada.

The stores regularly mark down these things, but I am told by the manager that the markdowns actually work backwards. People will avoid them. Go figger.

But, in sum: Doan blame the stores for throwing out good stuff every day. They are ORDERED to by the gummint.

About forty years ago, you could go down to the "Day Old Bread Store" and buy "outdated" bread for half-price or less.

Wanna know why you cannot find a store like that anymore? If you guessed "REGULATION", you guessed correctly.
 

bb28

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#18
Perhaps true. But, it's also because we have an overabundance of food at very low prices. With very low demand relative to supply, the buyer gets to be as picky as they want. If that means perfect shapes of food, no more than a few days old, etc. then so be it.

Quality food is very difficult to find but that is another topic.

I wouldn't call it regulation (at least that part). As a percentage of income, we spend very little on food -- even poor people -- relative to other countries.

This is the free market in action. Why buy bread that is about to go bad for half price if you don't need the cost savings? Inventorying produce is one of the worst businesses for warehousing due to obvious spoilage.

bb
 

Ishkabibble

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#19
I don't blame the grocers; it's simply a fact that people want the best quality product available for their money. Still, there was a time when seconds were sold, and it'll come again if times are tight. We have wiggle room.
 

Unca Walt

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#20
I really like the idea of that coming back. Not wishing Armageddon, but "off date" foods for super low prices is better than dropping them in a dump.

You all are gonna find this as hard to swallow as a Vaseline sandwich, but I swear it is true:

In my married life, my wife and I have scrounged around vacant lots to get enough returnable bottles to get an 18c carton of milk.

I mention the above to give you a scale to measure with when I tell you that those "off date" stores were the salvation of thousands of GI families and other poor folks.

They could be again. And should be.
 

Unca Walt

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#21
On the other hand, FM, you will not be beheaded for posting the above.
 

Son of Gloin

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#22
.... And who do we have to hold up as our next hope to get us out of this mess? Our best hope is a career criminal who has treated workers and the less fortunate members of our society with absolute disdain and thievery, and then has the gall to not come clean and repent but say I'll see them in court and in his speeches, "I love you." It's a really messed up nation, the founders wouldn't find anything right about it.
Damn, FM. I thought for certain you were talking about the self-serving, criminal sociopath, herself. Not the Donald.
 

FunnyMoney

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#23
Damn, FM. I thought for certain you were talking about the self-serving, criminal sociopath, herself. Not the Donald.
It applies to her as well.
 

the_shootist

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#24
I have no idea why so many people think Trump is going to fix everything. He's NOT! I support him because he's unlike anyone ever in the White House previously in history. He says what's on his mind with no filters at all. He's not trying to pander to every single person in the country. That alone doesn't come close to guaranteeing he'll be a good president. What it does suggest is we won't have the same old drooling politician taking up space in the Oval Office. He'll actually be fun to watch during meaningless political speeches. His wife is easy on the eyes too. (which is a bonus after the current First Wookie) Other than that I expect he will add no value whatsoever to the country. Given that there is no one else that will add any value either, I'm voting for Trump!
 

Professur

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#25
I can't possibly be the only one to see the obvious. Trump, Curd, Col. Sanders, and Shillary ..... Distraction. Why on earth does it take a year to select candidates for 2 parties and why does it take 12 pages in every daily rag? .... because now you're not watching what the outgoing president is doing anymore .. and any who are don't care because their new candidate will fix whatever he does. What did Obie do last week? Was anyone watching .. or were you all watching the dog and pony show?