[copious.abundance]

As you all know, wheat, along with rice, are the two most essential agricultural products used by mankind. If the price of either or both happens to spike, this will take a bigger chunk of money out of people's pockets, leaving them less money to spend on other things, thus causing a recession.

It just so happens that the real price of wheat has spiked just before or during every recent recession. This would lead one to conclude that spiking wheat prices cause recessions. Click on the following link to see a long-term chart showing real and nominal wheat prices:

>>> CHART <<<

First notice the big price spike around 1973, when it reached a staggering $28 in constant 2008 dollars. It just so happens that a deep recession followed in 1974.

The next price spike occured around 1978-79. Not so coincidentally, there followed two recessions in rapid succession, one in 1979 and another in 1980-82.

There was another, smaller, price spike around 1989. Once again, we had a recession in 1990. This recession was not so deep, but that's certainly because the price of wheat did not spike so high this time.

Next there was another wheat price spike in 1996-97. It was just after that time that the Asian financial crisis hit, which was followed a few years later by a recession in the US and Europe. Coincidence? Nosiree. Surely it was caused by the spiking price of wheat. People simply had less money to spend on other things, which caused the recession.

Lastly you can see a more updated wheat price chart here which shows the latest wheat price spike (this is a nominal chart) which peaked early last year. Once again it is not coincidental that a steep recession has followed. Surely this recession, just like all the previous ones, is being caused by the spiking price of wheat. And the bigger the price spike, the steeper the recession.

You can see a similar pattern with the other major world grain - rice. This chart here shows that the price of rice spiked at about the same time as wheat early last year. Put both price spikes together and surely you've got a major impetus for an economic crash. Going back a bit farther on this chart here, you can see the price of rice had spiked around 1996-97 (which preceded a recession) and prior to that in 1980-81 (which coincided with a recession).

So the only logical conclusion to derive from all this is that spiking prices of wheat and rice cause recessions.

[Schmuto]

So that's your setup?

You get any nibbles yet?

[TreeFarmer]

Oil I don't know that you can conclude it that firmly however, you do make a good case.
You have the right timeline, i.e. cause (price spike) preceeds effect (recession)
and, you make a good logical case.

One thing I'd consider though is how much of the average budget is spent on wheat/rice? Probably not much in developed countries and a great deal in poorer countries.

Good read anyway.

TF

[goodbye_bluesky]

I think bubbles cause recessions and in those bubbles the cost of wheat rises. All commodities skyrocketed in this last bubble.
There may be correlation between rising wheat costs and recessions but causality is a bit harder to prove.

[notill]

I'm going to guess that my family of four consumes somewhat less than 2 lbs. of wheat products per day, or perhaps 500 lbs. of wheat per year. At last years high of $400 per ton, the cost of wheat to feed my whole family for a year was still only about a hundred dollars.

[notill]

Had to come back,

I don't think your theory is without merit. When grain prices rise, the big food powers, Kraft. Nabisco, Kellogg etc. rush to exploit that rise with huge geometric increases in finished prices. Wall Street doing it's thing.

[shortonsense]

It just so happens that the real price of wheat has spiked just before or during every recent recession. This would lead one to conclude that spiking wheat prices cause recessions. Click on the following link to see a long-term chart showing real and nominal wheat prices:

>>> CHART <<<

So the only logical conclusion to derive from all this is that spiking prices of wheat and rice cause recessions.

Sounds completely reasonable. Looks like a better correlation than the "oil price shock" theory of recessions, I think you are on to something!!

Can you now declare Peak Wheat and Peak Rice, make some bad predictions ala Ehrlich, write a book about it with lots of horrible scenario's to scare people, sit back and collect honorariums doing speeches and stuff until everyone figures out it was just a gig to make a few $$ in a recession?

[3aidlillahi]

Correlation does not equal causation. I almost think that you're joking with this, mocking us with our economic models with regard to oil.

[copious.abundance]

Correlation does not equal causation. I almost think that you're joking with this, mocking us with our economic models with regard to oil.

[shortonsense]

Correlation does not equal causation. I almost think that you're joking with this, mocking us with our economic models with regard to oil.

Oh please, are you suggesting that Oilfinder was SERIOUS in the first place? I'm just applying tried and true peak oil concepts ( correlation DOES equal causation ) to this particular tidbit of information.

[Tyler_JC]

I know he's not serious, but there's definitely a correlation.

The reason? Wheat prices (and commodity prices in general) tend to roughly track inflation.

When inflation is high, the Fed pushes up interest rates to bring it back down, causing a recession by making it more difficult for consumers and businesses to borrow money. (econ 101)

High commodity prices are a symptom of rapid money supply growth. They don't by themselves cause a recession.

However, the solution to inflation often causes a recession.

We end up with is the impression of commodity shock induced recessions.



What we are actually seeing are monetary policy induced recessions.

[shortonsense]

What we are actually seeing are monetary policy induced recessions.

PEAK MONETARY POLICY!!!!

I like it. We need more economically minded posters, considering that the world tends to revolve around the concepts contained therein.

As "dirty" a science economics tends to be, it does explain an awful lot about why peak oil ( or peak anything and everything else which is often claimed in the same breath ) may or may not matter in the least.

[Tyler_JC]

More like "peak cheap money" but sure, same general concept.

[Schmuto]

Correlation does not equal causation. I almost think that you're joking with this, mocking us with our economic models with regard to oil.

For God's sake, look at the 2nd post in this thread. Of course he's dicking with you. He's trying to say that the folks on PO.com who think 147 CL caused the recession are nuts.

I happen to agree with him.

[copious.abundance]

This forum is so much fun!

[kiwichick]

good one of2

nice to see you have a sense of humour

pity it's not a laughing matter

[shortonsense]

This forum is so much fun!

FUN!!! It almost sounds like you are making light of the Doom which was supposed to have arrived with the 2005 peak oil...and when it didn't the hopes shifted to the 2008 peak oil, and now here you are listing so many oil discoveries last year that they easily matched consumption!!

I don't know Oil, sometimes when people respond to you I get the feeling its almost as though you wandered into a church service waving the Jan 9, 1966 New York Times.