Hooveless Cattle, Lame Chickens and Monsanto GM Crops. Hello Hyper inflation 2014!

As 2013 comes to an end, we look back at the past five years since the global financial crisis with an uneasy calmness.  A sense that not everything seems right even though a lot of the economic data points to expansion.  As never before has the world been subjected to this scale of coordinated monetary stimulus to rescue the world from an economic abyss. 

The US Federal Reserve monetizes debt at US$85bn a month ($75bn from January 2014), UK maintain's its asset purchase program at GBP 375bn ($620bn) and Japan buys 7.5 trillion yen ($81bn) a month of its own bonds.  All these unrepressed money manufacturers make the annual production of Joss paper or Hell money (金纸) seem trite.
 
In Chinese tradition, Joss money is burnt as a veneration to the deceased to ensure they have enough money to buy lots of goodies in the afterlife.  It is sometimes burnt as an offering during holidays and special occasions as well. 

Below is a $2bn hell bank note which shows the picture of the Jade Emperor.

Joss money features an image of the Jade Emperor on the front and the headquarters of the Bank of Hell on the back.  Another common feature is the signature of both the Jade Emperor and the King of Hell. 

Joss money comes in outrageous denominations ranging from $10,000 to $5bn.  Inflation is raging in the afterlife. 

Owing to environmental concerns by the living from rampant burning, countries like Hong Kong and Taiwan, have discourage the practice of Joss paper money burning together with all forms of  papier-mâché items such as cars, servants and houses.  Contemporary Joss paper burners are now fitted with a special cover which eliminates the spread of burning ashes.  The cover allows enough oxygen in to ensure that all of the offering are completely burned. 

Hopefully with less Joss paper transported to the afterlife, monetary expansion will be crimped and our ancestors in the afterlife can finally breath a sign of relief and look forward to cheaper goods and services.

Hell on earth, Inflation Deflation?

The Jade Emperor of our present is represented by our modern day central bankers.  The more important ones being: Ben Bernanke (now Janet Yellen), Mervyn King (now Mark Carney), Jean-Claude Trichet (now Mario Draghi) and Masaaki Shirakawa (now Haruhiko Kuroda).  Not to be outclassed is China where banking assets have expanded from $8trn to $24trn in less than 5 years.

Here on earth we are indeed a confused lot.

With so much supply of papier-mâché one would have thought that to maintain the exchange of goods and services more fiat currency would be required for the same amount of goods and services but according to a recent NY Times article inflation is falling to levels not seen in years.

Perhaps our present Jade Emperors seeking to avoid massive street protest have resorted to change the way in which inflation is measured.  The chart below from Shadowstats measures inflation as it would have been calculated in 1990 which shows inflation is 5 times higher than the official reported numbers.

 

Using 1980 basis, inflation is nearly 8 times higher than the reported figures.

 

 

It is quite clear from these two charts above that the US government have consistently revised how inflation is reported to depress inflation numbers. 

 

Malaysians not immune

 

For those living in Malaysia, the reported inflation since 2003 is shown below. 

 

Year	Inflation Rate
2003	1.07%
2004	1.42%
2005	2.94%
2006	3.62%
2007	2.03%
2008	5.40%
2009	0.60%
2010	1.70%
2011	3.20%
2012	1.20%



However given the lack of a Shadowstats equivalent in Malaysia, this article from the Malaysian Chronicle has a very reasoned argument to show why inflation was closer to 8% than the reported 3.2% in 2011.  About 2.5 times higher.

Even 8% looks tame in comparison to other developing nations.  The reason?  Malaysia is blessed with oil and enjoys huge subsidies, thereby keeping the cost of goods and services in check.  Malaysia ranks 54 amongst 61 countries according to a Bloomberg survey of oil price league table.  Norway ranks No.1 for the highest oil price in the world.  A country that have deep environmental consciousness and a first class public transport system.  Mr. Najib Razak, please take note.

Here is a quote from Our Deputy Finance Minister Datuk Ahmad Maslan during a debate on Supplementary supply Bill (2012) in 2013: "Out of 227 countries in the world, Malaysia's petrol and diesel price to its motorists is the eighth lowest...the government gives a subsidy of 90.4 sen for each liter of diesel and 90 sen for each liter of RON95 petrol."

Look at What You Eat. Your Taste Buds Do Not Lie

Sadly most of us do not hold an economics degree which goes without saying whatever statistics governments chuck at us we have an attack of MEGO - mine eyes glaze over.  Of course, everybody sense that these numbers do not reflect reality on the street.  And so many people just sleep walk from day to day tightening their belts as they go along. 

The answer to the lightness in your pocket lies not in your head dear reader, but your taste buds.

Perhaps the coil of even higher inflation have not sprung can be in part explained by the enormous productivity growth of the US's beef industry.  In 1975, 24 billion pounds of beef were produced with 135 million cattle but by 2012, 26 billion pounds of beef were produced with only 91 million cattle.  Average pounds of beef per cattle increased from 178 pounds to 286 pounds, an increase of 61% more meat in just under four decades!

This is no small feet.  I guess some improvement could be attributable to better breeding techniques, feed management and species development.  But the go to solution for the long suffering cattle industry is Zilmax, a medicated feed supplement for beef cattle to increase extra pounds of meat before slaughter.

Now Zilmax worryingly has been linked to cause cattle to lose their hooves.  Imagine your toe nails being forcibly pulled out of you and your legs have to support that extra meat from all that Zilmax that had been forced fed to you.

Similarly broiler chickens can get to your plate in less than six weeks compared to an average Chicken's lifespan of six years.  Free range chickens are normally slaughtered at eight weeks with more humanely treated organic chickens are allowed to live to twelve weeks.  Chickens are pumped full of antibiotics, put in tightly confined spaces, fed all round the clock with growth hormones added for that extra 'ummph'.  Most wobble with the weight and not bother to walk.

That goes for pork too. 

It is only a matter of time when these poor animals reach their biological limits and further tinkering just kills off the animals.  When that happens, grudging acceptance will give way to street protest.

Most born after the 1990s don't really know what a good beef, chicken, fish or pork taste like.  For good tasting chicken I'd recommend going to a place famous for its chicken called Qinyuan in Guangdong China where the chickens are allowed to roam free and fend for themselves like they should for up to 18 weeks (some even 52 weeks). 

The taste is divine. 

How to choose a good quality chicken?  Look at the thigh bone, its got to be long, slender and feels hard.  When snapped the bones are sharp.  They should weigh no more than 2.2kgs ideally.  The feet has got to be rough from all that foraging.  The feather has to be supple, strong and shiny not clumpy or falling off.  The neck somewhat longer and the meat less fat between skin and muscles.  The eggs are normally quite small and shell does not look fragile.
   
Happy 2014.