123 – Strong Dollar, Cheap Oil & Farm Economy


strong dollarI started out doing a podcast on how Africa is running out of US dollars and how that is bad for commodity prices, agricultural food exports, and those countries themselves.  Getting tied up with the “#breakfastwithbill”  in the mornings has me behind on podcasts.  In the time since I first started this podcast a whole lot of other economic news has come out.  Most of it BAD.

So in no particular order I will go through some of these.  They all will affect the profitability of agriculture.  Big time problems on the horizon.  Will we muddle through or run aground or sink the ship.

Low commodities and wage growth will lead to a “low growth” new cycle whenever we recover from the bust we are going through.  How big or small a bust?  Don’t know yet but we are in one.  Just ask a grain farmer, oil producer, or transportation company.

Risk Off investing, Gold, silver, YEN, US dollar, US Treasuries

European Banks in trouble?  Italian banks, Deutsche Bank.

Dividend Cuts, we just surpassed the 2008 total in companies cutting dividends.

Currency Wars, everybody wants a lower currency so they can export deflation to your competitors and neighbors and also maybe your neighbors.

Gold sales, 2 countries are selling gold reserves, are there more to follow?

World shortage of U S Dollars.

S&P Financial Index worst performing sector of the market, down 20% since July 2015 highs, banks in trouble?

Lots to talk about.  US farmers are losing lots of money because we have the highest priced currency in the world.  Which means we need lower prices, much lower prices to be competitive with our competitors around the world.  Japan went to negative interest rates.

Farmers in Brazil and Canada are getting prices in their currencies that are higher than this time last year.


Africa is running out of U.S. dollars.  Countries dependent on commodities, especially oil are short of US dollars.  This was explained to me this spring, but I did not pick up on it until now.  This is leading to a stronger dollar and lower commodity prices in dollars.  This hurts American agriculture.  Part of the problem is not just price, as America becomes more energy independent we just don’t need to import as much oil and the dollars are not flowing out to other countries.

Nigeria in the worst shape, 90% foreign currency comes from oil.  Really wrecking economies.  Angola not far behind.

Currency controls to keep currencies from crashing, but that then puts another whole wrinkle on things.  Black market currency rates, government controls who gets dollars and who doesn’t.  Of course alternative is:

immediate devaluation

hyper inflation

social unrest

change in leadership

Of course Argentina and Swiss National Bank could not defend their currencies.

Exchange rate set by the government and not the market is not sustainable in the long run.

Chaos, hyper inflation, and social unrest is coming if not fixed soon.

Fed raising rates, dollar gets stronger, commodity bust continues, global commodity collapse, global deflationary forces, strong dollar = rest of the world going down.  Strong dollar causing world chaos.

Western world doing this to punish Putin???  Keep Wall Street in the money???  Just this economic ignorant???

US agriculture depends on exports for profits.  Strong dollar killing ag.  World deflation in US dollars, but not in local currencies.  Gold price is up when priced in Canadian dollars.  New Zealand, Australia,  South African currencies all getting devalued but giving them an export advantage against US goods.

Africa does not have enough money to buy food.  Angola, South Africa, Ethiopia, and other places are facing a food crisis.  No money to buy food with.  We need to get out in front of this or Africa is going to get ugly.  South Africa – 29 million people, Ethiopia – 10 million.

Africa selling gold??? Libya did to buy weapons.  Others also?  Commodity route continues.

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