How soon will the US introduce export quotas?
All over the world, from Russia to Argentina, governments' response to agflation has been uniform: limit the export of grain or whatever agricultural commodity the country in question happens to produce. This goes against the textbook, officials quietly acnowledge, but it's one thing to read the Wealth of Nations in your study over a cup of coffee with a sandwich, and quite another to watch food riots from out the window of your car on your way to a policy meeting. When a shortage becomes real enough, governments always introduce quotas and rationing, even if it makes Adam Smith turn over in his grave. So it's only a question of price point at which the US government will have to put a limit on exports. The repercussions of this move will be quite serious. First, if if happens, importing countries could easily see the price of food double or triple. Which, in turn, should ruin some economies, devalue some currencies and put an end to some economic growth stories. Secondly, we'll likely see a global boom in agricultural equipment and irrigation projects, and possibly, some wars over water supplies. Third, OPEC countries, which have lots of oil but very little grain, will feel an urge to retaliate with oil export quotas, which will be another fascinating story to watch. And yet I don't see how the US can avoid such measures for too long. Food inflation is the nastiest kind of inflation, and, besides, the timing could not have been worse: just when landlords need a rent increase to turn the ATM back on, it turns out that renters have spent everything on groceries and the rental check fails to arrive. And that would be really nasty for everyone. No imputed rents - no appreciation, no HELOCs, no economic expansion at zero cost as you enjoy the HELOC-driven demand without having to pay wages. At some point the pressure to switch from the "invisible hand" to old-fashioned regulation will become too irresistable.