Credit Crunch Leads Nations to Barter for Food « naked capitalism

Tuesday, January 27, 2009

Credit Crunch Leads Nations to Barter for Food

No, the headline is not an exaggeration. And it demonstrates that credit conditions remain tight for many less than stelar borrowers.

From the Financial Times:

In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil.

The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.

The countries have not disclosed the value of any deals, and some have refused even to confirm their existence. Officials estimated that they ranged from $5m for smaller contracts to more than $500m for the biggest.

Josette Sheeran, head of the United Nations’ World Food Programme, said senior government officials, including heads of state, had told the WFP they were facing “difficulties” obtaining credit to purchase food. “This could be a big problem,” she told the Financial Times….

The countries’ struggle to obtain credit to import food is boosting the price of domestic crops. Ms Sheeran said that p

rices of crops in some African countries were rising sharply even as international food commodities prices had fallen from last summer.

More on this topic (What's this?)

You Read It Here First: Food will never be so cheap again (Red Hot Energy and Gold - Global..., 10/26/09)

Food Prices Rise 80% in Developing Countries (Shocked Investor, 10/26/09)

The New Survivalism (When Giants Fall, 9/7/09)

Read more on Food & Beverage, 2007 Credit Crunch at Wikinvest

14 Comments:

Anonymous says:

January 27, 2009 at 4:00 am

Takes the US$ out of the picture. Brokers too unless they want to be paid in bags of rice or have a couple of tanks sitting in the corporate parking lot.

wintermute says:

January 27, 2009 at 4:26 am

“boosting the price of domestic crops”

Is this not a market-solution in the offing? Higher prices will create a positive feedback cycle of domestic production – by incentivising producers/farmers. If local government in poor countries let the producers work (without having to pay bribes etc). Then these countries might be on the road to self-sufficiency

hIGHcastle says:

January 27, 2009 at 9:13 am

It will be interesting how the US reacts to this growing crisis, since we DID vote against the ‘right to food’ in the UN General Assembly.

http://www.dailykos.com/storyonly/2008/12/20/212722/43/694/675613

tyaresun says:

January 27, 2009 at 10:31 am

The Soviet bloc countries used to do it all the time before the fall of the Soviet Union because their individual currencies were not exchangeable.

Guillaume Lebleu says:

January 27, 2009 at 12:36 pm

Do you know if this is reciprocal barter, or non-reciprocal barter with a form of credit in a value unit like the US$. The second case would mean they are essentially creating a mutual credit currency.

john bougearel says:

January 27, 2009 at 3:59 pm

Good,

Happy to read this, this is a healthy step in getting off the dollar as the world reserve currency. And like Germany’s post Wiemar Republic, solved many problems through barter system in 1933 when it too was denied foreign credit. They worked out a solution that exchanged commodities and equip directly with other countries instead of the international banks.

We need modern day examples of barter systems working without financial intermediaries, LOCs, and such.

The “CAN-DO” message that this has the potential to send to bankers is “We don’t need no stinking banks.” The backlash is the potential to inflict “shock therapy” on these countries in some other form or fashion.

Unfortunately head of the UN Food Program Ms. Josette Sheeran is sending out the wrong kind of message with her own fears and “Can’t-Do, Can’t Live anymore if living is without you (read thieving banksters) when she said senior government officials told the WFP they were facing “difficulties” obtaining credit to purchase food. “This could be a big problem,”

She need to get a message to these heads of state pronto that obtaining credit for food is not a problem and we must stop perceiving and couching it as a problem pronto: The barter system was a perfectly viable means of exchange. But first, Ms Josette Sheeran must learn a thing or two from history to redirect her own fears about lack of credit.

Thankfully, heads of state from Russia, Malasyia, Morocco, and Vietnam seem to have some understanding of barter’s utility.

john bougearel says:

January 27, 2009 at 4:02 pm

Anon 8.30 is exactly right, govt’s like the us will certainly try to block this and spin barter into some evil it is not!

We must be prepared to slam that spin back to the mat every time it tries to rear its ugly head.

Anonymous says:

January 27, 2009 at 10:59 pm

This recession’s been rough on my neighborhood, so at my condo building we grow our own vegetables and raise our own farm animals. I have 2 pigs, 5 chicken, and 10 tomato plants. This spring I’m planting some corn in my second bedroom. Every Saturday we meet in the basement and barter. It works great for us!

Vinny Goldberg, Wz.K, M&M
(Wiz Kid, Maverick, & Maestro of all kinds of economic theory, research, and practice, some of which are legal)

IF says:

January 27, 2009 at 11:02 pm

Yes, I remember the bartering times in the East block. But they also introduced “convertible” currencies for trading rare goods, e.g. credit that was meant to be paid back in West German mark or Dollars.

Nothing wrong with bartering, but it only ever happens IMHO with inferior goods.

Anonymous says:

January 27, 2009 at 11:16 pm

IF,

Indeed, I too remember my bartering days in the Eastern Block. Money was almost worthless, but a pack of Marlboro or Kent handed under the table would open many doors. Coffee was in high demand as well. But if you really needed a big favor, a pair of American Levi’s would do the trick.

Vinny Goldberg

Anonymous says:

January 28, 2009 at 1:01 am

Yes in my travels a pack/carton of American smokes or good scotch, if you needed a big one, electronic parts to fix radios or other tech bits that are hard if not impossible to find did the trick.

Skippy

IF says:

January 28, 2009 at 1:04 am

Ha! These fools hoarding gold don’t understand that the real crisis currencies are cigarettes and bottles of vodka. (Just read about Sarajevo in the 90s. Or every day commie life when needing to grease some wheels…) Gold didn’t buy you much in the good old Soviet Union. Unlike color TVs it was available (in jewelery stores) in the 80s. On the other hand, in the wrong times (or while crossing the border) its possession might have sent you to a Gulag – where people had the chance to dig up some more. Korolyov hated the stuff till the end of his life. Golds biggest strength is also its biggest Achilles heel: it is too obviously valuable.

10 tomato plants, eh? What kind of moonshine do you burn from those?

Gloppie says:

January 28, 2009 at 8:50 am

I can’t help but notice that it is FOOD movements that are impaired, not guns, computers, cars or washing machines.

When will people finally understand that globalism doesn’t work?

Globalism is a fraud that promised renewed riches and delivered just the opposite.

Anonymous says:

January 28, 2009 at 1:00 pm

Governments can’t tax a barter transaction. Not that they should be able to but they always try. No gain to tax in a barter and it goes unreported.

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