Our Daily Bread

By Patrick
The NYT reported on the price of rice last week:

The price of rice, a staple in the diets of nearly half the world’s population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest.

The Moderate Voice and Dave Schuler commented upon the article, and Krugman devotes his column today to the rising price of grain worldwide:

Governments and private grain dealers used to hold large inventories in normal times, just in case a bad harvest created a sudden shortage. Over the years, however, these precautionary inventories were allowed to shrink, mainly because everyone came to believe that countries suffering crop failures could always import the food they needed.

This left the world food balance highly vulnerable to a crisis affecting many countries at once in much the same way that the marketing of complex financial securities, which was supposed to diversify away risk, left world financial markets highly vulnerable to a systemwide shock.