Agflation

Agflation is the inflation by agricultural commodity prices, i.e. by food.

For some time now, we have been experiencing a rise in food prices and food shortages. The food prices are currently at an all time height and production is slowest since the Green Revolution. Still, farmers produce more than twice the minimum needs for most people on the world.

Why does the price of food rise?

Normally, the main reasons for a rise in food prices are that not all food is in right place available for everyone, that many people can’t afford food, that a significant part of produced food is used for biofuels and government mandates.

The food prices are usually set by the amount of food relative to the population and the change in supply and demand over time.

What is said to have caused the current agflation are supply shocks. These include natural disasters like drought and large scale fires like in Russia, China and Australia and floods like in Canada and Pakistan. Food supplies have been affected severely by these disasters, nevertheless they are not the only supply shocks. Factors outside agriculture like a fall in the dollar have made it cheaper to buy from other countries. Panic buying and trade bans have also contributed to the supply shocks in the food market that is causing agflation over the world.


This increase in food prices supposes greater problems for those people living in the developing world who might face starvation due to food shortages and high food prices. 

Unrest in Egipt, unrest in the oil price

In the last weeks we have seen many disruptions and anti-government protests in Egypt. This has had many consequences on the world's economy. However, I feel it is important to point out that it would be frivolous  to go about this topic looking only at the economic impact.

The events occurring in Egypt at the moment are of a huge political and social impact. It is, in my opinion, highly remarkable how the use of the internet and social networks has aided in these disruptions in the government policies and has gathered people to fight for their freadom.

Going back to the economic part of this conflict, we can see its effect  mainly on the oil prices. The oil price has risen twice above $100, hitting a two-year high. The slowing down of the transport on the Suez Canal and the risk of this even closing are of an immense importance to the economy and our everyday lives. Every day, about 2.5 million barrels of oil pass through the Canal, and the fear about this has caused a downturn in the oil market.

On a more local aspect, the Egyptian stock market went down 10 % - the largest one-day drop in some years. Some rating agencies have also downgraded Egypt, showing again the fear that is raised by these disruptions in the economy.

Inequality and income distribution

Income distribution is how a nation’s total economy is distributed amongst its population.

The distribution of income within a community may be represented by the Lorenz curve.

The Lorenz curve is closely associated with measures of income inequality, such as the Gini coefficient.

The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It is commonly used as a measure of inequality of income or wealth.Worldwide, Gini coefficients for income range from approximately 0.23 (Sweden) to 0.70 (Namibia) although not every country has been assessed.

Davos 2011

The World Economic Forum  is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas

Their Annual Meeting in Davos-Klosters is perhaps best known to the world at large simply as "Davos".

This year the annual meeting will convene under the theme Shared Norms for the New Reality.

"We are now living in a completely digitalized world and a completely globalized world, so we have to find some new mechanisms and values to deal with this post-digitalized and post-globalized world," Klaus Schwab, WEF founder

Are people better than banks?

Social lending Web sites pair willing lenders with entrepreneurs and other cash-strapped borrowers.

The sites charge fees to broker and service the loan--around 1% from the lender and 2% to 4% from the borrower--as well as penalties for late payments (to cover the costs of chasing deadbeats).

The Internet enables a new infrastructure for participation, reducing the transaction costs of matching the wants and needs of people and giving them the opportunity to coordinate.

The opportunity of wealth - Microcredits

What are they?

Microcredits are small amounts of money loaned to poor people in developing countries that do not have the conditions for a usual credit.

These loans are given to people in extreme poverty in the compromise that they will start a small business and be able to pack back a small amount of interest rate.

What for?

The purpose of these credits is to stimulate the growth of businesses in these countries and thereby potentiating the growth of the economy. These credits are supposed to engage self-employment and therefore allow them to create an income, generate wealth and help to escape the extreme poverty.

 “Give a man a fish and he will eat for today; teach him how to fish and he’ll eat for a lifetime”

Problems?

• People say that it isn't as successful as they thought it would be
• Issuers give them out for a profit, not the greater good
• They put poor people in debt 

PPP (Purchasing Power Parity) or the Big Mac Index

The Purchasing Power Parity allows you to compare prices of goods or services in different countries taking into account exchange rates. It is usually used to compare the standard of living of different countries.

The Big Mac Index is an example of this. It compares the price of a Big Mac around the world. The price varies according to some local factors.