–Valuations are out the door for now. If small brokers that offered their clients leverage keep collapsing and liquidating their portfolios, you’d have to be a daredevil or playing with someone else’s money to be a buyer.

–It’s not that there’s no value in the market. It’s that there are so many sellers. The trouble is you just don’t know how much more forced selling there’s going to be. With so much stock being dumped on the market, it pays to be very discrete.

–A quick word about GE before we move on. GE is a world-class jet engine maker. It’s also a shameless money-lender.

–GE’s commercial finance business in Australia has a much higher profile than its business in the States, which goes under a different name altogether But the company’s dirty little secret is getting out: it’s really a financial company masquerading as an industrial.

–The company generated huge earnings during the credit boom as a commercial lender, not an industrial manufacturer. GE reported a double digit decline in first quarter earnings, and promptly blamed the whole thing on Bear Stearns. But if GE’s CEO Jeffrey Immelt were being candid with investors, he would admit that the problem isn’t with Bear Stearns, but in the performance of GE’s financial segments. Don’t take out word for it. Look below.

GE Summary of Operating Segments (unaudited)

Source: Edgar Online

–You can see that GE’s two big financial segments, Commercial Finance and GE Money, showed a twenty per cent and a nineteen per cent decline in profit in the first quarter, respectively. Earnings in the infrastructure business were actually up.

–GE used to be company that made money by making things. Now it’s a company that loses money by lending money. It’s a pretty good symbol for much of what’s wrong about American capitalism. The truth is, it should probably be two companies, not one.

–While the share market digests the news of collapsing brokers and falling financial profits, the grand poobahs of the world’s economy are wringing their hands in worry. What’s keeping them up at night? The three Fs, each its own kind of crisis: food, fuel, and finance.

–”The World Bank met on Sunday faced with a mounting food price crisis that has sparked deadly unrest in developing countries, underscoring the urgency of fighting hunger and poverty,” reports Channel News Asia.

–How urgent, you ask? The Prime Minister of Haiti was sent packing this weekend by crowds protesting soaring food and fuel prices. We don’t even know who the man is but reckon he won’t be the last public official to be ridden out of town on a rail before this current crisis is over (and it may not be any time soon).

–As usual, it’s the people at the margin (whether lending or with food) that are affected first when surplus turns to scarcity. Despite all the daily signs of abundance here in Australia, let us not forget that there are about four and half billion people on the planet who have little margin for error in their daily lives. If food prices go up, many of these people go hungry.

—World Bank President Robert Zoellick, doing his best impersonation of Franklin Delano Roosevelt, wants a “new deal” for global food programs. He’s asked richer nations to contribute US$500 million immediately to help get food to poorer nations.

–IMF President Dominique Strauss-Kahn was less pragmatic but more rhetorical. Wrapping up his organisation’s annual spring meeting, he said that, “Food prices, if they go on like they are doing today … the consequences will be terrible…Hundreds of thousands of people will be starving…As we know, learning from the past, those kinds of questions sometimes end in war.”

–People often talk about resource wars being a common feature of the coming century (or decade). But it’s usually oil and energy they’re talking about, not rice and wheat. Food is fuel for the body (we’ve been watching the Biggest Loser). If you don’t have access to cheap calories, what good is cheap fuel?

On the edge of this fertile farmland, and in the middle of one of the biggest booms in farm prices in history, the politicians in Buenos Aires have achieved what might have seemed nearly impossible – they have created a crisis in the agricultural sector. “Day 20. The strike continues: farmers reject government’s nine new initiatives,” says the headline on La Nación.

But farm problems are not limited to the pampas. Thanks to globalisation, they’re sprouting everywhere. “Fears grow over rice crisis,” is the front page story at the Financial Times. “Silent famine sweeps the globe,” reports WorldNet Daily. Thirty-three nations face “unrest” because of food shortages, says the IMF.

All over the world, food fights are breaking out. Not because there is too much food or too little, but because it has gone way up in price. Of course, you could put that another way: the paper money in which food is priced is going down faster than usual. There’s no less food than there was five years ago. But there is a lot more paper money. Modern central banking was invented so that we should have paper money – and have it in abundance. Now, we have so much that it is causing food prices to soar.

But food is hardly in a class by itself. When one bubble pops, the authorities immediately begin pumping up another one. After the dotcom bubble deflated in 2000-2001, up came even bigger bubbles in residential housing and the financial industry. Now, both housing and finance are losing air. But the central banks are still pumping hard. Where’s the air going? Apparently, into commodities. In other words, worldwide inflation of food prices is a monetary phenomenon, as Milton Friedman might put it, not an agricultural one.

To show you the scope of the phenomenon, we pull out a copy of The New York Times from 19 October, 1896. There, it is recorded in black and white that the average wheat price was about $1 a bushel – in gold – during the previous 20 years. An ounce of gold would buy you 20 bushels of wheat. Today, you can buy a bushel of wheat for about $12, which means an ounce of gold will buy about 75 bushels of wheat. In terms of real money – gold – the price of wheat has gone down for more than 100 years. In other words, however fast farmers have added to the world’s wheat output, central banks have outdone them, planting far more acreage in paper money.

And now that governments have caused a crisis, they are hard at work making it worse. In Argentina, the farmers are few; city dwellers are many. Argentina’s Peronistas can do the maths. They make out the farmers – historically patrician landowners with large holdings – to be greedy and insensitive. The politicians imposed a 49% windfall tax on foreign sales. The measure should lower prices for Argentine consumers and raise money for the government, they reasoned. It seemed like a no-brainer. That is, until the Gauchos blocked the roads into Buenos Aires and threatened to starve the city.

In America, the maths is different, but the result is equally imbecilic. There aren’t many farmers out on the prairie, but in Washington there are more farm-state US senators than pigs. They push and shove up to the taxpayers’ trough to get huge subsidies for their hometown campaign donors – lately, in the form of bio-fuels. Corn-fed ethanol may make no sense in environmental or energy terms, but it lubricates the big wheels of national politics. In the event, it takes a third of the US corn crop out of the food chain and puts it to use in the drive train – further driving up grain prices. With bread prices on the rise, politicians feel compelled to intervene. And every intervention falls upon the crops like a cloud of locusts.

Last Friday’s 10% spike in rice prices came as governments moved to corner the market. Three billion people, many of them with very marginal incomes, eat rice every day. The price of rice rose 50% in the past two weeks, causing Thai farmers to sleep in their fields to protect their harvests, while the Philippines posts armed guards at its granaries. Vietnam, India, Kazakhstan and China have all restricted foreign sales. The exporters are coming under pressure to export less – in order to lower prices at home. The importers, meanwhile, have no choice but to try to get as much of it as possible, as soon as possible, in order to head off shortages. Result: a run on rice.

India’s trade minister warned hoarders: “We will not hesitate to take strong measures…” Of course, hoarding is exactly what a smart family should do. Most likely, there will be runs on other commodities, too – and then a run on gold itself. People will want something real… something sure… something with which they can buy rice, without having to worry about it doubling in price two weeks later. That something, traditionally, is gold.

Hoard it now, while you still can.