World food prices will fall from current peaks in the coming years but will remain “substantially above” average levels from the past decade.

The world’s poorest nations are most vulnerable — particularly the urban poor in food-importing countries — and will require increased humanitarian aid to stave off hunger and undernourishment, a joint agricultural outlook by the Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization said.

High oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuel production and speculation have sent food prices soaring worldwide, triggering protests from Africa to Asia and raising fears that millions more will suffer malnutrition.

Meanwhile, in the US the core US inflation rate or Producer Price Index (PPI) rose 0.4% in April, double the increase forecast by economists.

This puts the core US inflation rate up 3% in the past year, the biggest year-over-year rise since late 1991.

“Since the beginning of the credit crisis last summer, Fed policy has been purely inflationary,” says Bill Bonner in The Daily Reckoning, “intended to convince people that they had more money and credit than they thought…and that they should spend it and invest it. But that policy can’t work forever. Eventually, consumer prices rise sharply. Then, the game is over…the Fed has to ‘lower inflation expectations’ before it can inflate again. The hocus pocus only has a positive effect, in other words, as long as people are misled…once they catch, the jig is up.”And on a global scale, “rising raw material prices, in particular rising food prices, are now causing real hardship and what represents a cause for shoppers in developed economies to grumble is a matter nothing short of life and death for the millions less fortunate around the world,” says Money Week editor Merryn Somerset Webb.

For example, a CNN.com study found that the price premium you pay for a hybrid over a gas guzzler wouldn’t be made up by cheaper gas prices for up to five years. And that’s after including government incentives.

Some of you wrote in and pointed out that economics weren’t everything. That becoming green is more of a social responsibility. It’s something you do to make sure your kids have a nice, clean Earth to live on when they grow older.

And I couldn’t agree more. But the responsibility side isn’t what I’m trying to show everyone. What I’m trying to point out is that the economics of becoming green, for the most part, don’t yet make sense.

Sure, companies can plant a lot of trees on land they’ve purchased. Sure, they can pay just a little bit more to switch to more renewable packaging materials, etc… But the things that would make the greatest impact – fuel saving technologies, advanced water conversion techniques, and more renewable solutions – come at a cost to the company.

Nine times out of ten, the company won’t want to kill their margins for the sake of going green, unless of course they are trying to improve their image (Google, here’s looking at you, kid). And there’s nothing wrong with having a good public image. But that doesn’t mean that the economics of the solution make any more sense.

With that said, I believe that over time this will change dramatically. And once that change happens, there will be a lot more money to be made. Let me explain…

The Three-Wheeled Car I Need Right Now

The other day I was going through one of my favorite websites, www.autobloggreen.com. While on the site, I ran across a very interesting ride.

It’s by a company you’ve probably never heard of, Venture Vehicles. It’s a three wheeled vehicle, which is basically a roll cage on wheels (meanings it’s pretty safe).

When you go to make a turn, the vehicle actually tilts 45 degrees in the direction you’re turning. You can see a video of the venture one in action here.

That’s not the best part, though. This three-wheeled, electric-only vehicle, goes 0-60 in seven seconds, can reach top speeds of over 75 MPH (making it highway capable), and can travel up to 120 miles, all on battery. When you get home, just plug it in and it’ll be fully charged in six hours (on a 120v plug, if you use a 240v, it’ll be much faster).

And if you want to go further, you can get their hybrid version which goes over 350 miles on about four gallons of gas (That’s a phenomenal 90MPG!) and can reach top speeds of over 100MPH. Now, this vehicle won’t be in production until next year. Which is sad because I want one today. Why?

The economics are starting to make sense.

You see the car I drive right now is a six cylinder. It gets great fuel economy on the highway. But in the city, where I do most of my driving, the fuel economy is horrendous. At current gas prices, I’ll spend about $280 this month filling up.

That Venture Vehicle I showed you earlier will cost between $20,000 to $25,000. If I put ten percent down and get a decent interest rate on a five year loan, I’ll pay something like $320 – $350 every month.

This is only a little more expensive than it costs to buy gas – today. But next year, gas might be $5 a gallon. At that point, it’ll cost me $340 to fill up my tank. Instead of filling up my tank and polluting the air, I could own one of these cars and pay a little more on electricity every month to recharge it. Sounds like a pretty good deal.

Now, here’s the thing – cars like these are set to flood the market in the next year or two. For example, Tesla Motors (a Silicon Valley startup) will release their $98,000+ all-electric roadster sometime this year. That doesn’t include a host of other manufacturers like Aptera Motors and Fisker Automotive. As gas prices keep rising, these electric vehicles will become more and more popular.

And the big tipping point is affordability. If consumers can obviously save money buying one of these, they’ll do it.

This goes for the entire industry. Solar panels won’t be accepted en masse unless the economics of it makes sense. Sure, adoption is growing. But it won’t be mainstream until everyone can afford it. The same goes for wind power.

This brings me to ethanol – another alternative that doesn’t make economic sense. In this case, ethanol makes no real sense at all. The argument is that its carbon neutral. But most people end up paying more to fill up with E85 (85% ethanol). And to make matters worse, they get worse gas mileage. So what sense does it make to fill up with ethanol? I wouldn’t do it. And many people don’t.

Of course, upbeat stock market predictions is what CNN and the rest of the mainstream financial press are all about — making Americans feel that all is well in the world, that the stock market and the US economy are ultimately benign forces, always and forever about to pick up.

Oddly, given some of the more pessimistic and, dare we say it, more informed predictions about the state of the US economy, CNN’s has made every effort to put a positive spin on its market predictions, assuring worried Americans that “it’s a certainty that the economy, the housing markets and the stock market have to bounce back sooner or later.” The piece continues:

If you could see that rebound coming, not only could you rest easier about everything from your job to your retirement, you could move forward confidently on all those financial plans you’ve put on hold until the way seemed clear.

You could think about trading up to a bigger home or downsizing to a place that better suits your needs. And even though you’ve stood unwavering by your investment strategy as the stock market tumbled — and you have, haven’t you? — you could feel good once again about putting your money in something besides a chickenhearted money-market fun.

Trading up to a bigger home? Now, there’s a truly contrarian strategy: getting more up to your neck in debt in the midst of a housing meltdown.

Two upbeat CNN predictions to watch out for: a summer rally for the US stock market and job losses will stabilize.

Positive sentiment is not just confined to CNN, however. This from Gary North in The Daily Reckoning:

“I monitor a chart on a website that almost no economic forecaster pays any attention to whatsoever. This chart has indicated a remarkable shift toward economic optimism. It has indicated that the American economy will not fall into recession this year. This shift has taken place in the last three weeks.

“The problem with the chart and the site is that, by design, no explanations are ever offered. There is no theory of why the economy will or will not fall into recession. That is because the site is a gambling site. You pays your money and you take your chances.

“The site is Intrade. It is a web-based site. It is run from Dublin. If the owner ever sets foot on U.S. soil, he will be arrested, tried, convicted, and sent to jail. But he can afford to stay out of the United States. He is a very rich bookie.

“The site allows gamblers to make bets on future events to take place or not take place during a defined time frame. One of these listed events is recession in the U.S. in 2008. As recently as mid-April, betting was over 70% that there will be a recession this year. Then, without warning, the odds turned the other way. Today, the odds are 27%.

Attorney General Michael Mukasey warned Wednesday that organized criminal networks have penetrated portions of the international energy market and tried to control energy resources.

In a speech at the Center for Strategic and International Studies in Washington, he said similar efforts have targeted the international financial system by injecting billions of illicit funds to try to corrupt financial service providers.

CNN’s account is incredibly thin on the details of who might be behind all of this, but Reuters says Mukasey “cited recent cases, many with links to the former Soviet bloc.”

He cited Semion Mogilevich, indicted by the United States in 2003 and arrested in Russia this January, who was suspected of exerting influence over “large parts” of the natural gas industry in the former Soviet Union.

The groups launder billions of dollars through U.S. financial institutions, and invest profits in publicly traded companies. They also “exploit the Internet,” by running scams on eBay, flooding in-boxes with e-mail spam and laundering money through “virtual worlds” such as Second Life, Mukasey said.

Suspected arms traffickers such as Viktor Bout, a Russian national arrested in Thailand in March, provide support to terrorists, officials said. But they said there are no signs of close ties between organized crime and the “core al Qaeda” organization.

The Justice Department’s report that Mukasey trotted out with his speech lays out eight threats posed by this shadowy network:

THREAT 1: International organized criminals have penetrated the energy and other strategic sectors of the economy. International organized criminals and their associates control significant positions in the global energy and strategic materials markets that are vital to U.S. national security interests. They are now expanding their holdings in the U.S. strategic materials sector. Their activities tend to corrupt the normal workings of these markets and have a destabilizing effect on U.S. geopolitical interests.

THREAT 2: International organized criminals provide logistical and other support to terrorists, foreign intelligence services and governments

THREAT 3: International organized criminals smuggle/traffic people and contraband goods into the United States.

THREAT 4: International organized criminals exploit the U.S. and international financial system to move illicit funds.

THREAT 5: International organized criminals use cyberspace to target U.S. victims and infrastructure.

THREAT 6: International organized criminals are manipulating securities exchanges and perpetrating sophisticated frauds.

THREAT 7: International organized criminals corrupt and seek to corrupt public officials in the United States and abroad.

THREAT 8: International organized criminals use violence and the threat of violence as a basis for power.

Excuse me, but except for maybe the human trafficking part and the uber-vague “targeting of U.S. victims and infrastructure,” which of these activites does the U.S. government not engage in itself? Go back over the list and think about it. And that last item is really rich. What’s the nature of government, after all, except a legal monopoly on the use of force?

A blogger at the Financial Times site treats Mukasey’s “long and thoroughly alarmist speech” with the derision it deserves:

“The general theme is that Mukasey, his law enforcement colleagues, and the US population at large face a global conflux of terrorists, mobsters, east Europeans and LatAm revolutionaries that puts historical threats like the Mafia into the shade.”

It reminds me of an article I read in U.S. News and World Report, oh, probably 30 years ago, describing how terrorist acts from the Middle East to Northern Ireland to South Africa were all part of a sinister nexus that probably led straight to the Kremlin, though of course that couldn’t be proved. It made quite an impact on an impressionable 12-year-old. Thank God I grew up, even if Michael Mukasey hasn’t.