Well, this one didn’t take long to start happening in real time. Yet another stinking mess the Republicans are leaving whoever replaces them. And don’t think you’ll see a single one of them take even a tiny bit of personal responsibility for systematically gutting the value of the formerly premiere global fiat currency. That talk of responsibility doesn’t actually ever apply to them, just to people they want to criticize.

The Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen…
[…]
“It’s too early to say the dollar will stop falling,” said Masataka Horii, head of the investment team in Tokyo for the $53.1 billion Kokusai Global Sovereign Open, Asia’s biggest bond fund. “The U.S. economy will be slow for a while.”

Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15.

America relies on foreign investors, who own more than half the U.S. government debt outstanding, to finance a deficit that New York-based Goldman Sachs Group Inc. predicts will expand to a record $500 billion for the year ending Sept. 30, after a $163 billion gap last year. Without their support, long-term interest rates would be 0.9 percentage point higher, a 2006 Federal Reserve study found.
Dollar Slide Drives Budget as Japan Shuns Treasuries, Bloomberg

More after the fold. If the thought crosses your mind: if they don’t buy our debt, how will we run a government using deficit spending? crosses your mind, good for you, that means logic is starting to win the battle, finally.

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As if the recent increases in basic food commodities globally wasn’t enough, now the dreaded new Wheat Fungus strains are devastating Africa’s wheat crops:

On top of record-breaking rice prices and corn through the roof on ethanol demand, wheat is now rusting in the fields across Africa.

Officials fear near total crop losses, and the fungus, known as Ug99, is spreading.

Wheat prices have been soaring this week on top of already high prices, and futures contracts spiked, too, on panic buying.

Experts fear the cost of bread could soon follow the path of rice, the price of which has triggered riots in some countries and prompted countries to cut off exports.
[…]
David Kotok, chairman and chief investment officer of Cumberland Advisors, said the deadly fungus, Puccinia graminis, is now spreading through some areas of the globe where “crop losses are expected to reach 100 percent.”

Losses in Africa are already at 70 percent of the crop, Kotok said.

“The economic losses expected from this fungus are now in the many billions and growing. Worse, there is an intensifying fear of exacerbated food shortages in poor and emerging countries of the world,” Kotok told investors in a research note.

“The ramifications are serious. Food rioting continues to expand around the world. We saw the most recent in Johannesburg.

“So far this unrest has been directed at rising prices. Actual shortages are still to come.”
MoneyNews.com

They didn’t say the words, but I have to suspect that, like California’s bark beetle problem, this is indirectly related to global warming, rising mean temperatures providing new flash points for problems to come from.

What’s even more disturbing is the report that Bush has cut funding for wheat rust research.
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Check these out, the first is a good overview of the current finance sector driven, government linked, bubble driven economic system we are finding ourselves increasingly mired in.

The first is from a recent article in Harper’s Magazine:

A financial bubble is a market aberration manufactured by government, finance, and industry, a shared speculative hallucination and then a crash, followed by depression. Bubbles were once very rare—one every hundred years or so was enough to motivate politicians, bearing the post-bubble ire of their newly destitute citizenry, to enact legislation that would prevent subsequent occurrences. After the dust settled from the 1720 crash of the South Sea Bubble, for instance, British Parliament passed the Bubble Act to forbid “raising or pretending to raise a transferable stock.” For a century this law did much to prevent the formation of new speculative swellings.

( I will use the familiar term “bubble” as a shorthand, but note that it confuses cause with effect. A better, if ungainly, descriptor would be “asset-price hyperinflation”—the huge spike in asset prices that results from a perverse self-reinforcing belief system, a fog that clouds the judgment of all but the most aware participants in the market. Asset hyperinflation starts at a certain stage of market development under just the right conditions. The bubble is the result of that financial madness, seen only when the fog rolls away.)

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Everybody is talking about oil, the economy, all that, but the biggest problem is going to be water:

I’ve been around the world twice. I’ve seen many cities, societies, [and] nations that disappeared because the water disappeared. China has a huge water problem. In Northern China, they’re running out of water. They know this and they’re working on it, big time. But if they don’t solve it, or if they don’t solve it in time, then China – as you put it – has failed.

By the way, Northern India has the same problem, only worse. Many places have it now. Water is becoming a huge problem worldwide. The same is true in the Southwestern United States. You know, you may have Arizona going to war with California. Some sections of Nevada, Colorado …they’re desperate there.

So it’s not just China – but water’s the main thing that worries me about China.
Jim Rogers, MoneyMorning.com

And that’s all over, this problem is the least talked about issue of all the big problems facing us. The longer we try to avoid the inevitable readjustments we will need to make as a global civilization, the worse the outcome is going to be.

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Interesting article, Deflation In A Fiat Regime?, brought up some recent articles by Doug Noland of PrudentBear.com

• Setting the Backdrop for Stage Two
• The Meaning of Stage II

Update: Noland’s April 25, 2008 column:

I am at this point more convinced than ever that only a severe crisis will instigate the necessary adjustment to the distorted and imbalanced U.S. and global economies. One is then left with the disconcerting view that Stage II will lead our authorities to exhaust all policy measures in a futile attempt to sustain the unsustainable. The obvious question: how long does the lead up Crisis Stage II last? I would today guess a number of months, although I wouldn’t at all be surprised if it was rather short. What will be the impetus for Crisis Stage II? A spike in interest rates, a run from U.S. Treasury and agency debt, a disorderly drop in the dollar, another bout of derivative and Credit market implosion, or acute global financial tumult should be considered leading candidates based on Stage II ramifications. Or it could easily be something completely unexpected, perhaps even war.

From Noland’s April 18, 2008 column:

With crude hitting a record $117 today, there is every reason to expect that newly created global liquidity will further inflate energy, food, and commodity prices generally. The Goldman Sachs Commodities index has gained 21% already this year. But when it comes to Monetary Instability, our financial markets might just prove the unappreciated wildcard. When the Fed and Washington radically altered the rules of U.S. finance last month, they placed in jeopardy huge positions that had been put in place to hedge against and profit from systemic crisis. With the end of “Stage one” arises a major short squeeze in the Credit, equities, and derivatives markets. And when it comes to contemplating the scope and ramifications of today’s “hedging” activities, we’re clearly in Uncharted Waters. It is not beyond reason that a disorderly unwind of “bearish” Credit market positions could incite a mini bout of liquidity, speculation, and Credit excess that exacerbates Global Monetary Instability – while Setting the Backdrop for Stage Two of the Crisis.