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Red Steele
Senior Contributor

Government Embargos

Let's imagine that we, the USA, have a rival country that we have outsourced almost all of our manufacturing to. We have created an environment where our domestic producers were forced into high priced products through OSHA, unions, EPA, taxation, etc etc. and were not able to compete pricewise, and stopped producing. Even our national defense is using this rival country to make such sensitive items as missile components.

 

Now, since we owe this country a trillion dollars, and they are concerned with our monetary policies, namely inflation, they stop lending us any more new dollars, and want to exchange what they have for hard, tangible assets, and for real estate, stocks, in short, for anything that is not a us dollar. We already pay them more interest than we pay to our private citizens, but they still sense that this is a losing proposition for themselves.

 

Now, lets go to a scenario where this rival is short of food to feed their billion population. They need all the corn, soybeans, etc, that can be imported, and they can buy all of our production with their supply of dollars if we let them.

 

How long before our government would close the door on these exports, to keep our own citizens from revolting over high food prices?

 

Would we embargo grain sooner or later under a situation like this?

 

If you have forward contracts in place, would they still be valid?

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10 Replies
Palouser
Senior Contributor

Re: Government Embargos

If a government imposes an embargo, as Russia did this year, affected grain contracts are voided by an included clause. I believe the term is 'Force majeure'. Beyond the control of the supplier. Several grain companies in the Black Sea wanted the Russian government to declare an embargo by certain dates because they were upside down in their contracts, which were signed before the drought became a big issue. Then they could renogitate or be relieved of having to fullfill the contracts at a sure loss.

 

I don't see any danger of China and the US getting crosswise for the reasons you suggest. Both have too much to lose.

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jweiser1925
Frequent Contributor

Re: Government Embargos

My thinking is they would release selected CRP ground for Corn or Beans before an Embargo.

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infire
Frequent Contributor

Re: Government Embargos

The idea of them demanding repayment of our debt in the form of grain & also demand some shipments beginning now is completely believable, matter of fact wouldn't be hard to imagine wars stemming from deals like this. Put yourself in their shoes, OK we've just about sucked all the value out of their currency, they don't manufacture anything anymore, they owe us, now let's take their food & if they refuse we'll fire these missles that we built for them but hav'en't shipped yet. Your nuts if you don't think that could play out!

 

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old man
Senior Contributor

Re: Government Embargos

Releasing CPR ground is next year. An embargo can be now

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redrotor
Veteran Contributor

Re: Government Embargos

It's a ficticious example. I don't believe 'they' make our missle parts. We're not that dumb. If they did fire missles at us, we still have missle defense systems. We didn't give that to them too, did we? We do have alot of debt with them, but we pay the interest so we're a good investment. We aree also there BIGGEST buyer of thier exports so why would they want to suck us dry by taking our food? They're not that dumb.

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Palouser
Senior Contributor

Re: Government Embargos

Completely unrealistic.

 

Stability and trade is in China's interest.

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infire
Frequent Contributor

Re: Government Embargos

Ficticious example absolutely, atleast I hope, but isn't it possible we aren't the only ones with missle defense systems. Anyway I don't know of any lenders who are tickled pink if you only pay the interest on debt. Embargoes have started stuff in the past, just stuff to think about!

 

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centralillinois
Contributor

Re: Government Embargos

While Obama was in the Illinois Senate for  eight years, he spent a lot of time driving through a very large cornfield from Chicago to Springfield.  He didn't get to his current address by making mistakes.  He knows how  his  bread was buttered in  Illinois.  And when he was in the U.S. Senate, he voted with Illinois farmers in mind. 

 

If anyone in  his administration uses the term "embargo", Grassley and Durbin will be on  the phone reminding Obama of his decade in Illinois.  An embargo won't happen. 

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ncil
Veteran Contributor

Re: Government Embargos

Were any of you guys farming during the Carter embabgo.

Took decades to prove to our export customers that the US was a reliable supplier of ther food needs.

 

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