If Inflation is not the first topic that comes to mind when you read about food fraud, you are not alone. There is no immediate, intuitive connection between recent sensational headlines about horse meat being found in so-called beef lasagnas and the concept of price inflation.
But in fact, it is Price Inflation that is causing food fraud.
Everyone has experienced shrinking package sizes where price is maintained (quantitative easing), offsetting higher input costs.
However as per this recent Zerohedge article, quality and ingredient substitutions are now the rage:
We’ve had an endless series of products whose ingredients have been cheapened in order to maintain the price. Consumers won’t be able to taste the difference, the theory goes.
As WealthCycles readers know, although the term “Inflation” is commonly used in referring to rising prices, the true meaning of economic inflation is inflation of the Currency Supply. Importantly, we detail in Semantics Deception Illustrates Power of Words, that when you control the language, you control the argument.“Undue expansion or increase, from overissue; — said of currency”is the pre-2003 Webster’s Dictionary definition. Adjunct scholar Frank Shostak at the Mises Institute explains the cause and effect:
… the essence of Inflation is not a general rise in prices but an increase in the supply of money, which in turns sets in motion a general increase in the prices of goods and services.
A relatively benign example of “food fraud” is the steady, ongoing downsizing of quantities contained in standard packaging, reported a year ago by The New York Times, such as the can of green beans that used to contain 16 ounces but has eroded to 14.5 ounces over the years, or the 16-ounce package of pasta that now contains 13.5 ounces.
Five or so years ago, Ms. Stauber bought 16-ounce cans of corn. Then they were 15.5 ounces, then 14.5 ounces, and the size is still dropping.
“The first time I’ve ever seen an 11-ounce can of corn at the store was about three weeks ago, and I was just floored,” she said. “It’s sneaky, because they figure people won’t know.”
While intended to maintain profit levels without making it obvious to consumers they are paying more, package downsizing is not, for the most part, true fraud: the amount of beans contained in that can is clearly labeled. But labeling abuses are becoming increasingly common. Consider this qualitative easing. The National Consumer League recently filed a formal complaint with the U.S. Food and Drug Administration asking that four brands of lemon juice be taken off the market for mislabeling their product.
The four products tested by NCL, each of which contain only a small amount of real lemon juice, are:
· “NaturaLemon 100% Lemon Juice from concentrate – Natural Strength” contains only about 35 percent lemon juice.
· “Lira 100% Lemon Juice from concentrate” contains only about 25 percent lemon juice.
· “Lemon Time Lemon Juice from concentrate” contains about only 15 percent lemon juice. The product states on its front label, “Contains 100% Lemon Juice with added ingredients.”
· “Pampa Lemon Juice from concentrate” contains only about 10 percent lemon juice. The product states “Made with 100% Juice.” The label also includes the statement “Natural Strength.”
Consumer advocates believe that these producers water down their products to lower production costs and increases profits. In the case of lemon juice, recent weather conditions have led to variability in the supply of fresh lemons —and lemons being harder to get has given unscrupulous producers incentive to dilute their products with water and add citric acid and sugars to compensate for flavor.
The label of NaturaLemon illustrates just how bad the problem is. The label indicates that the bottle contains the juice of 30 lemons! However, doing the math, the bottle is likely made with only the juice from 10 lemons. The incentive to cheat is obvious.
Other kinds of food fraud are much more serious, even dangerous, as with Chinese-produced dog food that resulted in pet deaths. Human health also is at risk, according to an April 2012 report by SmartMoney.com:
Because they’re ingested, fraudulent foods carry more significant health concerns than other fakes. Consumers with allergies could have a reaction, says Amy Kircher, associate director of the National Center for Food Protection and Defense. Some substituted items aren’t meant for human consumption, and others contain toxic ingredients like lead or melamine.
Ultimately it is the pressure on prices that is causing producers to engage in fraud in order to keep costs down. As the amount of currency increases, the value of each unit of currency drops, and it takes more currency to buy products, i.e. Price Inflation.
Producers have a vested interest in keeping costs as low as possible in order to maintain market share, as Zerohedge reports.
So what is food fraud anyway? Well, it’s sort of what you would expect. It’s when companies label food one way, but the truth turns out to be completely different. I have been predicting an escalation in this trend for years, since it was obvious that as inflation led to increases in food prices, companies would resort to this type of behavior to keep margins inflated.
And there is the connection. In order to maintain their edge over the competition, producers substitute horse meat for beef—what the consumer didn’t know wouldn’t hurt him. No one would be able to taste the difference, the horse meat industry was in a significant depression so prices were attractive and, voila! Consumers continued to enjoy their frozen lasagna at prices they could afford. No harm, no foul, right? Of course, once the secret recipe leaked out, there was an inevitable dive in purchases of frozen lasagna, not only from the offending manufacturer but from all other lasagna-makers as well.
The trend is likely to continue as food manufacturers and retailers stretch to be the last to adjust to steadily rising prices. According to a January ABC News report, citing the non-profit watchdog organization U.S. Pharmacopeial Convention, or USP, incidents of food fraud are up by 60 percent in a year.
Although numerous government agencies are tasked with policing the food supply, one has to wonder whether their diligence is waning. After all, governments and central banks also have a vested interest in denying that price inflation is occurring. The same deceit that allows manufacturers to fool the public while keeping prices lower than they would otherwise be allows the watchdogs of the economy to continue denying that food price inflation is rearing its ugly head.Courtesy: wealthcycles