Over the years I've mentioned some of the major failings of the U.S. intelligence community, from the failure to foresee the rapidity of the collapse of the communist governments in Eastern Europe to the round-up, torture, and murder of virtually all the human assets the CIA was running in China.
And the Chinese hack of the U.S. Office of Personnel Management starting in 2013, exposing the personal information of 20 million current and former employees, including those with highest level security clearances. That was actually a joint CIA/FBI failure. As was the Soviet development of the H-bomb.
And....well, it is a very long list.
Here's one more instance. the memory of which was triggered by wheat trading decisively over $8.00 this morning (821-2 +18-2)
First up, some background from IEEE Earthzine, October 28, 2015:
The ‘Great Grain Robbery’ of 1972
In 1972, the U.S. and the U.S.S.R were deep in the middle of the Cold War, but that did not stop the daily business of trade among nations. In fact, given the dicey agricultural policies and poor weather of the Soviet breadbasket, crop failure was not unusual. Soviet agricultural trade representatives often turned to the foreign commodity markets to make up the difference.
In July of 1972, the Russians began buying up foreign wheat, purchasing 10 million tons from U.S. brokers by August. Richard E. Mooney’s economic analysis in a 1975 issue of The New York Times states that despite receiving reports of crop failures in the Soviet Union and elsewhere, the U.S. government failed to appreciate the significance of the global grain shortage and the effect it might have on the U.S. economy. As federal grain subsidies continued to favor bargains for the Soviets buying American wheat, the price of domestic grain rose sharply, causing a food price crisis back home. According to John A. Schnittker in a 1973 paper for the Brookings Institution, the U.S. government wasted $300 million in public funds and lost the same amount in potential revenue by unwittingly subsidizing the Russian wheat purchases.
As it turned out, the shortage in Russia was part of a worldwide shortage in grain production that almost wiped out international stockpiles. Clifton Luttrell wrote in the Federal Reserve Bank of St. Louis Review in 1973 that the U.S. government did not recognize this as it was happening because the government did not have a big-picture view of agricultural output worldwide.
At that point, sophisticated agricultural monitoring was only in its infancy. According to Gary Weir of the National Geospatial-Intelligence Agency, despite using satellites to photograph grain-growing areas, the resolution was not clear enough to reveal much information on the health of crops, leaving the probable outcomes of Russian harvests opaque to U.S. intelligence. Afterwards, the debacle was nicknamed the “Great Grain Robbery.” To prevent another such calamity, U.S. intelligence began looking at earlier technological research....
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Not only did the Americans supply the wheat the Soviets desperately needed but they paid the grain companies a $300 million subsidy and extended $750 million in credit for the purchases.
And because the Kremlin was able to keep the magnitude of the disaster from becoming common knowledge they were able to make the purchases in a market that did not have access to all the relevant information needed to establish a clearing price.
Next up, the St. Louis Fed paper referenced above:
IN JULY and August 1972, the United States sold tothe Soviet Union about 440 million bushels of wheat for approximately $700 million, more than the total U.S. commercial wheat exports for the year beginning in July 1971. The sales were equivalent to 30 percent of average annual U.S. wheat production during the previous five years and more than 80 percent of the wheat used for domestic food during that period. The sales involved a series of subsidized transactions following an agreement whereby the U.S. Government made available credit of $750 million to Russia for the purchase of grains over a three-year period.1 Previously, the Russians had purchased only a relatively small quantity of U.S. farm products.
Immediately following the sales announcements, the domestic price of wheat began to rise, and within a few months the prices of feed and food grain, soybeans, and livestock turned upward and all continued to rise at a high rate during most of the next twelve months (Chart I). By year-end food prices had also turned sharply upward. The price of wheat almost tripled during the year ending in August 1973. The prices of corn and soybeans more than doubled, and the prices of steers, hogs, and broilers rose 55, 102, and 153 percent, respectively (Table I). The wholesale price index of all farm prodncts rose 66 percent, and the wholesale price of food increased 29 percent....
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As the paper points out, the food inflation had quite a few reasons for exploding, but the fact the negotiators on the American side were flying blind due to the lack of intelligence was a major factor.
note on dollar figures: the BLS inflation calculator says a dollar in January 1972 was worth as much as $6.73 was in October 2021. You can safely double and maybe triple that to get buying power comparisons meaning the subsidies to the grain companies were not worth $2.02 billion but more like $4 to 6 billion.
ditto for the current value of the credit extended.
Not quite the quote probably misattributed to Lenin: "The capitalists will sell us the rope with which to hang them." but eerily close to:
"The Oxford Dictionary of Quotations (5th edition) points out that 'Remembrances of Lenin', by I. U. Annenkov, includes a manuscript note attributed to Lenin: 'They [capitalists] will furnish credits which will serve us for the support of the Communist Party...."
