Friday, January 04, 2008

Inflation, Food, Energy

While oil does have a few disadvantages -- 1) it's not renewable, and 2) it seems to be primarily located under dictators -- it does have this one distinct advantage: we don't use it for much else other than fuel. Most importantly, we don't eat it. But we do eat corn. And we eat things that could be grown in places where we can grow corn. Thus, it is probably a bad idea, in a world with 6 billion people whose middle class is growing with the increased economic freedom in China and India, the world's two most populous countries, to turn our food into vehicle fuel. Yet, that is what the U.S. government is encouraging with subsidies and various energy bills. The results? The Financial Post reports that the result has been a 6.5% rise in food prices overall this year, with a 22% rise in raw food prices. Wheat prices this year have gone up 92%, and corn prices have gone up 44%. The reason corn has not gone up in price as much is because of the subsidies (meaning the true price of corn is hidden, since you are paying for it with your taxes), and because of the subsequent increase in acreage dedicated to corn. Yet, despite these two factors, the price has gone up significantly. The higher price of corn affects the price of meat, since it is a feed grain, and it also strongly affects the price of food south of the border -- in places where people really do not need to be spending more money on food. The wheat prices are going to have more of an effect here in the U.S., and that price has almost doubled. In a year. In the meantime, oil rose to $100/barrel. With this much inflation in food and fuel, someone is lying to us about the inflation rate. And in the meantime, the dollar is crashing . . . What have they been doing to us over there in Washington?
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