Food Scarcities and High Food Prices are Government-Made Crises

Posted by PITHOCRATES - July 21st, 2013

Week in Review

The world’s population is growing.  And it’s threatening our food supplies.  Or so say the experts on population.  But what’s interesting is that the populations in the advanced economies of the world which are generally food exporters have fallen.  Apart from the United States these countries are having so few babies that they won’t be able to replace their parent’s generation.  So these countries will see a decline in population.  Yet the world’s population is growing.  So who’s growing the world’s population?   And threatening the world’s food supplies?

Primarily the less-advanced economies.   The food importers.  Like the countries of Africa.  Afghanistan.  Yemen.  And the Palestinian Territories.  Many of which have the lowest life expectancies.  And the highest child mortality rates.  So, the countries that can feed the world aren’t having enough babies to replace the current generation.  While the countries that have the highest fertility rates are also suffering from the shortest life expectancies due to those high child mortality rates.   So it’s hard to see where the food crisis is.

Once upon a time food was so scarce that famines were commonplace.  A lot of wars were fought to prevent famine.  One of the reasons Adolf Hitler invaded the Soviet Union was for food.  To make Europe’s breadbasket, the Ukraine, a part of the Third Reich.  Today the advanced economies have so much food that they’re making gasoline out of it.  So if there is any food shortage it must be manmade.  And anything manmade can be unmade.  But until we do food prices will rise (see Food prices forecast to treble as world population soars by Steve Hawkes posted 7/21/2013 on The Telegraph).

Professor Tim Benton, head of Global Food Security working group, added there could be shortages in the UK in the future as the emerging middle class in south-east Asia sparks a revolution in “food flows” such as the trade in grain and soya around the world…

The shock forecast came as the chief executive of Tesco, Philip Clarke, warned the era of cheap food was over because of the forecast surge in demand.

In an interview over the weekend, the supermarket chief said: “Over the long run I think food prices and the proportion of income spent on food may well be going up…”

Food inflation in the UK has been running around 4 per cent for much of the year, and is among the highest in the EU after poor harvests last year and the rising cost of feed.

Here’s a thought.  If food is becoming so scarce why don’t stop using it for energy?  Let’s use fossil fuels that we can’t eat for energy.  And use food for food.  By mandating that we add ethanol to gasoline we diverted corn from the food chain already suffering from a depleted corn crop thanks to Midwest droughts.  Raising corn prices.  And meat, poultry and dairy prices.  As cows and chicken eat corn.  So if we stop artificially raising the price of corn feed we stop raising the price of everything downstream of corn in the food chain.  Crazy talk, I know.  But sometimes you just have to think outside of the box.

And here’s another thought.  Let’s do everything we can to bring energy costs down.  Let’s drill for more oil.  Let’s build that Keystone XL pipeline.  Let’s frack like there’s no tomorrow.  Because high fuel prices cause high food prices.  Everything we grow and raise has to travel great distances before landing on our kitchen tables.  By tractor, by truck, by train by ship.  Means of conveyance with internal combustion engines that burn a petroleum product.  From the farm to the silo to the grain elevator to the rail terminal to the mill to the food processing plant to the wholesale distributor to the grocery store.  Every mile of every trip from the farm to our kitchen table burns a petroleum product.  Every mile we burn fuel bringing food to our tables adds to the price tag in the grocery store.  Higher fuel costs even reduce what families can spend in those grocery stores.  For the higher gas prices are the greater amount of their paycheck go into their gas tanks.  Leaving less to buy food with.

And speaking of energy let’s dig up that coal and use it for what it’s best for.  Burning.  To produce steam.  To spin turbines.  That spin electric generators.  And let’s end the war on coal.  And make it less costly to generate electric power.  Because when food isn’t moving it’s using electric power.  For electric power runs our grain elevators, our mills, our food processing plants, our wholesale distributors and our grocery stores.

There are a lot of manmade causes making food scarcer and more costly.  If we care about feeding the world we should focus on the manmade causes.  For we can do something about those.  Unlike a drought.  But petroleum and coal can even lessen the impact of the occasional drought.  We can ship food from areas not suffering from drought to areas suffering from drought.  And we can use the electric power generated from burning coal to store food surpluses in refrigerated warehouses.

The only food crisis we have is manmade.  Or, rather, government-made.  Where government officials take more and more control of the private economy to fight the myth of manmade global warming.  Whose solution to save the planet is a simple one.  Save the planet.  Kill the people.

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Environmental Policies create Chicken Wing Shortage this Super Bowl Sunday

Posted by PITHOCRATES - January 26th, 2013

Week in Review

There’s already been a lot of disappointment for football fans.  Especially for people in New England and Atlanta.  As well as for people in Denver, Houston, Seattle and Green Bay.  Whose teams came so close to making it to the Super Bowl that they could taste it.  And as if that disappointment wasn’t bad enough there’s something else they may not be able to taste (see Chicken wing shortage threatens Super Bowl Sunday by FOX NEWS posted on the New York Post).

The National Chicken Council released a report that said the demand for wings this year is at “an all-time high” due to decreased wing production caused by the high cost of corn and feed prices. Wings are currently the highest priced portion of a chicken and cost $2.11 a pound in the Northeast, up 12 percent from last year…

“Chicken companies produced about 1 percent fewer birds last year, due in large part to record high corn and feed prices,” Bill Roenigk, chief economist and market analyst at the Washington, D.C.-based National Chicken Council said in a release. “Corn makes up more than two-thirds of chicken feed and corn prices hit an all-time high in 2012, due to two reasons: last summer’s drought and pressure from a federal government requirement that mandates 40 percent of our corn crop be turned into fuel in the form of ethanol. Simply put, less corn equals higher feed costs, which means fewer birds produced.”

The Left claimed their environmental requirement to burn 40% of the corn crop as fuel in our cars had nothing to do with the higher food costs that have hurt families this past year.  But they did.  For corn is everywhere in our food supply.  We eat it as popcorn.  Corn on the cob.  Cream style corn.  And we eat the things that eat corn.  Or come from things that eat corn.  Chicken.  Beef.  Pork.  Milk.  Eggs.  Cheese.  Everything a family struggles to put on the kitchen table to feed their family.  All made more costly thanks to those environmental policies.  Policies based on rising temperature in the Nineties that didn’t continue to rise.  Proving all of their projections wrong.  Yet here we are.  Having to cut back on wings this Super Bowl Sunday.  Just so Al Gore can live in a mansion on the beach.  For even Al Gore doesn’t believe the global warming alarmism he puts out.  For if the sea levels were really rising he would not have bought a mansion on the beach.

If you can afford a mansion on the beach do you know what else you can afford?  All the chicken wings you heart desires.  So, if you want a good time this Super Bowl Sunday try to get an invite to the party Al Gore will be having in his mansion on the beach.  It should be a swinging time.

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The Government made us Obese by making us Eat and Drink High-Fructose Corn Syrup

Posted by PITHOCRATES - January 5th, 2013

Week in Review

The study of sweeteners can be confusing.  Once upon a time people used sugar made from sugar cane grown in tropical climates.  Then we found we could make sugar from sugar beets grown in cooler climates.  These are pretty much pure sucrose.  Then there is high-fructose corn syrup (HFCS) which is a combination of glucose and fructose, heavy on the fructose.  Made from, of course, corn.  Today this is the dominant sweetener in the United States.  Because of intensive lobbying by the HFCS lobby.  Who had their friends in government place a quota on domestic sugar production, subsidize U.S. corn producers and slapped an import tariff on foreign produced sugar.  Artificially raising the price of sugar in the U.S.  To force those buying sweeteners to buy the higher priced HFCS.  Create great profits for the HFCS business.  And their friends in government.  While increasing the cost of the sugar millions of Americans add to their coffee.  And water else they like to sweeten.

As bad as this manipulation of the market economy is it gets even worse.  Due to the greed of those in government this rise in HFCS use may have caused another problem.  Our obesity epidemic (see Fructose makes people think they’re still hungry: Study by QMI Agency posted 1/3/2013 on the Toronto Sun).

A new study may provide a clue to North America’s obesity problem.

Fructose — a very cheap and sweet sugar found in North American staples — may be tricking people’s brains into thinking they’re hungry when they’re actually full.

The study, published in the Journal of the American Medical Association, used magnetic resonance imaging (MRI) to track the blood flow in the brains of 20 young men of normal weight before and after they drank beverages with fructose or glucose, another type of sugar.

They found glucose suppressed activity in the areas of the brain that control reward and a desire for food. Not so with fructose…

The study’s authors acknowledge the study is small and doesn’t prove a link between fructose and obesity. But the journal’s editors, Dr. Jonathan Purnell and Dr. Damien Fair, note the findings mirror those from previous studies on animals.

What’s more, the study’s participants also reported feeling less full after consuming the fructose drinks, lending credibility to the MRI results.

Of course, the only reason why HFCS is ‘cheap’ is because the government artificially increased the cost of the competition.  Sugar.

While the food purists on the Left are telling our parents they’re making their kids fat because they don’t make them watercress sandwiches for lunch they’re surprisingly silent on the chemically produced HFCS.  They don’t attack those in government that have put HFCS in so many of our food products.  Giving us our obesity problem.

HFCS started entering our foods from 1975 to 1985.  And it was following this period that we started jumbo-sizing everything.  Because we just didn’t feel full like we did when we ate and drank food products made with sugar.  So we overate.  And became obese.  Apparently.

Perhaps we should look at the government as the cause for our obesity problem.  Not the 32 ounce soda.  For we used to feel full when drinking a 12 ounce soda before the government forced us to start drinking and eating HFCS.

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Price of Beef and Dairy Goods rise as Midwest Drought leaves less Corn for Food and Ethanol

Posted by PITHOCRATES - September 30th, 2012

Week in Review

The Midwest drought has reduced corn yields.  Greatly raising the price of corn.  Good for famers who have corn to sell.  But not so good for people who buy that corn.  From those who make ethanol.  To those who feed livestock with it.  And the drought also reduced the amount of food available to export to impoverished, hungry nations.  As well as raising food prices in U.S. grocery stores.  From beef to eggs to milk to cheese.  It has hit dairy farms in California especially hard (see Calif dairies going broke due to feed, milk prices by GOSIA WOZNIACKA, Associated Press, posted 9/29/2012 on Yahoo! News).

Across California, the nation’s largest dairy state, dozens of dairy operators large and small have filed for bankruptcy in recent months and many teeter on the edge of insolvency. Others have sold their herds or sent them to slaughter and given up on the business.

Experts say California dairymen face a double whammy: exorbitant feed costs and lower milk prices. The Midwest drought has led to corn and soybean costs increasing by more than 50 percent this summer, stressing dairymen from Wisconsin and Minnesota to Missouri. But in California, milk prices have also lagged behind those in the rest of the nation, exacerbating the crisis.

Not helping those “exorbitant feed costs” is the ethanol mandate that requires us to burn some of this reduced food crop in our cars as fuel.  Which the government has refused to waive.  Despite fervent requests from those who have to cull their herds because they can’t afford to feed them.  But environmentalism wins out over people.  And cows.  More people go hungry because of the cost of food.  And dairy farmers send their cows to slaughter because they can’t afford to feed them.

Save the planet.  Kill the people.  And cows.  Especially when you have to please your environmentalist base when going into the 2012 elections.

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Jefferson, Hamilton, Washington, Whiskey Rebellion, French Revolution, New French-British War and Proclamation of Neutrality

Posted by PITHOCRATES - August 23rd, 2012

Politics 101

America’s First Tax was a 25% Excise Tax on American Whiskey made from Corn

Thomas Jefferson held a dinner party where he, Alexander Hamilton and James Madison met to resolve some issues.  Hamilton was stressed out.  He was facing strong opposition for his assumption plan.  Secretary of the Treasury Hamilton wanted to assume all the states’ debts and lump them into the federal debt.  To get the nation’s finances in order.  Establish good credit.  And raise revenue for the new nation.  The Virginians, Jefferson and Madison, offered their assistance if Hamilton would give them the nation’s capital.  Hamilton got his assumption.  And the Virginians got the nation’s new capital on the Potomac River.  Across from Virginia.  Where they could keep a close eye on the nation’s business.  And everyone lived happily ever after.

Well, not exactly.  There was already growing discontent across the land.  Hamilton understood business and commerce.  And banking.  Farmers don’t like bankers.  Or commerce.  Or business.  Many in the south and on the frontier worked the land.  As yeoman farmers.  Families working small farms that they owned.  They believed, as Jefferson believed, that the most honorable work in America was farming.  And that America’s future was the growth of farming.  Small farms.  Owned by families working the land.  Yeoman farmers.  Proud.  Pure.  And wholly American.  This despite Jefferson being a member of the slave-owning planter elite.  Who indulged in little physical labor.

So the south and the frontier were no Hamilton supporters.  They didn’t like his high finance ideas for the new nation.  And they especially didn’t like his whiskey tax.  A tax of 25% on western corn products.  Which you made whiskey from.  The new American alcoholic beverage of choice after they eschewed beer.  The beverage of choice before the rebellion.  When they were all content British citizens.  But an excise tax on corn products was little different from the excise taxes that caused the colonies to rebel against Great Britain in the first place.  Sure, there was one subtle difference this time.  The whiskey tax was taxation with representation.  And, technically speaking, legal.  But on corn?  The new tax seemed to fall unfairly on the West.  Which had a corn economy.  And used the whiskey they made from it for money.  So these frontier people were not just going to sit idly by and take this new taxation without a fight.

The Washington Administration took Decisive Action in Suppressing the Whiskey Rebellion

This first tax was to help finance Hamilton’s assumption.  But it was more important than the revenue it would raise.  The whiskey tax was a matter of principle.  It was probably poor policy.  And probably not the smartest thing to do.  Picking a fight with the toughest and most fiercely independent people in the country.  Frontier people.  Who lived off the land without any of the city comforts enjoyed back east.  But the tax was the law.  And the first test of the new nation.  If the government retreated in the face of opposition to a law passed by Congress their experiment in self-government would fail.  For as unpleasant as taxation was it was the reason they formed a new nation in 1787.  To levy taxes so they could pay their past debt.  And their current bills.  So President Washington and Hamilton hunkered down on the tax.

And the riots came.  The Whiskey Rebellion.  Around Pittsburg.  Kentucky (aka bourbon country).  The backcountry of the Carolinas.  And elsewhere.  They refused to pay the tax.  And attacked the tax collecting apparatus.  Even the courts.  It was war.  The spirit of ’76 was alive again.  Protesting a distant central power trying to impose a tax on them.  Washington offered amnesty if they just dispersed and went home.  They refused.  So Washington raised an army of some 13,000 strong.  Larger than any army he commanded during the Revolutionary War.  And led the army west with Hamilton to meet the insurrection.  The first and only time a sitting president led an army.  As the army approached resistance melted away.  So Washington handed command over to Henry “Lighthorse Harry” Lee (a Revolutionary War veteran and hero) and returned to the capital in Philadelphia.  Hamilton remained with the army.  As the army arrived the insurrection collapsed.  The army caught some rebels and tried them.  And two received death sentences.  Who Washington later pardoned.

Score one for the rule of law.  Washington was pleased with the outcome.  Hamilton, too.  They took decisive action to subdue an insurrection.  The people in general were happy that they restored peace.  And that the country didn’t collapse into anarchy.  All in all a win-win for the people and the government.  Almost.  Not everyone saw it in this light.  Some saw a king leading an army against his own people.  A professional army.  Little different from British redcoats.  Or Oliver Cromwell’s New Model Army a century or so earlier.  A professional standing army squashing those who disagreed with the government.  And Jefferson did not like it.  Nor did a lot of those in the south.  Or on the frontier.

President Washington issued a Proclamation of Neutrality in the New War between Great Britain and France

Seeing Hamilton ride at the head of an army only reinforced Jefferson’s opinion of him.  A power-hungry, British-loving puppet master.  And the puppet was President Washington.  The dislike between Hamilton and Jefferson turned into outright hostility.  They had two different visions of America.  And these two visions were mutually exclusive.  Cabinet meetings became insufferable as Hamilton and Jefferson constantly fought.  And the French Revolution didn’t help matters any.  The radical Jefferson supported the radical French.  Who he knew and sat with in the Jacobin clubs while he was in France.  Jefferson was all for overthrowing monarchies.  So when the French and British declared war on each other it was a no brainer who to support for Jefferson.  Vive la France!

Of course there was only one problem with that position.  About 75% of U.S. exports went to Great Britain.  Even more of her imports (approximately 90%) came from Great Britain.  And then there was the Royal Navy (RN).  Who still ruled the high seas.  And all the international trade routes.  In addition to the RN there was the British Army.  Who still occupied forts on the American western frontier.  And who were still in contact with their Indian allies from the Revolutionary War.  Couple this with the fact that the U.S. had no comparable army or navy.  And was already having trouble on the frontier with the Indians (from the influx of settlers into the western territories).  So siding with France against Britain was not the smart move.  Yes, the French were instrumental in helping the Americans achieve their independence from Great Britain.  But America was a country emerging from 8 years of war that just had to suppress a tax rebellion over a sin tax.  She did not have the wealth to enter a European war.  Besides, the Americans were supported by the monarch (King Louis XVI) the French were overthrowing.  Which complicated matters.

Washington and Hamilton saw things differently than Jefferson.  More like realists than the idealist Jefferson.  The Revolution was over.  The British and Americans were no longer enemies.  But important trade partners.  That shared a common British past.  Of laws and traditions firmly established in what was once British America.  So Washington issued his Proclamation of Neutrality (1793).  They would support neither in this European war.  Which infuriated the French.  And Jefferson.  For though they were neutral it was clear that their neutrality would favor the British.  As well as Hamilton.  And it did.  But it also favored America’s best interests.  For another long war would have probably bankrupted the nation.  And perhaps resulted with her partitioned among the European nations.  For the French Revolution lasted for a decade.  And the Napoleonic Wars it begot lasted another 11 years.  Which let us not forget the French lost.  In large part due to the Royal Navy.  And Great Britain’s wealth generated by her international trade.  Something the Americans could not have altered had she entered the war on France’s side.  A wise foreign policy call by President Washington (and yet another time he saved his country).  But it was one that tore his administration apart.  Firmly establishing the opposition party.  With Jefferson at its head.  With but one purpose.  To destroy Hamilton.  And to lead the nation away from where Hamilton was taking it.

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President Obama’s EPA Policies are Causing High Food Prices and Global Hunger

Posted by PITHOCRATES - August 18th, 2012

Week in Review

President Obama says he cares for poor people.  But his actions clearly show that unless there’s something in it for him he doesn’t care for poor people.  Even if they are going hungry (see White House offers drought relief, feels heat to waive ethanol mandate by John W. Schoen, NBC News, posted 8/13/2012 on Economy Watch).

President Barack Obama announced emergency measures Monday to ease the impact of the worst drought in half a century, but stopped short of waiving the government’s requirement that a large portion of the now-shriveled corn crop be diverted to make ethanol…

As the lowest yields in nearly two decades squeeze feed supplies, livestock producers are asking the government to waive a five-year-old requirement that gasoline sold in the U.S. contain roughly 9 percent ethanol. Because most ethanol in the U.S. is made from corn, roughly 40 percent of the corn crop, in a good year, is purchased by the biofuel industry…

With the rest of the world’s food chain already strained, the competition for each kernel of corn is going global. Last week, a United Nations food index jumped 6 percent, and the UN’s Food and Agriculture Organization warned against the kind of export bans, tariffs and buying binges that worsened the price surge four years ago. The U.N. food agency stepped up the pressure on the U.S. to ease its biofuel policies…

Ethanol production had already begun slowing before this summer’s drought, as fuel suppliers have approached the limit of demand for the biofuel. Though higher concentrations are sold in a few stations, most gasoline formulated with ethanol is limited to a 10 percent blend.

Cutting production, though, could produce a bigger political backlash from another key contingency in an election year: American drivers. Since other additives have been phased out over the past five years, gasoline refiners have overhauled their plants and rely on ethanol to produce high-octane fuel that burns cleanly enough to meet air quality standards.

Save the planet.  Kill the people.

You know food prices are rising when the UN is asking the U.S. to ease its biofuel policies.  These are, after all, the same people pushing for economy-destroying environmental policies on the entire world.  Particularly on the advanced economies of the world.  So this food crisis is serious.  Which is why they are urging President Obama to stop using 40% of the corn crop for fuel.  And to use this food as food instead.  To save starving children in the less economically advanced parts of the world.  But President Obama’s answer?  “No.”  Why?  Does he not care for the starving children of the world?  Apparently not.  For he apparently cares more about the campaign donations from the ethanol lobby.

President Obama has shown he has no problem using executive orders to overrule the Constitution.  So he clearly could use his executive powers to change policies he has the legal authority to change.  Such as relaxing his EPA requirements during this hot and dry summer.  Let the cars pollute for a year until this crisis ends.  Then he can re-cripple the economy with his punishing EPA requirements later.  He can do it by executive order.  But he won’t.  Because the ethanol lobby is too well connected.  Besides a lot of his rich Hollywood contributors are all environmentalists who will never have a problem putting food on their tables.  But they will have a problem putting campaign cash on President Obama’s table if he rescinds any environmental policies.  So people will starve.  So the president can please his cash-contributing friends.

Never before has one man caused so much suffering to so many for the benefit of so few.  Well, actually, there have been a lot of people who have done this.  But they were usually warmongering dictators.  Not the leader of the free world.  Which makes this especially sad.  Unlike his republican rival for the presidency this fall, our president clearly takes care of his rich friends while poor people suffer in the United States from high food prices.  And poorer people throughout the world suffer hunger.  Because of President Obama’s EPA policies.  Something that even the UN says are harmful to poor people everywhere.  And is begging the president to stop willfully hurting these people.

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Energy/Environmental Policies requiring Ethanol cause Hunger and Economic Devastation throughout the World

Posted by PITHOCRATES - August 4th, 2012

Week in Review

As if the Great Recession wasn’t bad enough already.  Bad economic policies and bad regulatory policies have already beaten this economy into the ground.  And now the government is going to pile on with bad energy/environmental policies.  Making the American people say “ouch” (see Corn for Food, Not Fuel by COLIN A. CARTER and HENRY I. MILLER posted 7/30/2012 on The New York Times).

…By suspending renewable-fuel standards that were unwise from the start, the Environmental Protection Agency could divert vast amounts of corn from inefficient ethanol production back into the food chain, where market forces and common sense dictate it should go.

The drought has now parched about 60 percent of the contiguous 48 states. As a result, global food prices are rising steeply. Corn futures prices on the Chicago exchange have risen about 60 percent since mid-June, hitting record levels, and other grains such as wheat and soybeans are also sharply higher. Livestock and dairy product prices will inevitably follow.

More than one-third of our corn crop is used to feed livestock. Another 13 percent is exported, much of it to feed livestock as well. Another 40 percent is used to produce ethanol. The remainder goes toward food and beverage production.

Previous droughts in the Midwest (most recently in 1988) also resulted in higher food prices, but misguided energy policies are magnifying the effects of the current one. Federal renewable-fuel standards require the blending of 13.2 billion gallons of corn ethanol with gasoline this year. This will require 4.7 billion bushels of corn, 40 percent of this year’s crop.

Almost half (40%) of our corn goes to produce ethanol.  That alone has raised the price of our food.  And a lot of our food has corn in it.  Including cows.  As in corn-fed beef.  Dairy cows, too, eat corn.  They give us milk and cheese.  Chickens eat corn.  Providing us with low-fat chicken breasts.  Eggs.  And those delicious Chicken McNuggets our kids love.  Our energy/environmental policies have been increasing the cost of groceries for families.  And the drought is only going to increase them more.  Making it ever harder for the American family to put food on the table.  Especially when a lot of them are struggling to get by on less thanks to an already bad economy.  So why do we use food to fuel our cars?  Because the government has dictated that we do.

The price of corn is a critical variable in the world food equation, and food markets are on edge because American corn supplies are plummeting. The combination of the drought and American ethanol policy will lead in many parts of the world to widespread inflation, more hunger, less food security, slower economic growth and political instability, especially in poor countries…

Any defense of the ethanol policy rests on fallacies, primarily these: that ethanol produced from corn makes the United States less dependent on fossil fuels; that ethanol lowers the price of gasoline; that an increase in the percentage of ethanol blended into gasoline increases the overall supply of gasoline; and that ethanol is environmentally friendly and lowers global carbon dioxide emissions.

The ethanol lobby promotes these claims, and many politicians seem intoxicated by them. Corn is indeed a renewable resource, but it has a far lower yield relative to the energy used to produce it than either biodiesel (such as soybean oil) or ethanol from other plants. Ethanol yields about 30 percent less energy per gallon than gasoline, so mileage drops off significantly. Finally, adding ethanol actually raises the price of blended fuel because it is more expensive to transport and handle than gasoline.

Ethanol isn’t what they say it is.  In fact it makes a pretty poor fuel.  And it will propagate hunger and economic devastation throughout the rest of the world.  Especially in poor countries.  So there is no good reason to use food to fuel our cars.  It would appear the only reason why the government dictates this policy is that the lobbyists make it worth their while to dictate this policy.  Amazing what you can get away with when you veil your special interests in the cloak of environmentalism.  The media and the court of public opinion eviscerate any non-environmental corporation for doing what the ethanol lobby does.  But if you want to make evil profits all you have to do is say ‘global warming’ and no one will fault you for your greed.

Families will have to cut out their visits to McDonalds as these high prices hit pretty much everything on their menu.  Which is an unintended consequence the government may actually like.  For they say our kids are too fat.  But this won’t make our kids happy.  They like their McNuggets.  Which can mean only one thing.  Our government hates kids.

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Prices, Scarcity and Value

Posted by PITHOCRATES - December 12th, 2011

Economics 101

“Economics is the Study of the Use of Scarce Resources which have Alternative Uses”

Agriculture advances gave us food surpluses.  Food surpluses gave us a division of labor.  The division of labor gave us trade.  Money made that trade more efficient.  Religion and the Rule of Law allowed great gatherings of people to live and work together in urban settings.  Free trade let us maximize this economic output and elevated our standard of living.  And free labor sustained economic growth by increasing the number of people making economic exchanges.  Of course, we need something else to facilitate these economic exchanges.  Prices.

British economist Lionel Robbins defined economics as the “study of the use of scarce resources which have alternative uses.”  Resources are the things we buy.  Or they make up the things we buy.  We can use these resources to make many different things.  For example, we can eat corn as a food.  It can be an ingredient in food.  We can make it into a sweetener.  We can use it to make bourbon whiskey.  We can even use it to make fuel to burn in our cars.   So corn has many alternative uses.

Depending on the corn harvest corn can be abundant.  Or scarce.  We can have a lot of it.  Or if there was a drought we may not have so much of it.  For another example of scarcity you can consider a concert.  Whether it is for your favorite band or a Broadway show, ticket prices for that show will vary.  The pair of tickets that are front row center are the most coveted.  And typically end up with a service or a scalper.  Thousands of people may be able to enjoy the show.  But only two can sit front row center.  These two tickets are very scarce.  And if you ever bought a pair of these tickets you know how expensive these tickets can be.

We Agree to Economic Exchanges when both Buyer and Seller Agree on the Value which is Communicated by Price

Those tickets are expensive because they are scarce.  The price of these tickets tells us this.  There are more seats available that are not as good.  And they cost less.  Because there are so many of these ‘cheap’ seats pretty much anyone can buy them.  Unlike the front-row center seats.  The scarcer something is, then, the greater its value.  And the more expensive it is.

Something becomes scarcer when the alternative uses for it grows.  For example, we now use corn to make ethanol to fuel our cars.  Leaving less available for food.  So food prices rise.  Because with this new use for corn the users in the food industry have to compete with each other to buy the smaller amount of remaining corn.  Corn, then, became scarcer when we added another use for it.  And more expensive.

We determine the price we are willing to pay for something based on the value it has to us.  In every economic exchange both buyer and seller assign a value.  Of what the buyer is willing to pay.  And what the seller is willing to accept.  We communicate this information with prices.  And we agree to make the economic exchange when both buyer and seller agree on the value of what they’re exchanging.  By agreeing on a sales price.

‘High’ Prices make sure Scarce Resources that have Alternative Uses are Always Available for those Alternative Uses

In this way prices automatically ration limited resources that have alternative uses.  And directs these limited resources to where their use is valued most.   By automatically flowing to the highest bidder.  This is the hallmark of capitalism.  And why you can walk into any American supermarket and be overwhelmed by the choices available.  But when you interfere with prices you have shortages.  And rationing by government bureaucrats.  Such as the gas lines during the Seventies.  When price controls made gas cheap to buy.  But it was almost impossible to find any to buy.  Because that cheap price for a scarce resource (made scarce by the Arab oil embargo) allowed people to buy it up until there was no more left.  Had we allowed the price to rise we would have bought less gas.  Guaranteeing there would be gas available for those who needed it most.  And who were willing to pay the higher price.

During the height of the Cold War when Soviet defectors came to the United States the American supermarket astonished them.  They never saw anything like it behind the Iron Curtain.  For communism didn’t use prices to manage their resources.  Bureaucrats managed their resources.  Their decisions filled stores with things no one wanted to buy.  And made people stand in line for hours to buy their ration of soap or toilet paper.  Things these defectors could fill a shopping cart with on any day of the week in any American supermarket.  And have money left over to buy so much more.  Thanks to capitalism.

Prices are relative.  Prices that may seem high serve a purpose.  They make sure scarce resources that have alternative uses are always available for those alternative uses.  Yes, the prices may be ‘high’ from time to time.  But these high prices guarantee these scarce resources will always be available to buy.  Unlike a low price.  Which, if too low, it will make a scarce item unavailable.  At any price.  Such as gasoline in the Seventies.

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Gasoline is better than Liquid Natural Gas or Ethanol

Posted by PITHOCRATES - July 1st, 2011

Liquid Natural Gas and Subsidies

The problem with alternative fuels is that they all require subsidies.  That’s one thing gasoline never needed.  Because it was everything a consumer wanted at a price a consumer could afford.  But there’s a problem.  Although consumers like it, government doesn’t.  So they’ve been pushing ethanol to replace it.  And now liquid natural gas is making a comeback (see Goodbye gasoline? GM gives natural gas cars a boost by Edward McAllister posted 7/1/2011 on Reuters).

The United States has more natural gas than it knows what to do with – up to 100 years of supply, experts say – thanks to a new drilling technique called hydraulic fracturing which releases huge reserves of natural gas trapped in shale rock…

Drivers who fill up with natural gas at the pump saved up to $2 per gallon when gasoline prices hit $4 a gallon. (Graphic: here: r.reuters.com/get42s ).

First of all, the environmentalists are trying to shut down all fracking (busting open rock formations to release trapped oil and/or gas by pumping fluids into cracks and fissures).  They hate it as much as drilling for oil.  Because it’s environmentally unfriendly.  And contaminates the ground water.  Or so the environmentalists say.  New York State is sitting on a lot of natural gas in shale.  But getting that gas is on hold until the completion of environmental studies. 

And that $2 per gallon saving over gasoline?  Don’t count on it.  Because it takes more liquid natural gas (LNG) to go the same distance gasoline will take you.  LNG has only 65.7% of the energy content of gasoline.   Which means it will take 1.5 gallons of LNG to equal one gallon of gas.  Think of it this way.  Say you take a vacation that takes two full tanks of gas.  With LNG, it will take you three tanks.  So, yes, you’ll pay less per gallon at the pump.  But you will have to buy more gallons. 

For example, if you have a 14 gallon gas tank and gas is $4/gallon and LNG is $2/gallon, you’ll save $14 dollars to travel the distance that a full tank of gasoline will take you.  If gas falls to $3.50/gallon, the savings drop to $7.  If gas drops to $3/gallon, there is no savings.  Just the inconvenience of another stop at the filling station.  LNG is only a bargain when gas is closer to $4/gallon.  Or more.  Unless there’s something else to sweeten the deal.

Even if oil prices retreat again, some in the industry say natural gas will remain attractive due to its long-term abundance and the potential for government support…

Much hinges on politics. The Natural Gas Act launched in the House of Representatives in April proposes incentives for purchasing and building natural gas vehicles, replacing a previous bill whose sweeteners for users of the fuel have recently expired.

The proposed incentives include a 50 cent per gallon fuel credit, a purchasing credit that covers up to 80 percent of the extra cost of a natural gas vehicle, and tax breaks for building fuelling infrastructure. The bill has bipartisan support and some say it could pass this year.

Ah, yes.  Government support.  Which tells you one thing.  LNG is not a sweet deal.  If it were the government wouldn’t have to bribe you to use it.

Ethanol and Subsidies

The problem with government getting involved in the fuel business is that it politicizes the fuel industry.  If LNG was a value to the market the market would provide LNG.  But it doesn’t.  The same is true for ethanol.  It has no value in the market.  How do we know this?  Because it takes government subsidies to get it to the market (see Industry warns gas prices would rise 89 cents without ethanol posted 7/1/2011 on PolitiFact).

Those who favor rolling back ethanol subsidies argue that a roughly $6 billion subsidy is unsustainable given today’s rising national debt.

However, the ethanol industry, represented by a group called the Renewable Fuels Association, has made an aggressive counterattack, arguing that ethanol is vital to keeping a lid on gasoline prices — potentially a potent issue for Americans as gasoline hovers between $3 and $4 per gallon.

The trade group’s Metro station advertisement mirrors other information available on the group’s website. It says, “Ethanol reduced gas prices by 89 cents per gallon in 2010. Ethanol reduced the average American’s household gasoline bill by more than $800. If ethanol disappeared, gas prices could rise by as much as 92 percent.”

Now that this subsidy is threatened, the ethanol industry is going on the offensive.  They used some scientific studies for their claims.  Studies they funded.  And they played fast and loose with the facts.  That 89 cents saving per gallon was during the spike in oil prices when gas was around $4/gallon.  Over the decade (2000-2010) the savings was only 25 cents.  But it wasn’t even that much.  Because, like LNG, ethanol doesn’t have the same energy content as gasoline.  It only has 71.7% of gasoline energy.  Which means you need 1.4 gallons of ethanol to equal one gallon of gas.  So when you add ethanol to gas you’re just taking a lot miles out of every gas tank.

PolitiFact goes into more detail and gives Renewable Fuels Association a rating of ‘barely true’ for the accuracy of their advertisement.  They’re not lying.  But they are certainly misleading you.  Because of their selective use of facts and figures.  Which is the point.  Honesty doesn’t sell ethanol.  If you want people to buy it you just can’t tell the whole truth.

The Great Corn Con

And there’s a good reason why they aren’t telling the whole truth.  Because if people understood what was going on in the corn industry, they’d be furious.  Because they’re not saving the planet.  Or cutting our dependence on foreign oil.  No.  The only thing the corn subsidies are doing is making farmers rich.  And making people hungry (see The Great Corn Con by Steven Rattner posted 6/24/2011 on The New York Times).

Even in a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply.

But rather than ameliorate the problem, the government has exacerbated it, reducing food supply to a hungry world. Thanks to Washington, 4 of every 10 ears of corn grown in America — the source of 40 percent of the world’s production — are shunted into ethanol, a gasoline substitute that imperceptibly nicks our energy problem. Larded onto that are $11 billion a year of government subsidies to the corn complex.

Using corn for fuel only increases the price of corn.  And anything that uses corn.  Like food.

Corn is hardly some minor agricultural product for breakfast cereal. It’s America’s largest crop, dwarfing wheat and soybeans. A small portion of production goes for human consumption; about 40 percent feeds cows, pigs, turkeys and chickens. Diverting 40 percent to ethanol has disagreeable consequences for food. In just a year, the price of bacon has soared by 24 percent.

So it’s the high price of corn that’s making chicken and hamburger more expensive.  Remember that when you’re shopping for your next BBQ.  Or buying ingredients for that next meatloaf.  Just pick up some extra breadcrumbs to make that hamburger go farther.  It’s not all bad, though.  Sure, we’ll eat less.  But they’ve been saying we’re too fat anyway.  So perhaps a little malnutrition will help get us to a healthier weight.  The important thing to remember is all the good that will come from our sacrifice.  Like using less foreign oil.

Here is perhaps the most incredible part: Because of the subsidy, ethanol became cheaper than gasoline, and so we sent 397 million gallons of ethanol overseas last year. America is simultaneously importing costly foreign oil and subsidizing the export of its equivalent.

That’s not all. Ethanol packs less punch than gasoline and uses considerable energy in its production process. All told, each gallon of gasoline that is displaced costs the Treasury $1.78 in subsidies and lost tax revenue.

So we’re subsidizing the ethanol industry to produce ethanol to use instead of gasoline made from imported oil.  And paying a pretty price to do this.  And then we’re not using the ethanol for the reason we subsidized it in the first place?  The American taxpayer is paying higher taxes so we can provide a cheaper fuel for other countries?  While we still import the expensive foreign oil?  You know what you call this?  Government.

Govern against the Will of their Constituents

When government stayed out of the oil business gasoline was cheap and plentiful.  Didn’t need any subsidies.  And you didn’t have to bribe manufacturers to build a gasoline powered car.  Also, government didn’t have to subsidize the fuel dispensing industry either.  The oil companies built refineries, pipelines and gas stations everywhere.  If there was a road there was a gas station.  If there was a city there was a car dealership selling gasoline-powered cars.  It all worked.  As if by magic.  With no help from the government.

Ethanol and liquid natural gas have never worked.  Despite government spending billions in trying to make them work.  The problem?  The market just doesn’t want them.  Like a dog that doesn’t want to swallow a pill.  You can do whatever you want.  Hold his mouth shut.  Stroke his throat.  Whatever.  He’s just going to spit that pill out once you let go.  And consumers have been spitting back every attempt to put us in alternative fueled vehicles.  We just don’t want them.

But government does.  Because they profit from them.  The corn lobby goes to Washington with cash.  And politicians like cash.  So much so that they will repeatedly govern against the will of their constituents.  And they don’t care if their policies increase the price of food.  Because they’re rich.  They can afford it.  Thanks to those lobbyists.  And those nice salaries and benefits courtesy of the taxpayers.  We may be eating meatloaf made with more bread than meat, but they’ll be enjoying fine corn-fed steak.  Along with some nice corn-fed bacon.

All men are created equal?  Our elected representatives apparently didn’t get that memo.

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LESSONS LEARNED #57: “Environmental policy is a zero-sum policy; save the planet, kill man.” -Old Pithy

Posted by PITHOCRATES - March 17th, 2011

DDT gets rid of Mosquitoes and Malaria

No one thinks much about malaria in big American cities.  Because they’re modern, paved cities.  So there aren’t a lot of mosquitoes.  At least, not like there used to be.  In colonial times, summers were bad.  Anywhere there was standing water.  Thomas Jefferson hated to be anywhere near tidewater areas during the summer months.  Because people got malaria.  He thought it was the air.  It wasn’t.  It was the mosquitoes.  Unpaved areas in tidewater streams just bred mosquitoes wholesale. 

As our concrete cities grew these wetlands went away.  As did malaria.  In the United States.  Other nations, though, were not so fortunate.  Especially sub-Saharan Africa.  Where malaria kills hundreds of thousands of children each year.  Why?  Because much of sub-Saharan Africa is impoverished.  With no modern, paved cities.  And it’s a mosquito paradise.  For awhile, that is.  Because man stepped in and used chemistry.  Created a miracle synthetic pesticide.  DDT.  And went to war against mosquitoes.  Campaigned especially fiercely in the tropical countries that really favored mosquito breeding.  Armed with DDT, it was a lopsided war.  Areas that saw millions of people infected by malaria each year had less than a hundred people infected after the DDT campaign.  It was a huge success.  Chemistry saved the children.  It was so successful they also used it in agriculture.  Food yields improved with the resulting pest elimination.  The mosquito and other pests were on the run.  But then an unlikely ally saved them.  Rachel Carson.

Carson wrote Silent Spring.  Published in 1962, she saved malaria.  And started the environmental movement with her attack against chemistry.  It was hurting the environment.  DDT was thinning egg shells.  And some other nasty stuff.  And perhaps it was.  But there were two uses of DDT.  Heavy agricultural uses.  And the lighter anti-malaria uses.  Some of the things she cited may have been more on the agricultural side.  In any event, environmentalism was born.  DDT fell out of favor and nations banned it or discouraged its use.  And malaria returned in force, killing hundreds of thousands of kids each year.

Firebreaks stop the Spread of Wildfires

Smokey the Bear says only we can prevent forest fires.  Well, that’s not exactly true.  We can’t change the weather.  Oh, sure, we can change the climate by warming the earth with manmade greenhouse gases, but we can’t make it rain.  Or stop the lightning.  Put the two together (a long time without rain then a lightning storm) and it will start a forest fire/wildfire.  And there’s nothing we can do about it.  Well, there’s nothing we can do to prevent it from starting.  But we can limit the severity of the wildfire.  By cutting firebreaks in the forest.

Dried trees burn very well.  And dried brush makes excellent tinder.  As a forest burns, the trees burn and flick off embers.  The wind blows the embers downwind.  Where they land on dried brush (i.e., tinder).  A fire smolders.  Then takes hold.  Flames grow.  And jump to the trees.  Which flick off embers.  That blow downwind.  And so on.  This is how fires travel.  And sometimes you can’t stop them.  They get too big to try and douse with water.  So they burn.  And the only thing that will stop them is the lack of fuel.  And this is where a firebreak comes in handy.  If you cut firebreaks into the forest at strategic locations the fire will spread until it comes to one of these fire breaks.  The embers flicking off of trees will then fall harmlessly on the firebreak.  Where there is no fuel.  And the embers will burn out.  Without starting a new fire.  Depending on the strength of the winds and the width of the firebreak, you can stop a lot of fires.  As long as there isn’t a rat living in the area.

Fire struck Riverside County outside Los Angeles in 1993.  It was huge.  And hungry.  That fire advanced and ate everything in its path.  Trees.  Brush.  And houses.  Homeowners in Riverside Country wanted to plow in some fire breaks to protect their homes.  Unfortunately for them, they shared their habitat with the kangaroo rat.  Which was on the Endangered Species List.  And plowing in those firebreaks may have harmed those rats burrowed shallowly in the sandy soil where all that tinder was growing.  So they were forbidden to cut in those firebreaks.  To save the rat.  And the fire burned through their houses.  And kept on burning.

The Food Chain Turned Upside Down

The San Joaquin Valley in central California is one of the most fertile farmlands in the world.  The Westlands.  Some call it the food basket of the world because they grow so much stuff there.  The San Joaquin River is fed from the snow in the Sierra Nevada Mountains and drains into the Sacramento-San Joaquin River Delta.  And it’s from this delta the government has helped the farmers pump water to irrigate their farmlands.  That is, until drought hit the area.  And a little fish.  A tiny smelt.

In the Delta there lived a fish.  This fish was on the Endangered Species List.  And this fish liked to hang around with man.  And the things man built.  Like water pumps.  With the prolonged drought, those irrigation pumps were pumping a lot of water.  And apparently killing a lot of smelt.  That were hanging around the pump inlets.  So a federal judge ruled in 2008 to shut off the irrigation pumps.  To save the fish.  And they did.

Without water farmers can’t farm.  So land went unused.  Farmers planted fewer tomatoes.  And fewer of their other crops.  Worse, some farmers had to destroy some of their healthy crops.  Such as almond trees that took 30 years to grow.  Without water they’d died.  And dead trees attract pests.  That can spread to healthy trees.  So it was either cut down some of their trees.  Or face pest infestation and lose all of their trees.  So food production in the fertile San Joaquin Valley dropped.  There was less food.  Which, of course, raised food prices.  All to save a small fish.

Diverting Corn from Dinner Tables to Gas Tanks 

Some say that we have to find an alternative to oil.  Because oil will run out one day.  Soon.  They’ve been saying this for decades.  And we haven’t run out yet.  But that’s beside the point.  The point is that they say it will run out because of our increasing demand for gasoline to drive our cars.  And that rising demand one day will exceed the oil supply.  One of their solutions?  BiofuelsEthanolFlex FuelE85.  Made from corn.  Our food.  And others.  For we feed a large part of the impoverished world with our surplus corn.

Back in the summer of 2008, gas hit $4/gallon.  That hurt.  The pain was so bad that it made people change behavior.  They bought smaller cars.  Hybrids.  And cars that ran on the ‘cheaper’ E85 (ethanol).  Which sold for something like fifty cents less than unleaded gas.  It seemed like quite the bargain.  Until you used it.  As those who had a significant commute to work soon learned.  One tank of gas let you commute to work for a whole week.  A tank of ethanol?  It didn’t take you quite as far.  People often learned this the hard way.  After having to stop in an unseemly part of town to refuel late night on the way home from work after hearing that ‘low fuel’ chime unexpectedly.  Those of us who did soon switched back to gasoline.  Why?  To prevent late night surprises like that again.  And because we just don’t like pumping gas.  Or, should I say, ‘fuel’.

You see, ethanol has less energy than gasoline.  So it takes more of it to go as far as gasoline takes you.  When you crunched the number you were actually paying more using the ethanol.  Because you were buying more of it.  Which brings us back to the interesting argument of why we have to replace oil.  Because our growing demand will eventually use it all up.  Now, let’s apply that logic to ethanol.  And the fact that it takes more ethanol to drive as far as with gasoline.  What does that tell you?  They will divert an enormous amount of our corn crop from dinner tables to gas tanks.  Making less food available for us.  And for export.  Which will do what?  That’s right.  Make some people go hungry.  And increase food prices.

Trading Humans for non-Humans

Advancements in environmental policy come at the expense of man.  Every time they protect an endangered species man has to yield ground.  When we fight global warming it is man who makes the ultimate sacrifice.  We have to lose some liberty.  Pay more for food.  Or eat less.  When they ban life-saving chemicals people die.  Hundreds of thousands of them.  Especially children in sub-Saharan Africa.  All in the name of saving the planet.

Environmentalists are okay with this.  For they must know about it.  And yet they pursue their agenda.  So they don’t mind the zero-sum game they play.  Trading humans for non-humans.  Because they favor the non-humans over the humans.  So when it comes to saving the planet or saving man, their choice is an easy one.  They save the planet.  And kill man.  For the human dead are acceptable collateral damage in their war to save the planet.

www.PITHOCRATES.com

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