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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Obama’s Rejection of the Keystone XL Pipeline raises Food Prices and makes the World a more Polluted Place

Posted by PITHOCRATES - April 13th, 2013

Week in Review

President Obama yielded to the environmentalists in his liberal base on the Keystone XL pipeline.  Who opposed it on environmental grounds.  Ironic as the environment will be at greater risk if the president doesn’t let them build the pipeline.  And to make matters worse the price of gasoline will go up also.  Making one of the worst economic recoveries in U.S. history worse.  By leaving less money in consumers’ pockets.  While at the same time raising the price of everything that uses refined oil to get to market (see Killing Keystone Seen as Risking More Oil Spills by Rail by Rebecca Penty & Jim Efstathiou Jr. posted 4/9/2013 on Bloomberg).

A rejection of the Keystone XL pipeline by President Barack Obama would push more of Canada’s $73 billion oil exports onto trains, which register almost three times more spills than pipelines…

Shipping more supplies by rail would lead to higher costs for oil producers because train shipments are more expensive than pipelines…

Without Keystone, designed to carry 830,000 barrels a day of oil, shipments of Canadian crude by rail would rise an additional 42 percent by 2017, according to RBC Capital Markets.

“One of the unintended consequences of delaying Keystone XL is that more oil has been getting to markets in Canada and the United States using rail, truck and water-borne tankers,” Shawn Howard, a spokesman for TransCanada, said in an e-mail. “None of those methods of transportation are as safe as moving it by pipelines,” he said.

Trains are one of the most efficient ways to transport heavy freight.  Bulk freight carriers on the Great Lakes can ship heavy freight cheaper but they don’t travel as fast as trains.  And they can only travel on water.  A train can travel almost anywhere.  Over, under and around bodies of water.  Something a ship just can’t do with land.  But the benefit of train transport comes with a cost.  Rail infrastructure is very costly.  And you have to have it wherever a train travels.  Unlike a ship.  Still, rail is the best way to transport bulk freight.  Except that kind of bulk freight that we can push through a pipeline.

To think of the immense advantage of moving things by pipeline consider the hot water in your house when having a bath.  Without the pipeline system in your house you would have to heat water outside over a fire.  Then carry it in small containers and pour it into your bathtub.  Container after container you would have to fill with cold water.  Carry it to where you converted it into hot water.  Then carry the hot water by foot where you could stumble or fall, spilling your converted cold water.  Leaving you a mess to clean up.  And the need to burn more fuel to convert more cold water into hot water.

Now imagine having a bath by simply opening the hot water tap at your bathtub and letting it fill your tub.  It’s a whole lot easier.  Less chance to spill water.  And you burn less fuel.  So which would you rather do?  Clearly moving anything by pipeline is the best way to move anything.  You reduce the chance of spills because the only moving part is the oil in the pipeline.  And there are no loading and unloading costs to factor into the price of gasoline.  As the refineries basically have a hot water tap to turn on when they want to refine oil.  It just doesn’t get simpler than that.

Keystone XL pipeline doesn’t put the people or the environment first.  Just those people who oppose businesses and capitalism.  Who don’t care that people have to spend more to put gasoline into their cars.  Or have to spend more at the grocery store thanks to higher fuel costs passed along in higher food prices.  For if it were up to them people wouldn’t even have cars.  Or enjoy eating anything that came from an animal.  That’s the world the environmentalists have in mind for the American people.  Where the people sacrifice.  So the animals can enjoy a pristine environment.  Where they can happily eat each other.  And crap all over the place.  The way Mother Nature meant it to be.  Before God created man.  Who the environmentalist hate.  And blame for making a mess of everything.

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People beg the EPA to Waive their Ethanol Mandate to lower Food Prices but the EPA Refuses

Posted by PITHOCRATES - November 18th, 2012

Week in Review

People suffering from the high price of corn beg the EPA to waive the ethanol mandate.  To use corn for food.  And not for fuel.  To help hungry children in the US.  And around the world.  Whose parents have to pay higher and higher food prices thanks to a reduced corn crop thanks to those droughts this past summer.  The EPA’s response?  Kids are fat enough already and could stand to lose a few pounds.  Figuratively, of course (see EPA rejects request to waive requirements for corn-based ethanol by David Shepardson posted 11/16/2012 on The Detroit News).

The Environmental Protection Agency on Friday rejected a request from eight governors and nearly 200 members of Congress to waive requirements for the use of corn-based ethanol in the nation’s 240 million vehicles in the wake of this summer’s severe drought.

The move is a victory for corn farmers that have seen prices jump by 400 percent in recent years, but a loss for pork and beef producers who have seen the price of feed jump…

The EPA said it has not found evidence to support a finding of severe “economic harm” that would warrant granting a waiver of the Renewable Fuels Standard.

Can you imagine gasoline prices rising 400% and the government saying they see no economic harm in that?  Can you imagine prescriptions prices rising 400% and the government saying they see no economic harm in that?  Can you imagine the cost of health insurance rising 400% and the government saying they see no economic harm in that?  Of course you can’t.  So why do they not see harm in a 400% rise in corn prices?  Could it be because the ethanol lobby supports Democrat candidates and their environmental policies?  And higher corn prices mean more generous campaign donations?  Perhaps.

“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact…”

In 2011, nearly half the corn grown in the U.S. was diverted to ethanol production to meet the RFS, critics say…

Food producers — including the makers of frozen food and restaurant chains — have criticized the mandates, saying it raises food prices…

The American Coalition for Ethanol praised the decision by the EPA…

The Michigan Farm Bureau had opposed granting the waiver, saying it doesn’t believe keeping the requirements in place “would severely harm the economy of Michigan at this time.” But Michigan poultry and livestock producers are affected by higher corn prices.

The governors of Maryland and Delaware, also home to poultry producers, told the EPA in October that without a waiver they would face “the loss of thousands jobs.” North Carolina, New Mexico, Georgia, Texas, Virginia, Utah and Wyoming also had asked EPA to waive the requirements.

The EPA conducted several economic analyses and concluded that on average waiving the mandate would reduce corn prices by 1 percent. EPA also said waiving the mandate would not affect household energy costs.

The Democrats talked a lot about arithmetic during the 2012 campaign.  Saying that simple arithmetic proved that they should raise tax rates on rich people.  Because collecting another 5% or so from high income earners would help balance the budget.  Even though we have trillion dollar deficits.  And the proposed tax rate hikes would bring in nowhere near a trillion dollars.  So it would appear the Democrats are arithmetically challenged.  Which probably explains why they say doubling the corn crop (by eliminating the methanol mandate) will only lower corn prices by 1%.  When doubling the supply of any other commodity in the world would cause the price to collapse.

These are the same people that place import tariffs on foreign made goods to restrict supplies to keep domestic prices high.  These are the same people that accuse other nations of anti-dumping violations for flooding the market with their goods.  Which lowers domestic prices.  So these people seem to believe that increasing supply will lower prices.   Except when it comes to corn.  Even if you double the size of the corn crop.  Amazing.

Of course, it’s about the money.  The corn and ethanol producers are getting rich.  Who are only getting rich because of their friends in government.  Which is the definition of crony capitalism.  Or corruption.  The government interferes with market forces.  So their friends and supporters can get rich.  And share that wealth with their friends in government.

And while the crony capitalists are getting rich the American consumer gets poorer.  As they pay more for corn, beef, pork, chicken, eggs, milk, cheese, etc.  Families have to cut back on their grocery budgets.  And cut back on going out.  Because they have less disposable income.  And restaurants have to raise their prices because of the increase in their food costs.  But this is okay as far as the EPA is concerned.  As they put big money political contributions ahead of American families.

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FT138: “High gas prices mean high food prices.” —Old Pithy

Posted by PITHOCRATES - October 5th, 2012

Fundamental Truth

We use Diesel Fuel in our Ships, Trains and Trucks to move Food from the Farm to the Grocery Store

People don’t like high gas prices.  When the price at the pump goes up more of our paycheck goes into the gas tank.  Or, more precisely, in everyone’s gas tanks.  For even if you don’t drive a car when gas prices go up you’re putting more of your paycheck into the gas tanks of others.  Thanks to oil being the lifeblood of our economy.  And unless you’re completely self-sufficient (growing your own food, making your own clothes, etc.) everything you buy consumed some petroleum oil somewhere before reaching you.

Gas prices go up for a variety of reasons.  The purely economic reason is the market forces of supply and demand.  When gas prices rise it’s because demand for gasoline is greater than the supply of gasoline.  Which means our refineries aren’t producing enough gasoline to meet demand.  And the purely economic reason for that is that they are not refining enough crude oil.  Meaning the low supply of gasoline is due to the low supply of crude oil.  Which brings us to how high gasoline prices consume more of our paychecks even if we don’t drive.  The reason being that we just don’t make gasoline out of crude oil.  We also make diesel fuel.

Diesel fuel is a remarkable refined product.  It just has so much energy in it.  And we can compress an air-fuel mixture of it to a very small volume.  Put the two together and you get a long and powerful power stroke.  Making the diesel engine the engine of choice for our heavy moving.  We use it in the ships that cross the ocean.  In the trains that cross our continents.  And in the trucks that bring everything to where we can buy them.  To the grocery stores.  The department stores.  To the restaurants.  Everything in the economy that we don’t make for ourselves travels on diesel fuel.  Which is why when gas prices go up diesel fuel prices go up.  Because of the low supply of oil going to our refineries to refine these products.

Oil is at a Disadvantage when it comes to Inflation because you just can’t Hide the Affects of Inflation in the Price of Oil

And there are other things that raise the price of gasoline.  That aren’t purely economical.  But more political.  Such as restrictions on domestic oil drilling.  Which reduces domestic supplies of crude oil.  Political opposition to new pipelines.  Which reduces Canadian supplies of crude oil.  Special ‘summer’ blends of gasoline to reduce emissions that tax a refinery’s production capacity.  As well as our pipeline distribution network.  Higher gasoline taxes.  To pay for roads and bridges.  And to battle emissions.  The ethanol mandate to use corn for fuel instead of food.  Again, to battle emissions.  All of which makes it more difficult to bring more crude oil to our refineries.  And more difficult for our refineries to make gasoline.  Which all go to adding costs into the system.  Raising the price at the pump.  Consuming more of our paychecks.  No matter who is buying it.

Then there is another factor increasing the price at the pump.  Inflation.  When the government tries to stimulate economic activity by lowering interest rates they do that by expanding the money supply.  So money is cheaper to borrow because there is so much more of it to borrow.  Hence the lower interest rates.  However, expanding the money supply also causes inflation.  And devalues the dollar.  As more dollars are now chasing the same amount of goods and services in the economy.  So it takes more of them to buy the same things they once did.  One of the harder hit commodities is oil.  Because we price oil on the world market in U.S. dollars.  So when you devalue the dollar it takes more of them to buy the same amount of oil they once bought.

Oil is at a particular disadvantage when it comes to inflation.  Because you just can’t hide the affects of inflation in the price of oil.  Or the gas we make from it.  Unlike you can with laundry detergent, potato chips, cereal, candy bars, toilet paper, etc.  Where the manufacturer can reduce the packaging or portion size.  Allowing them not to raise prices to reflect the full impact inflation.  They still increase the unit price to reflect the rise in the general price level.  But by selling smaller quantities and portions their prices still look affordable.  This is a privilege the oil industry just doesn’t have.  They price crude oil by a fixed quantity (barrel).  And sell gasoline by a fixed quantity (gallon).  So they have no choice but to reflect the full impact of inflation in these prices.  Which is why there is more anger about high gas prices than almost any other commodity.

Perhaps we can lay the Greatest Blame for the Current Economic Malaise on the Government’s Inflationary Monetary Policies

Current gas prices are hitting record highs.  And this during the worse economic recovery following the worst recession since the Great Depression.  Gas prices and the unemployment rate are typically inversely related to each other.  When there is high unemployment people are buying less gasoline.  This excess gasoline supply results in lower gas prices.  When there is low unemployment people are buying more gasoline.  This excess demand for gasoline results in higher gas prices.  These are the normal affects of supply and demand.  So the current high gas prices have little to do to with normal economic forces.  Which leaves government policies to explain why gas prices are so high.

Environmental concerns have greatly increased regulatory policy.  Increasing regulatory compliance costs.  Which has greatly discouraged the building of new refineries.  And making it very difficult to build new pipelines.  Which tax current pipeline and refinery capacities.  A problem mitigated only with their restriction on domestic oil production.  The current administration has pretty much shut down oil exploration and production on all federal lands.  Reducing crude oil supplies to refineries.  These environmental policies would send gas prices soaring if the economy was booming.  But the economy is not booming.  In fact the U-6 unemployment rate (which counts everyone who can’t find a full time job) held steady at 14.7% in September.  So an overheated economy is not the reason we have high gas prices.  But the high gas prices may be part of the reason we have such high unemployment.

Perhaps we can lay the greatest blame for the current economic malaise on the government’s inflationary monetary policies.  Inflation increases prices.  Especially those things sold in fixed quantities priced in dollars.  Like oil.  And gasoline.  The price inflation in refined oil products is like a virus that spreads throughout the economy.  Because everyone uses energy.  Especially the food industry.  From the farmers driving their tractor to work their fields.  To the trucks that take grain to rail terminals.  To the trains that transport this grain to food processing plants.  To the trucks that deliver these food products to our grocery stores.  From the moment farmers first turn over their soil in spring to the truck backing into to a grocery store’s loading dock to consumers bringing home groceries in their car to put food on the table fuel is consumed everywhere.  Which is why when gasoline prices go up food prices go up.  Because we refine gasoline from the same crude oil we refine diesel fuel from.  Oil.  Creating a direct link between our energy policy and the price of food.

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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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The Fed believes the Third Time’s the Charm when it comes to Printing Money so here comes QE3

Posted by PITHOCRATES - September 16th, 2012

Week in Review

The Keynesians will print more money.  QE3 is on its way.  The third round of quantitative easing.  Because QE3 will pull this economy out of recession.  Just as they said QE2 would.  Just as they said QE1 would before that.  And just because they failed the last two times they tried this doesn’t mean it will fail this time, too (see Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates by Jeff Cox, CNBC, posted 9/13/2012 on Yahoo! Finance).

The Fed said it will buy $40 billion of mortgage-backed securities per month in an attempt to foster a nascent recovery in the real estate market. The purchases will be open-ended, meaning that they will continue until the Fed is satisfied that economic conditions, primarily in unemployment, improve…

Enacting the third leg of quantitative easing will take the Fed’s money creation past the $3 trillion level since it began the process in 2008.

According to the Wall Street Journal the Fed balance sheet stood at just below $1 trillion prior to the Great Recession.  That is, pre QE1.  Since then the Fed has increased that to $2.8 trillion prior to QE3.  An increase of 180%.  QE3 will take that above $3 trillion.  And increase from the level before the Great Recession of over 200%.    Meaning the monetary base after QE3 will be more than three times the monetary base prior to QE1.  And all during the Obama presidency.  In less than four years.  And just like QE1 and QE2 this latest quantitative easing won’t work either.  For like so many are saying if quantitative easing worked there would not have been a need for QE2 let alone QE3.  So it won’t help the economy.  But it will have an effect.

In addition, he addressed concerns that savers are being penalized from low interest rates, saying that the policy has allowed for growth in other areas.

“While low interest rates impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates promote,” he said.

Small business owners have no idea of the full impact of Obamacare on their businesses.  So they are not hiring anyone anytime soon.  And then there’s Taxmageddon.  The largest tax increase in history to occur 1/1/2013.  Environmental policy.  And so on.  These are the things preventing people from hiring new employees.  And no amount of cheap money will change that.  Some people understand this.  Keynesians don’t.  In fact, the only thing they understand is spending money.  The key to economic activity is putting as much money into the hands of spenders as possible.  So they spend it.  And the people that get this money spend it, too.  And the people that get this money spend it after they get it.  And so on.  According to the Keynesian multiplier.  Where spending begets more spending.  Spending is good.  But savings is not.  According to Keynesians.  They see saving as lost economic activity.  Leakage from the economy.  So they want people to save as little as possible.  So they like low interest rates.  Because it provides no incentive for people to save.  So Keynesian policies penalize savers.  They understand this.  And they approve of this.

Of course with all the money the Fed is printing there will be inflation.  It’s just a matter of time.  We’d have double digit inflation right now based on the growth of the monetary base if there weren’t worse economies than the U.S. economy.  Some Eurozone countries are so bad no one wants to invest in their economies.  So they’re parking their money in the U.S.  Even at these low interest rates.  Even paying banks (i.e., negative interest rates) to hold their money.  Because it is the safest alternative.  But how long can this last?

The stock market, which had been slightly positive prior to the decision, shortly after 12:30 p.m., surged while bond yields, particularly farther out on the curve, jumped higher. Gold and other metals gained at least 1 percent across the board while the dollar slid against most global currencies…

Washington conservatives have been critical of the central bank’s money creation, which has caused its balance sheet to swell to $2.8 trillion. They worry that the growing money supply will lead to inflation, which has reared its head in food and energy prices but has remained tame through the broader economy.

Bill Gross, who runs bond giant Pimco, said the new round of easing would take the Fed’s balance sheet up to nearly $3.5 trillion if the purchases continue for a year.

“That potentially is reflationary,” he told CNBC. “We’re just to have to see if it works.”

Bonds issued when interest rates were higher have increased in value.  Because you can’t buy bonds today at such a high interest rate.  So older bonds (with higher interest rates) are worth more than newer bonds (at lower interest rates).

Gold increases in value when the value of the dollar drops.  Because the price of gold is in dollars.  So when you put more dollars into the monetary base you depreciate the dollar.  And raise prices.  Because it takes more weaker-dollars to buy the same things the once stronger-dollars bought.

So far inflation has been confined to food and energy.  Where it is harder to hide.  Especially oil.  Because it’s sold by the barrel for dollars.  So when you make the dollar weaker you send up the price of oil.  And everything you make from oil.  Like gasoline.  Which is why gasoline prices are approaching record highs.  Not because of a booming economy.  But because of inflation.

There is inflation in food, too.  But you can hide this a little.  You can keep prices steady while reducing portion sizes.  So the price per unit portion sold is higher.  But people don’t notice this as much as they do the price at the pump.  Where they cannot reduce the portion size.  Because gas is sold by the gallon.  Which means the full effect of Keynesian inflation monetary policy is reflected in the gas price.  Which is why high gas prices anger us more than just about everything else.

So inflation is here.  And at the rate they’re printing money it’s going to explode sooner or later.  For they’re printing it at a far greater rate than they did during the stagflation of the Seventies.  Giving Jimmy Carter that high misery index (unemployment rate plus the inflation rate).  A policy that did not help Carter’s economy.  Nor will it help the current economy.  In fact, it will only take a bad economy and make it worse.

If printing money worked the Seventies would have been a decade of unprecedented growth.  But they weren’t.  In fact all nations that printed money suffered from high inflation.  And poor economic growth.  Yet they pursue the same policy today.  Why?  Because if they don’t it’s an admission that their policies have been failures.  At the same time admitting that the Republican policies are better policies.  And they would rather throw the country into another depression before admitting that.

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The Drought and Methanol Mandates decimate Corn Crops and High Quality Prime Cuts of Beef

Posted by PITHOCRATES - August 26th, 2012

Week in Review

Restaurants are one of the greatest job creators.  Because there are so many of them.  And if they open for breakfast, lunch and dinner that’s a lot of food servers, chefs, cooks, barkeeps busboys, dish washers, supervisors and managers.  Running a restaurant is hard.  It’s the number one business that fails.  Because margins can be thin.  And the amount of competition great.  But the people who mortgage their homes to open up a restaurant put a lot of people through college.  Gave single parents flexible hours to work around their kids schedules.  And let some people just do what they love.  Work with people.  Create great food.  And provide exceptional service.

This recession has been hard on restaurant owners.  As eating out is one of the first expenses a family cuts in their family budget.  Now things are going to get even harder (see Peter Luger Steak Prices May Soar as Drought Culls Herds by Peter S. Green and Esmé E. Deprez posted 8/21/2012 on Bloomberg).

The worst Midwest drought since 1956 has scorched crops and sent the price of corn, the main ingredient in livestock feed, up 62.8 percent since mid-June. Ranchers are culling herds to avoid feed costs, flooding the market with cheap supplies of beef.

There’s a parallel decline in the quantity of animals that yield the highest-quality prime cuts, which require months of extra feeding. The shift will be felt in steakhouse menus down the road.

So prices will go up and the quality of the meat will go down.  Which raise the prices on their menus.  And drive patrons away.  Because they, too, are facing higher costs in their lives.  And they can’t afford to pay more for less.

The drought prompted President Barack Obama to help farmers with $170 million in government meat purchases.

“We’ve got a lot of freezers,” Obama told a campaign rally in Council Bluffs, Iowa, on Aug. 13. The government is also considering cuts to ethanol mandates after livestock producers complained that too much grain is being diverted to make fuel.

“We’ve got a lot of freezers.”  The government has trillion dollar deficits in all four years of Obama’s presidency and he’s still spending money that he doesn’t have.  Which isn’t very smart.  And will do little.  For how is buying this meat going to solve the problem everyone is having in the food industry?  The high price of feed corn?

Why not just do the easy thing?  The thing that doesn’t increase the debt?  Don’t consider cutting methanol mandates.  Do it.  Cut them all.  Eliminate every last one.  Let gasoline be gasoline.  And food be food.  If we don’t divert 40% of the corn crop to the methanol industry that will nearly double the corn crop.  Now that would make an impact that would go a long way in lowering food prices for every American.  From eggs to chicken to milk to cheese to hamburger to prime cut steaks.  Lower prices for everyone.  And more economic activity.  From the extra money households don’t have to spend on groceries.  So they can go out during the week for dinner and a movie.  Helping all those restaurants.  And all the people who work in them.

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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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Mercantilism, Royal Navy, Napoleon, Pax Britannica, Corn Laws, David Ricardo, Comparative Advantage, European Union and NAFTA

Posted by PITHOCRATES - May 22nd, 2012

History 101

Mercantilism gave Britain the Royal Navy which Ushered in the Pax Britannica

Great Britain had a rough go of it at the end of the 18th century.  They lost their American colonies in the American Revolutionary War.  A war that started over the issue of taxation to pay for the previous Seven Years’ War.  So instead of securing new revenue to pay down old debt they incurred new debt.  The French Revolution closed out the century.  Causing concern for some in Britain that their monarchy may be the next to fall.  It didn’t.  For the constitutional monarchy and representative government in Britain was a long cry from the absolute monarchy that they had in France.  So revolution did not come to Britain.  But war did.  As the French expanded their revolution into a European war.  Pulling the British back into war with their old enemy.

With a large conscripted French Army and the concept of total war France made total war.  Napoleon Bonaparte won a lot of battles.  Conquered much of Europe.  Even marched back and conquered Paris.  Proclaimed himself emperor of France.  And continued waging war.  Including an ill-conceived invasion of Russia.  Which marked the beginning of the end for Napoleon.  And the French Empire.  Weakened from war France saw her old nemesis, Great Britain, rise as the first superpower since the Roman Empire.  And like the Romans’ Pax Romana Britain entered a century of peace.  Pax Britannica.

The reason the British could do this was because of their mercantile past.  They set up colonies and international trade networks.  And they used the proceeds from that lucrative trade to finance the greatest naval power then in the world.  The Royal Navy.  And the Royal Navy would help keep the peace in the Pax Britannica.  She became the world’s policeman.  Making the world safe for trade.  Especially on the high seas.  But then something interesting happened.  She broke from her mercantile past.  Because they saw the shortcomings of mercantilism.  One of which produced wealthy landowners at the expense of a hungry population.

When the British repealed the Corn Laws in 1846 Food Prices fell and the Standard of Living Rose 

The British Corn Laws were a series of laws protecting those who grew cereal crops.  The stuff we grow that has edible grains.  Corn, rice, wheat, barley, etc.  What we call staple crops as they form the basic sustenance of humans everywhere.  We grow these in greater abundance than all other foods.  And when you look at the grain size you come to one realization.  It takes a lot of land to grow these crops.  And who owns large tracts of land?  The landowning aristocracy.  A small group of people with a lot of wealth.  And a lot of political influence.  Hence the Corn Laws. 

The Corn Laws were legislation with one goal.  To prevent the British people from buying less expensive food.  By either forbidding any importation of cheaper grains until the domestic price had reached a certain price level.  Or adding tariffs to the less expensive imports so the landowners could still sell their grains at higher prices.  Thus preserving their wealth.  And they made specious arguments about how lower-priced food was actually bad for the people.  For it was just a way for manufacturers to maximize their profits.  For if food was cheaper they could pay their workers less.  Being the greedy bastards that they were.  So the only fair thing to do was to keep food prices high.  To keep the living wage high.  To force manufacturers to pay their workers more.  You see, the only way to help the poor and middle class was to let the wealthy landowners become even wealthier.  By keeping the price of the food they sold high.

Opposition grew to the Corn Laws.  People studied the works of their fellow countrymen.  Adam Smith and David Hume (both Scottish).  And the Englishman David Ricardo.  All great economists and thinkers.  Who were all proponents of free trade.  Ricardo’s Comparative Advantage basically proved the case of free trade over the protectionism of mercantilism.  Eventually the political power of the landowners could not overcome the economic arguments.  Or a famine in Ireland.  And, in 1846, they repealed the Corn Laws and adopted free trade.  Food prices fell.  Leaving people with more disposable income.  To purchase the goods the Industrial Revolution was making.  Increasing their standard of living.  While small famers had to leave their farms being unable to farm efficiently enough to pay their bills at the prevailing prices.

The Success of NAFTA proves David Ricardo’s Comparative Advantage

Mercantilists and other opponents to free trade like to point at the human costs.  Small farmers losing their farm.  Just so they can preserve some semblance of privilege to protect the high prices in their industry.  But it was becoming more and more difficult to make the argument that the masses were better off paying higher prices.  Because they’re not.  Lower consumer prices increase the standard of living for everyone.  Higher living standards create healthier living conditions.  And reduces child mortality.   For the greatest killer of children in the world is poverty.

The British were both a military and an economic superpower during the 19th century.  But someone was chasing her.  The Untied States.  Who was feeling her economic oats.  Her economy would catch up and surpass the British.  Making it the mightiest economic power of all time.  How did this happen?  Two words.  Free trade.  The United States was the largest free trade zone in the world.  The economic advantages of all those states trading with each other freely across their state borders made Europe stand up and take notice.  And in response created treaties that ultimately led to the European Union and the Eurozone.  To replicate the large free trade zone of the United States.

Back across the Atlantic the Americans, Canadians and the Mexicans took it up a notch.  And created the North American Free Trade Agreement.  NAFTA.  Extending the free trade that existed in each of their countries across their international borders.  The mercantilist fought against this.  Because protectionism, restrictions and tariffs helped the privileged few protect the high prices in their industry.  In America they talked about a great sucking sound as all American jobs went to low-wage Mexico.  Some manufacturers did move to Mexico.  Primarily because like the small farmers in Britain after the repeal of the Corn Laws they could no longer sell at prices to meet all of their costs.  But it was not as the mercantilists predicted.  Yes, imports increased.  In 2010 they were up 235% from pre-NAFTA 1993.  But exports were up, too.  Some 190% for the same period.  Proving Ricardo’s Comparative Advantage.  By focusing on what we do best and trading for everything else all countries do better.

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