Back on February 8, 2007, Howard S. Katz blogged:
"Hamburger at a price of $5.00 per pound (cheapest grade); starvation in Mexico; food shortages around the world: These are some of the blunders which are just around the corner (next 1-2 years) due to the actions of the U.S. Congress, the Government of Mexico and our paper money system.
"You are undoubtedly aware that every time you buy a gallon of gas these days, 10% of it is ethanol. Ethanol is simply ethyl alcohol. It is the same stuff which is in wine, in beer and in vodka and which makes us take leave of our senses when we drink too much. It is, however, a perfectly adequate substitute for gasoline, and were car engines designed for it they could run on fuel which is 100% ethyl alcohol.
"In 2005, Archer, Daniels, Midland (the world’s largest processors of soybeans, corn, wheat and cocoa) persuaded the U.S. Congress to vote a subsidy of 51¢ per gallon to convert corn to ethanol.However, the manufacture of ethanol from corn is not a very efficient process. It takes a lot of corn to make a small amount of ethanol. David Pimentel (professor of agriculture at Cornell) estimates that it would take 100 percent of the country’s corn crop to increase the fuel supply by 7%. "
Larwyn just e-mailed:
"Inflation directly caused by Ethanol on our Grocery bills is going to make the increases in SSI, Food Stamps and other entitlement more than would be required. Last week when I sent out the information on the nitrates and phosphates growing algae and killing ponds and streams, I noted the RISE IN WHEAT PRICES - And why do you think we are now IMPORTING WHEAT - BECAUSE WE'RE PLANTING TOO MUCH CORN!!!
NOW THERE IS A WHEAT SHORTAGE!!! Guess the REPUBS from the farm states will soon be quoted "LET THEM EAT RICE!!"
Now, Rick Moran of American Thinker blogs that:
"Fallout from the ethanol scam continues to hit the economy. Not only has the rise in the price of corn due to diverting part of the the crop for fuel made much of the food we buy in the grocery store more expensive, now the drive to plant more corn for ethanol production has caused a shortage in wheat."
There is a two prong problem. First, the Greenspan Fed has overly expanded the money supply, with the result that dollars are held around the world, not only by governments like Japan and China, but also by private citizens. A student from Russia told me that the likelihood of small Russian dollar holders selling is going to increase as the dollar depreciates (and it has just hit all time lows). Small holders of dollars around the world have no more incentive to hold dollars than those who watched the Nasdaq plunge in '00-'02 had an incentive to hold on to the devalued tech stocks.
Second, through government intervention the Bush administration has worsened the problem by artificially increasing demand for corn just at the point where commodity demand is exploding around the world.
The underlying problem, though is government intervention, whether you call it Federal Reserve Bank policy or whacky energy subsidies. The Fed's claim to being a competent manager of the money supply deserves increased scrutiny and will likely get it as inflation worsens.
Showing posts with label corn. Show all posts
Showing posts with label corn. Show all posts
Saturday, September 15, 2007
Sunday, May 27, 2007
Ethanol and Inflation
Don Surber of the Charleston Daily Mail blogs that Heather Stewart of the London Observer has covered the story that Al Gore's fight against global warming is now starving the third world. Heather Stewart notes that America's thirst for environmentally friendly biofuels is driving up food prices around the world as farmers use corn for ethanol rather than food.
In February, Gold Bug Howard S. Katz blogged that
"In 2005, Archer, Daniels, Midland (the world’s largest processors of soybeans, corn, wheat and cocoa) persuaded the U.S. Congress to vote a subsidy of 51¢ per gallon to convert corn to ethanol. This means that, when you put 10 gallons of gas in your car these days at a pump price of $2.25/gallon, you are actually paying $2.76 for the ethanol gallon. You pay $2.25 at the pump, and another $0.51 is taken from you by the Government...the manufacture of ethanol from corn is not a very efficient process. It takes a lot of corn to make a small amount of ethanol. David Pimentel (professor of agriculture at Cornell) estimates that it would take 100 percent of the country’s corn crop to increase the fuel supply by 7%...With this extra demand for corn, the price of corn started to rise, and between August 2006 and January 2007 the price of corn almost doubled (from $2.20/bu to $4.20/bu)."
Katz also pointed out that the increasing corn prices would filter into meat prices since corn is a key foodstuff for cattle. As well, he noted it is pressuring the cost of food Mexico.
Serber reminds us to:
"not blame the United States because Zimbabwe, which once exported food, must import it thanks to Robert Mugabe's racist seizure of farmlands."
Of course, third world governments are corrupt, and naive, left wing idealists play into government interventionists' and inflationists' hands.
Surber adds:
"Last month, food prices rose 4% nationally....Corn product chips, tortillas, enchiladas, will go up 25 to 30% at the restaurant level if things continue as they are now...Analysts blame a combination of drought, freezing weather, and the rising demand for corn due to the popularity of ethanol. With ethanol production expected to double in the next four years, some analysts say today's prices may look like a bargain in comparison."
But the chief cause of rising prices, Fed monetary policy, is excluded from this list. Back in February Katz also predicted that beef prices would rise thanks to Congress's ethanol subsidy. But the policy underlying inflation is the Fed's.
Surber now notes that:
"Another favorite Memorial Day snack that may take a bite out of your wallet is beef.My Pittsburgh bureau chief supplied the reality check by actually buying groceries: I noticed that the chicken on special this week, fryers and split fryers etc, generally priced at $.99 Lb are on special at $1.19. Filet Mignon special last year at $6.99 lb for whole filet is $8.99. Guess you could say ethanol production hurts the poor and the rich!"
Of course that is true. But blaming particular causes for price increases plays into the inflationist establishment's hands. There are two US causes to the problem that Don Surber notes: (1) Government intervention resulting in poorly thought-through policies like ethanol and (2) price inflation due to the Fed's monetary expansion. A third problem is third-world corruption. A fourth problem is European jealousy of and hostility toward America. It difficult for me to talk about the London Observer or Heather Stewart or Europeans' opinions of America with a straight face. I'd prefer to leave them running in place on hamsters' treadmills, swinging from trees and eating bananas, as long as they don't run wild and return to their millenial habit of murdering Jews.
Both of the policies, government intervention and inflation, make corn and beef prices higher, hurting almost everyone except for those who benefit from them, i.e., Archer Daniels Midland, inflationist bankers, big business, hedge fund operators and real estate developers.
In February, Gold Bug Howard S. Katz blogged that
"In 2005, Archer, Daniels, Midland (the world’s largest processors of soybeans, corn, wheat and cocoa) persuaded the U.S. Congress to vote a subsidy of 51¢ per gallon to convert corn to ethanol. This means that, when you put 10 gallons of gas in your car these days at a pump price of $2.25/gallon, you are actually paying $2.76 for the ethanol gallon. You pay $2.25 at the pump, and another $0.51 is taken from you by the Government...the manufacture of ethanol from corn is not a very efficient process. It takes a lot of corn to make a small amount of ethanol. David Pimentel (professor of agriculture at Cornell) estimates that it would take 100 percent of the country’s corn crop to increase the fuel supply by 7%...With this extra demand for corn, the price of corn started to rise, and between August 2006 and January 2007 the price of corn almost doubled (from $2.20/bu to $4.20/bu)."
Katz also pointed out that the increasing corn prices would filter into meat prices since corn is a key foodstuff for cattle. As well, he noted it is pressuring the cost of food Mexico.
Serber reminds us to:
"not blame the United States because Zimbabwe, which once exported food, must import it thanks to Robert Mugabe's racist seizure of farmlands."
Of course, third world governments are corrupt, and naive, left wing idealists play into government interventionists' and inflationists' hands.
Surber adds:
"Last month, food prices rose 4% nationally....Corn product chips, tortillas, enchiladas, will go up 25 to 30% at the restaurant level if things continue as they are now...Analysts blame a combination of drought, freezing weather, and the rising demand for corn due to the popularity of ethanol. With ethanol production expected to double in the next four years, some analysts say today's prices may look like a bargain in comparison."
But the chief cause of rising prices, Fed monetary policy, is excluded from this list. Back in February Katz also predicted that beef prices would rise thanks to Congress's ethanol subsidy. But the policy underlying inflation is the Fed's.
Surber now notes that:
"Another favorite Memorial Day snack that may take a bite out of your wallet is beef.My Pittsburgh bureau chief supplied the reality check by actually buying groceries: I noticed that the chicken on special this week, fryers and split fryers etc, generally priced at $.99 Lb are on special at $1.19. Filet Mignon special last year at $6.99 lb for whole filet is $8.99. Guess you could say ethanol production hurts the poor and the rich!"
Of course that is true. But blaming particular causes for price increases plays into the inflationist establishment's hands. There are two US causes to the problem that Don Surber notes: (1) Government intervention resulting in poorly thought-through policies like ethanol and (2) price inflation due to the Fed's monetary expansion. A third problem is third-world corruption. A fourth problem is European jealousy of and hostility toward America. It difficult for me to talk about the London Observer or Heather Stewart or Europeans' opinions of America with a straight face. I'd prefer to leave them running in place on hamsters' treadmills, swinging from trees and eating bananas, as long as they don't run wild and return to their millenial habit of murdering Jews.
Both of the policies, government intervention and inflation, make corn and beef prices higher, hurting almost everyone except for those who benefit from them, i.e., Archer Daniels Midland, inflationist bankers, big business, hedge fund operators and real estate developers.
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