DISQUS

Subsidy Eye · 1 year ago

Asserting that ethanol subsidies share none of the blame for rising food prices is outrageous. Mr. Ochterski should know better. Only a year ago (when corn was trading at $4), the USDA was crediting the subsidized and mandated diversion of corn into ethanol as having raised the grain's price enough that price-linked subsidies (e.g., marketing loan payments) no longer had to be paid out.

The world's population did not surge, nor did Chinese change their diet, overnight. The surge in the use of corn for ethanol -- 75% of the increase in production over the last three years -- was much more sudden. By citing the expected 8% (or greater) decline in corn production this coming crop year as proof that corn is not the dominant ethanol feedstock, Mr. Ochterski shows a breathtaking ignorance of the market. The problem is that federal mandates require a 25% increase in biofuel (mainly ethanol) use this year.

Hmm. Could rising demand and falling supplies possibly be driving up prices? Naaaaw.

Andrew S. · 1 year ago

While I agree with you that ethanol is probably part of the problem (I am totally against farm subsidies of ANY type for economic and other reasons) the point that I was trying to bring out in this article was the underreported effects of dollar devaluation that are translating to higher prices not only for gas, but also for food and other goods as well. Certainly this is not a one-dimensional issue, because there are certainly food shortages that are contributing whether or not we are subsidizing ethanol production, but dollar devaluation is a MUCH more serious problem in the long-run and we should be taking steps to fix that problem right away.

Subsidy Eye · 1 year ago

You assert that the "dollar devaluation is a MUCH more serious problem in the long-run". Please explain. The fall in the value of the U.S. dollar against other currencies is a response to many factors, and is an unavoidable and necessary correction. There will be winners and losers. Among the losers will be foreigners holding credit instruments and securities denominated in American currency. Among the winners will be sectors of the economy that export.

I am much more conerned about self-inflicted damage, such as ethanol subsidies and mandates, which cost taxpayers and consumers dearly -- and not only consumers in the United States, but in urban slums in places like Haiti and Africa as well.

Andrew S. · 1 year ago

The American Dollar is the world-reserve currency at the moment. If it loses that status it helps nobody. This will destabilize the entire world economy with devastating results.

Some losers include:

People on fixed incomes- Those who receive government entitlements have seen a 50% decline in the real buying power of their checks in the last 5 years alone.

Anyone who earns money in dollars- Study the history of countries which experienced high inflation or hyperinflation. Very few people in those countries had pay raises that kept up with the rate of inflation. In fact, it's mathematically impossible and would only accelerate inflation more.

Anyone who is a fan of US sovereignty- A week dollar means that foreigners can just come and buy up whatever they like for pennies on the dollar. For instance, the Flatiron building and the Chrysler Building in New York City were just bought by foreigners for pennies on the dollar.

Ultimately the economy as a whole is effected- We don't have that many industries that export anymore. We are a services based economy. When Americans see the value of their dollar has eroded they will stop buying as many pedicures and start walking their dog themselves. They might fire the cleaning lady and start doing their own book-keeping too.

If you're really curious what hyperinflation could do to the US I suggest you look at the history of Argentina. A little over 100 years ago they were in the top 5 wealthiest countries in the world. Hyperinflation hit and overnight they became a 2nd world country. Perhaps I should post an article about this soon.

Thanks for the lively discussion!

Subsidy Eye · 1 year ago

It is pretty doubtful that the United States is heading for the hyper-inflation of Argentina (or Turkey, which experienced it for a decade).

But you seem to be suggesting that the fall in the dollar is something that the U.S. Government can easily resist, rather than it being the result of market players loosing faith in the ability of the U.S. economy to yield superiour returns. The United States cannot force the world to hold dollars; indeed, many citizens and banks have been shifting more of their portfolio towards the euro and pound sterling for several years.

If America is concerned about other countries buying up its assets, that process started long ago when it went on a consumption spree financed by willing overseas lenders.