Just when you thought...
Sultan Bush just now announced a big "aid package" to foreign countries to "help" them deal with rising food prices.
Let's think about this. Part of the rise is local, caused by temporary and typical conditions like a bad rice harvest in Australia. According to economists, widespread global trade should moderate such local effects, because rice will be easily available from other sources to replace the single-country deficiency. Instead, widespread global trade, plus a number of other factors, is leading to huge price spikes EVERYWHERE and IN OTHER COMMODITIES as a result of local effects.
Something is deeply wrong here. The basic theory of trade is probably good, because it has worked before. But the other factors
are creating monstrous distortions, leading to actual deaths.
In other words, somebody or something is manipulating the worldwide economy, and poor people are dying as a result. (Who's the somebody? I'd be inclined to look first at China, only because China is the main practitioner of Mercantilism, war by economic means.)
Will an "aid package" help? No. It will only make things worse, because it will pump extra money into the buying side, which is guaranteed to raise prices even more. And since Sultan Bush finances everything by borrowing from China and devaluing the dollar, this added debt will devalue the dollar a little bit more, making every price a little bit higher.
The real puzzle here: why are no professional economists complaining about this? Why aren't they (at the very least) asking what's wrong? Are they all strongly stupid
, or are they all blackmailed into silence?
= = = = =
Update Jan 2012: Well, now we know what happened. These rising food prices were purely generated by Goldman's speculation.
Bush was insuring that those poor countries were able to pay the prices necessary to keep the speculation running. In other words, he was subsidizing Goldman, just as he did in a MUCH larger way in Sept 2008.
Labels: the broken circle