Tuesday, February 15, 2011

Global Doomage

In case anyone missed NASCAR recently, then you might have missed them testing E15 fuel. That's right, government mandated bio-fuel is going up from 10% to 15%. Which means even more corn will be turned into ethanol and mixed with gasoline to power vehicles. As a result engines have to be tinkered with to compensate for the loss of energy due to the increase in ethanol content.

Meanwhile the likes of World Bank President Robert Zoellick are warning on the rise of food prices globally. Ever since the concerted push for green energy, the price of things like tortillas has done up - need corn to make them. Cost of meat has also gone up - corn is used to feed cattle. Supply and demand should hold here; but when a national government artificially distorts a market to push dubious goals via monetary bribes, the supply will follow the greatest profit which in this case is government green subsidies. Since the United States exports so much food, this distortion causes global ripples. Which means poor people in places like Egypt become even more impoverished because their limited money has to pay for food who's price has zoomed up. As more money is spent on food, there is less for other things which means other sectors of the economy will starve of cash flow. Which means such dreaded things as recession and rebellion can happen. All because of misguided government meddling based on dubious science. If you want a recipe for a new Bastille Day, this is it.

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