07.01.2008 0

Biofuels and Inflation Driving Up Food Prices Worldwide

  • On: 07/20/2008 16:29:52
  • In: Monetary Policy
  • There really is nothing governments cannot muck up.

    A combination of global inflation and the legally-mandated production of biofuels like ethanol are driving up the prices of basic foodstuffs worldwide, prompting the Chairman of the World Bank Chairman to call on the Group of Seven to increase emergency food assistance. At least 33 countries around the world are facing civil unrest due to high food prices and shortages.

    Elizabeth Stuart of Oxfam is attributing the increased costs to biofuel production:

    “’Half of the increase in the demand for major food crops was due to the move to biofuels,’ she said. ‘These have dubious environment benefits, and by driving up prices, are crippling the lives of the poor. … The [World] Bank, with other international institutions and the G7, must come up with a joint plan to tackle this crisis.’”

    Sold as a fossil fuel alternative, and now mandated to be used by law across the country, ethanol production now threatens to cause worldwide hunger. It’s yet another reminder of how politicians adopt a new fad – like children running out to get friendship bracelets – without thinking of even the near-term implications.

    In addition, the additional cost of fuel and oil-based products has made the production and delivery of food more expensive, adding even more to the costs.

    Larry Kudlow notes the relationship between the rise in global commodities and the falling value of the dollar, noting negative impacts upon the U.S. domestic economy:

    “…[T]he continued decline in the value of the dollar … has permitted the global commodities boom (energy and corn) to leak into higher U.S. inflation. Bulging commodity costs have depressed the profits of non-financial domestic businesses…”

    These are all things that government could have prevented by not getting involved, from the ethanol mandate to increasing the money supply, proving once again the government which governs least, governs the best.

    ALG Perspective:
    The crisis, one that could cost millions of people their lives, is wholly manufactured by governments. The blood of the starving will be on the hands of the radical “Greens” and the willing stooges who have mandated this famine. While the World Bank is calling for an increase in emergency food aid, that policy will do nothing to bring rising costs under control. The Group of Seven, as it meets, should address these problems by calling for an end to biofuels and beginning a coordinated effort to pull excess money out of circulation. Those are two things which governments the world over do have power to do: remove artificial mandates and onerous regulations which have very negative implications for the global economy, and keep global inflation under control. ALG News will not be holding its breath.

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