AP: Biofuels playing a role in the "worst bout of food inflation since 1990"
Here's the deal: ethanol is not the only reason that the average price of a bowl of cereal and milk is moving from 44 cents last year to 49 cents this year to an expected 56 cents next year. But, as AP writer Lauren Villagran explains, a weak U.S. dollar, high fuel prices and China's growing economy don't hide the fact that the rapid increase in corn ethanol production is affecting people at the grocery store. And so, the "worst bout of food inflation since 1990" does have something to do with all those millions of gallons of etahnol. And are you ready for this tidbit: "China will import almost 50 percent of the world's oilseeds within a decade, becoming the world's largest importer, according to estimates from the Organization for Economic Cooperation and Development." That will affect food and biofuels, no doubt. The upshot of Villagran's article is that these prices are part of a complex, global issue. Will it follow that more people will demand high-efficiency, low-liquid-fuel-using cars pronto? Or will Americans just buy steak less often?
[Source: AP]
Reader Comments (Page 1 of 1)
steven 4:14PM (10/09/2007)
I'm not an economist (as my next line will prove), but isn't inflation really the increase in prices based on a weakening dollar, not the increase in prices due to the increased costs of the raw materials used to make those products? Ask a farmer these days. After years of getting hammered, this good news for them. With corn flakes going through the roof, I eat Rice Chex!
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MikeW 10:31PM (10/09/2007)
Well it is not the 1% deportation rate of the 3 million illegal aliens.
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bison 11:06AM (10/10/2007)
> isn't inflation really the increase in prices based on a weakening dollar, not the increase in prices due to the increased costs of the raw materials used to make those products?
Inflation is primarily caused by the government increasing the amount of money in circulation via the Federal Reserve. Basically the Fed prints money and "loans" it to the government. Since the amount of money is increased without a corresponding increase in goods and services, this in effect devalues the dollar and makes everything more expensive for everyone.
Politicians on both sides love this "solution" because it's basically a hidden tax -- people don't see it happening, and even if they do, most of them don't understand it.
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