Sunday, August 31, 2008
So much corn is grown in Iowa that it grows out of gutters, sewers, city sidewalk cracks, and ditches. Yet, the world needs to be fed so company's like Monsanto develop hybrids that accelerate growth. I was always taught that "if it grows too fast, it's a weed." My cartoon suggests that there maybe costs as well as benefits to using pesticides and herbicides to genetically manufacture food.
Meet Ibrahima Coulibaly from Mali and James Macha from the U.S. Both are cotton farmers, but with vastly different experiences. The American farming subsidies that support James have a negative impact on farmers like Ibrahima, who are trying to climb out of poverty. The result is communities in poor countries face conditions that make them more vulnerable to crime, conflict, or even terrorism. How can rich and poor countries work together so that there is a level playing field?
Suppose all agricultural subsidies were removed which I think is good since the free market will be allowed to operate. I don't believe that countries like Mali will be able to compete since the US and EU have economies of scale and high factor endowments. It's because of subsidies that corn, wheat, and rice are overproduced and exported to those countries. Africa is subject to doughts which can eliminate a harvest. Corruption is so high in Africa that the free market does not work and farmers have little incentive to produce since the crops will be stolen or nationalized. Political instability is also a reason. I think subsidies are good for Africa since they ensure that there will be food to eat.
Charles Potter, KWPC, interviews Dr. Edmond Seifried, Lafayette College in this video. Dr. Seifried predicts that interest rates will increase to 3 or 3.5 by the year's end, commodity prices will peak soon, and fundamentals favor a recession in 2009.
For those in the FED challenge, Dr. Seifried mentions that Richard Fischer, Dallas Fed, has voted against Ben Bernanke every time when the FOMC wanted to lower interest rates. A link to an interview with the Dallas President is here. According to what Seifried calls the "Fischer Effect" a depreciating dollar gives foreign suppliers little incentive to keeping supplying oil to US since the buying power of the dollar is weakened.
I disagree. The last I looked trade was voluntary and the US has a very stable government. When you think about, there's only a couple of things a foreign supplier can do with a US dollar. They can either spend the dollar on US goods or buy US capital. Either option will appreciate the dollar. Even if the US dollar is sold to another country, the other country has the same two options. The dollar will return either as an export or a credit in our capital account. Dr. Seifried is a nationally known speaker and is heads and heels above me. I wondered if the Fischer Effect was meant to be a play on words after Irving Fischer. After all, an increase in the expected rate of inflation will increase nominal interest rates.
Saturday, August 30, 2008
The bad loans made by banks are starting to work their way through the markets. According to Edmond J. Seifried, Lafayette College, housing starts have plummeted from 2.5 million to 1 and construction inventories are growing. The July, 2008, data shows .965 million units--the lowest in 14 years. More consumers are choosing liquidity by paying down their credit card debt and allowing their non liquid assets like homes go to foreclosure or deteriorate. Energy spikes are making the long commute in New York, as much as 100 miles per day, uneconomical. Suburbs are turning into ghost towns as half million dollar homes are left behind so workers can locate closer to the city. All of this plus skyrocketing prices in food are setting the stage for a slow 2009.
Thursday, August 28, 2008
By now most people know that GMO stands for Genetically Modified Organisms. But how do GMOs affect us, the food we eat, and the environment? Jeffrey Smith, founder of the Institute for Responsible Technology provides a solid general overview in this interview.
The Pinky Show: http://www.pinkyshow.org/
Institute for Responsible Technology: http://www.responsibletechnology.org/
This is an excellent explanation of negative externalities.
Wednesday, August 27, 2008
LUXEMBURG, IA - MAY 9: Iowa farmer Ernie 'George' Goebel pulls a corn planter behind his John Deere tractor while planting corn in a field on the farm he was raised on May 9, 2007 near Luxemburg, Iowa. With the increase in demand for alternative energy some farmers have elected to switch to growing corn in order to produce the profitable ethanol fuel. In the nation approximately 90 million acres of corn are expected to be planted this season. (Photo by Mark Hirsch/Getty Images)
Tuesday, August 26, 2008
BELVIDERE, IL - AUGUST 12: Corn grows in a field August 12, 2008 near Belvidere, Illinois. Despite farmers experiencing the worst flooding in 15 years in the Midwest, the nation's corn harvest is expected to be the second largest in history and soybeans the fourth largest. (Photo by Scott Olson/Getty Images)
Monday, August 25, 2008
Sunday, August 24, 2008
Corn yields are higher in Iowa even after flooding along the Des Moines, Raccoon, Iowa, and Cedar Rivers wiped out fertile land. Genetically Modified Food makes tilling to kill weeds obsolete and corn resistant to infection from Japanese Beetles who like corn silk. Corn is now planted closer together and the pesky male corn has been eliminated. Corn grows at an accelerated rate now. Corn is Knee high by the middle of June. Detasseling machines replace child workers and men have to stand atop the machines to detassel what the machines can't reach. Technology has increased the supply of corn for both biofuel and food consumption as producers respond to price incentives. Innovation brings some unintended consequences. Iowa has suffered from multiple tornadoes which bring high winds. The pesticides used to control approximately seven types of weeds found in corn fields have cross-pollinated organic crops. The flooding and winds that reach 80 mph carry Roundup to water supplies. One must weigh the costs and benefits of GMO's but I would bet that the expected value of GMO's are greater than the expected costs.
Saturday, August 23, 2008
www.eusem.com: The story in the film "GM food and you" is a journey through the maze of complexities surrounding genetic modification. New technologies have a great influence on our daily lives and plant biotechnology is no exception. After all, plants provide us with the food we need to survive. However, plant biotechnology is a controversial area where both the basic research and its application to our daily lives is viewed with suspicion by members of the public. Legitimate concerns have been raised. The content of the film addresses the role genetic modification and plant biotechnology plays and is likely to play in our society. Is GM food safe to eat? What about the impact on our environment? Do we need it? Is all the truth told about GM crops? What about our right to choose? Can GM crops help the third world? See: www.eusem.com
Economics assumes that productive resources are limited and society must make a choice. When a society makes a choice, there's a cost of foregone opportunities. As society has chosen to produce more biofuels such as 85 octane Ethanol. As a result, the demand has increased the price of corn which acts as a signal to producers to plant more corn. Since resources are scarce, producers chose to plant less wheat and feeder corn to plant more corn for Ethanol. As a consequence, both the price of corn and wheat have increased. Many blame the American demand for Ethanol on the food riots in Haiti, Asia, and Mexico. St. Louis based Monsanto claims that the scenerio above represents a false dilemna. The company claims that the yeilds per acre have increased by the use of genetic manufactured food. In short, they maintain that society can have more of both food and biofuels if they are allowed to bioengineer food. This is shown graphically in the movement from point 1 to point 2. I can only believe that this is right. As always, there will be costs and benefits, but I believe the benefits outweight the costs.
In 2006, farmers in Brazil were the third largest adopter of biotech crops globally – planting more than 28 million acres (11.5 million hectares) of transgenic soybean crops. Permalink:
Tags: genetically modified crops gm crop gm crops gmo gmos monsanto soybean
Tuesday, August 19, 2008
I wanted to write something about unemployment, but came up empty handed. Here's some ideas.
I used to work for a paper company, but they folded.
I used to work for a cigarette company, but they went up in smoke.
You can't call me a quitter!! I get fired first.
I wanted to be an economist, but it demanded too much time.
Monday, August 18, 2008
Wednesday, August 13, 2008
The USD continues to fall against the Euro. This means goods like Apple's iPods are cheaper for foreign buyers since the buyers have to supply less of their currency for more of ours. In theory, the USD should appreciate, but I think importing tankers of oil will cause the USD to slip even farther.
Thursday, August 07, 2008
Monday, August 04, 2008
The exchange rate is 500 Francs to 1USD. This makes the 5000 bill worth $10 USD.
Sunday, August 03, 2008
Saturday, August 02, 2008
Friday, August 01, 2008
Econ 101 equates the trade deficit with Net Capital Inflows. So when Americans buy from China, they have to finance the amount that imports exceed exports with borrowing from abroad. The bigger the trade deficit, the more American assets we're selling off. Our debt will imprison US citizens behind a great wall of debt.