Bad joke on households: What do you get when the federal reserve prints dollars like never before, the federal government spends like a drunk at a bar with someone else’s credit card, and “green” idiocy prevents drilling and pipeline construction?
Tell me it’s not true!!
Brazil, the world’s biggest coffee grower, is facing the risk of frost after hail this month, raising the prospect of a 40 percent jump in bean costs after Kraft Foods Inc. and J.M. Smucker Co. already increased prices.
Arabica beans have already jumped 24 percent this year on signs demand is outpacing supply. The shortage will be 6.2 million bags in the crop year starting in October, according to Rabobank International. Kraft, maker of Maxwell House coffee, raised prices three times last year. It estimated in February that North American commodity costs would increase $700 million to $800 million this year, or about 1.5 percent of 2010 revenue.
Well, this is what happens when central banks create money from nothing.
In the past few months, American workers, consumers, and businesses have experienced a sudden and dramatic rise in gasoline prices. In some parts of the country, gasoline costs as much as $4 per gallon. Some politicians claim that the way to reduce gas prices is by expanding the government’s power to regulate prices and control the supply of gasoline. For example, the House of Representatives has even passed legislation subjecting gas stations owners to criminal penalties if they charge more than a federal bureaucrat deems appropriate. Proponents of these measures must have forgotten the 1970s, when government controls on the oil industry resulted in gas lines and shortages. It was only after President Reagan lifted federal price controls that the gas lines disappeared.
Instead of imposing further restraints on the market, Congress should consider reforming the federal policies that raise gas prices. For example, federal and state taxes can account for as much as a third of what consumers’ pay at the pump. The Federal Government’s boom-and-bust monetary policy also makes consumers vulnerable to inflation and to constant fluctuations in the prices of essential goods such as oil. It is no coincidence that oil prices first became an issue shortly after President Nixon unilaterally severed the dollar’s last link to gold.
Basic economics says that when government restricts the supply of a good, the price will increase. Yet Congress continues to reject simple measures that could increase the supply of oil. For example, Congress refuses to allow reasonable, environmentally sensitive, offshore drilling. Congress also refuses to remove the numerous regulatory hurdles that add to the prohibitively expensive task of constructing new refineries. Building a new refinery requires billions of dollars in capital investment. It can take several years just to obtain the necessary federal permits. Even after the permits are obtained, construction of a refinery may still be delayed or even halted by frivolous lawsuits. It is no wonder that there has not been a new refinery constructed in the United States since 1976.
In the “more dire predictions” category, Jim Juback from MSN (moneycentral.msn.com) thinks oil will continue its price rise. He sites geology and geopolitics. I often read his columns and they are quite good on the whole.
He omitted what I believe to be the major cause of this, and other, inflation. Government central banks producing huge quantities of fiat currency.