Yesterday’s UN food summit sidetracked the issue of high food costs
The United Nations Food and Agriculture Organization High Level Conference on Food Security was held yesterday attended by many of the world’s leaders.
They agreed they would agree to disagree over whether ethanol production from food stocks like corn is causing world food shortages and
high prices until further studies are done.
What amazes me is that all these important people went to all the trouble of traveling to Rome to fix something that is desperately broken and not even talk about what the problem is. They came there to beat up on the United States and George Bush for a failing energy policy of using corn to produce ethanol to be added to gasoline. I search ethanol news on Google everyday. It now takes me a lot longer lately because of all the hype about ethanol causing food riots and world hunger. And sure enough, my research shows that we are causing a world food problem. And it is being caused by our faulty energy policy related to adding ethanol to gasoline. But it is not the fault of it being made from corn, which is why the summit in Rome failed, because it can be proved we grow nearly enough extra corn to offset the amount we use to produce ethanol from. In fact last year, the bottom almost fell out of the corn market because so much of it was planted and harvested with the promise of getting rich selling it to make ethanol.
I am not the only one complaining. Argentina, Venezuela, and Cuba also stood up declaring that it’s ridiculous for them to have gathered there coming away deciding to study further what the impact of making ethanol from corn is having on food prices when study after study and expert after expert have already identified the problem, speculating in the commodities futures market on everything from gold to corn to anything that we have to have, everything that can keep the value of money afloat even in the worst of times, thing we can’t do without, things we would sell our souls to get if it was all there was left to buy. And everyone at that summit knows the real problem, they are just afraid to touch too close to it as long as most of the citizens of the educated world don’t understand it clearly first because they’re own money is surfing on what we rely on instead of their investing in the future by using stocks and bonds to compete for what will turn real profits.
The reason that this is happening is because the value of the US dollar is declining. And there is isn’t an educated businessmen or politician out there that doesn’t know it. There is no shortage of oil. There is no shortage of food, there never has been, not any more than usual. In fact the price of everything is only rising for us and those countries that peg their currencies to ours. It’s those countries that are experiencing the most extreme financial problems where there isn’t enough money for people to buy food which is even causing food riots in many of them. In other countries that haven’t tied their economies to our dollar, the price of food and oil is actually more stable or even dropping because as our dollar slips, the value of their currency rises. In fact charts that show a direct correlation between the rise in the price of oil and the drop in the value of the dollar have been floating around for a long time. But many Americans are oblivious to how the economic gimmicks work that are causing this so I’m going to try to simplify it.
Until recent years, the dollar has been the strongest currency on the planet. In fact we have grown so used to hearing about the price global commodities like oil and corn expressed in our own currency, now that are dollar has gotten so weak with much of the financial markets including our own running from it, we still think when we here how the price of oil goes up in dollars, that it is going up all over the world the same way. But that’s not true at all. It’s just going up for us as our dollar weakens, for the most part. There are reactions in the market that cause it to fluctuate but basically the steady rise in crude oil prices is pegged to the steady decline of the dollar. In fact it is usually the decline of the dollar on any given day that leads to the rise in oil, we are just told reasons that make simpler sense by reporters who think they have it figured out because that is the kind of sense they made of it.
But what is happening is that the decline in the value of the dollar, which is a signal that our economy is heading in a direction that does not provide the kind of confidence to investors needed to let their money ride out in long term investment in new ideas and innovations for the future. This is causing our money marketers to look for places to protect the value of their wealth anywhere they can until they feel confident the US is again a wise investment. We are all familiar with what happened to the property market over the last few years. It really began when Enron fell followed by many other large corporations and investment groups which gave the impression to many that Wall Street was riddled with corruption. So a lot of money left Wall Street heading for higher ground which landed in something that’s traditionally thought to be stable, land.
But when too many people saw land as the best place to secure their future, its value rose to unrealistic highs where the market could no longer move so land became worthless, unless you wanted to live on it. So money managers tried lending their money to the housing market to make it easy to buy homes. But now with the economy failing, too many people can’t afford to pay for the loans they took out on property that was way overpriced. So as using land as a commodity hedge began to show itself as a problem, money has been heading to gold, corn, oil, anything that can help provide a hedge against the sinking value of the dollar. But the logic of this is truly ridiculous because what’s happening is that as the dollar shrinks, the price of everything rises to pay people who are protecting the value of their money which in turn makes the dollar weaker.
A commodity future is the buying of a product before it is harvested, corn, oil, anything with a guaranteed source of supply and demand - commodities. Then it’s sold at it’s going rate but the buyer doesn’t pay for it until the contract is complete. But they have to pay the price agreed in the future contract even if the price has gone down where they pay more than the commodity is worth when the transaction is complete so the contract is only entered into with the anticipation the price will go up so it can be sold for a profit. The price of oil is determined by what futures contractors are agreeing on to sell oil for today that will not be actually sold until a later date
So if oil is 120 a barrel now and I think it will be selling for 150 a barrel in 3 months, then I buy a futures contract locking into today’s price of 120 dollars a barrel. But I don’t have to pay for three months. In fact I don’t have to pay at all, just 5% of how much I am buying. Then after 3 months has passed and oil is selling for 150 dollars a barrel, I can sell what I bought at120 dollars a barrel for 150 dollars a barrel. But if the price happens to drop, I am stuck paying the 120 dollars at a time that oil is selling for less so I lose money.
Usually future contract in any given commodity account for a small percentage of that product being traded. But what’s happened recently, as it did in the housing market, trillions of dollars have headed in the direction of investing in futures contracts. You see a futures contract is a gimmick that although it does represent real products because a profit is going to be made or lost over it, the money has to come from somewhere. But the transaction doesn’t translate into an actual transfer of product through the hands of the people who are at either end of futures contract.
It’s more like going to a bookie where it doesn’t matter, or shouldn’t if a process is not corrupt, how much money is placed on a particular horse or boxer, it has nothing to do with the outcome of the race of contest because the betting process and actual competition are not linked to each other in any way. And that’s basically how the future market is supposed to work because it represents such a small part of the overall market of any given commodity that it can be used as a hedge or for speculation and serves to help establish the going rate of a commodity. But when there is enough money being invested in the commodities market to actually represent the amount of corn or oil being harvested, then betting on the price going up means that indeed it will go up, it has to in order to pay off the contract.
So if this is why the prices of our lifestyle is going through the roof, what does ethanol have to do with causing it to happen?
The answer is twofold and very complicated. First of all, the way we use ethanol is as an oxygenate, not as a fuel. And as an oxygenate, it costs a lot of miles per gallon, maybe even more than if we didn’t use it at all but enough of a loss to weaken our economy while we pretend that it actually helps make us less reliant on foreign oil imports. I mean even if it gave us equal mileage to gasoline, it takes more energy to produce if than it would gives back in miles traveled so it would still make us need more energy from foreign sources.
But it does not give anywhere near the mileage of gasoline nor what they claim, which is 33 percent less power than gasoline. Since it’s added to gasoline at 10%, it means we should get 3.3 % less mileage when using E10 gasoline. But the reports have been consistent since its use began that there is a noticeable difference in mileage from E10 fuel. A 3.3 percent loss would not be noticeable without keeping track of mileage. And those that do keep track of their mileage claim a 10% or more loss, some much higher, when using E10 compared to straight gasoline.
So the value of our nation is declining because we’re placing so much emphasis on a fuel additive that makes the price of everything rise because it takes more E10 gasoline to get us through the work week to keep the economy running. But that’s still not the main reason ethanol is causing the problems in our economy. To see the problem clearly, we have to travel back to 1999 when something happened you are still not being told about, which is when the price of gasoline first started to rise until it hit its current peak today, back when on a really good weekday, it was 77 cents a gallon.
That’s when a reporter from the Washington Times started asking around Washington about whether the additive to gasoline that ethanol replaced called MTBE could be causing a national drought occurring at the time. She didn’t get an answer but the science that lead to her questions made a lot of people nervous in our nations capitol. So the President and his administrators flinched demanding MTBE be taken out of gasoline siting groundwater pollution as the problem. The story was quickly brushed under the red carpet in road in on but MTBE was taken out of gasoline without the public being told about it. It was eventually replaced with ethanol in 2006. MTBE and ethanol are both oxygenates added to gasoline for reasons having to do with air quality even though it makes it more dangerous to breath.
The real problem with oxygenates, which is still causing what’s wrong with the economy today, is that that they make people sick, sicker than the smog it was supposed to get rid of. The problems with our economy first started to surface, although buried so deeply from our view that not even our economic or political leaders were aware of except at the very highest levels, is that when MTBE was secretly taken out of gasoline in 1999, sales of medical related products and services slowed. What you have to understand is that medical services and products, specifically pharmaceutical and over the counter cure-alls, are the biggest profit makers in the world, even over oil and petroleum related products. And if all of a sudden we didn’t need as much gasoline, it would put a pinch on the economy because the people who make that money would have already spent their money before they made it if they had been forecasting profits to be steady but the dropped unexpectedly.
That is not exactly how it works. Money from big industries flows through the worlds banking system keeping it fluid. And if it is projected to keep flowing at escalating rates, then it’s lent out at comparable amounts to what is expected the economy can handle paying it back in. If there is a lot of cash flowing though the worlds banks and it looks like it will continue, then money managers give themselves a lot more freedom to play with investing in lot of directions while not being afraid of losses here and there hoping to cover them by the ones that make great profit, like with publishers of books.
Publishers almost universally lose money on most of what they publish. But it’s those few that become best sellers that they cover the rest with. And if they have some that do exceptionally well, they will invest in more that might or might not make them money during the next publishing season, they will take more risks based on their past sales and the financial cushion their success has created for them. With medical related products doing so well as long as MTBE was in use without money managers knowing what was driving the money market boom, money was thrown around in the trillions of dollars creating what we call the economic globalization of the worlds financial institutions and industries.
But when MTBE use was stopped, money projected from US sales of medical products also slowed. But it had been projected to keep climbing pretty much forever. So as financial managers began to figure out what was driving the medical related profits that were keeping their financial system afloat, MTBE was added back into gasoline. But as it began to effect weather pattern adversely again, it had to be taken out. This happened many times until the trillion-dollar loan to finance the building of refineries to produce MTBE was paid off in 2006. And if that loan was the only problem stopping us from getting rid of oxygenates altogether, then perhaps ethanol would not have replaced MTBE.
The same way that Enron crashed trying to pay for covering up the fact that MTBE was not always being added to gasoline when it was supposed to be while they tried to make the payments on the trillion dollar loan, there are other trillions of dollars in bad loans out there floating around the planet that will not be able to be paid off if Americans do not keep getting sick at the rates they did when MTBE was in use.
So what is really going on is that our country is being looted by certain financial institutions that road the wave of profits made off poor air quality so they can pay off the trillions of dollars they borrowed secured by our federal reserve, which they have to do before we find out what’s going on. And the thing is they believe they’re doing us a great service by putting us through this, that they are patriots for protecting our financial institution by poisoning us for profit because if they were not doing it, the world’s economy would crash, which it looks by the way they are managing it, it’s heading that direction anyway because they don’t have any confidence in their own con game so they’re looting the payments on the loans they’re supposed to be stealing from us to pay them off because they are way in over their heads and don’t understand they’re stealing money that’s going to be worthless if it’s not spent on what they stole it for.
What’s the cure? It’s simple. But it can’t be prescribed by the same people that are causing the disease. And in order to get them out of the way, the average American will have to understand the depth of how bad things have gotten so that they understand the issues as they are, not as they are being represented to them by the people ripping them off. And there’s nothing about the truth that can be educated in a couple of paragraphs or a 30 second sound bite. So perhaps the cure can never be used. But it is simple and the economy will boom again if it can be applied. But it means that a lot of very rich people will have to actually lose the money they lost in their original ventures riding the MTBE wave of illness building what they thought was feasible at the time but failed, this globalizing of the worlds industries around a central banking system.
And they are not going to be happy being told the fairy-go-round ride is over. It means a lot of very privileged and educated people will be using their backs and brains to create a real future rather than sitting back and riding in the broken down cart they built for the rest of us to pull them around in. It would mean going back to where we were before MTBE use started when the prospects for the future were harder but very doable, and starting over only carrying the deficit of the mess they made getting here while losing what little trust we might have had in them then.
The future in the early nineties was good, even great. But the wealthy have grown accustomed to a lifestyle that is so unrealistic that even the thought of a step backwards overwhelms them. So they’re running away trying to take a bunch of money with them that isn’t worth anything without making the people that provide the value of it sick breathing unnecessary pollutants. And in this case, the truth will not set them free. It will set us free but in a world without any money in it because the truth will cause the worlds banking system to crash in on itself. Fortunately for the human race and the future of life on earth, money is not what makes the world go round, people are.
Money equals human effort, something we have an abundance of. There is no shortage of food, oil, or human effort. There isn’t even a shortage of money. The system would actually have worked if we as voters knew better what was going on. But we hired the people we expect to admit they invested their fortunes in the wrong direction to be the authority who informs them that the free ride is over, they crapped out, they rolled snake eyes, that’s the way it goes, that’s the way it goes when we bet the wrong way, it is the same for them.
Once the dust settles, when we rebuild our economy again from the ground up, if we decide to bank our economic future on a casino model like the one we have now, I hope we remember to not elect the same people to run it that do most of the gambling there.
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