Why insanity is the new normal
We’ve been hearing about the impending financial apocolypse for months now. When did ‘sub-prime’, ‘credit crunch’, and ‘recession’ become part of the collective lexicon?
When I got my license, gas was $0.98/gallon. It’s now nearly $4. Ouch! What gives? I’ve heard people griping that the government isn’t doing enough to develop biofules and alternative sources of energy as if that will save us from high oil prices. That the government needs to repeal the gas taxes. We need subsidies! Ok, no offense, but those people are idiots.
I offer to you, dear reader, a hypothesis for the rising cost of gas: most of the gas in this country is about 10% corn ethanol. CORN being the operative word. CORN people! Has anyone noticed that the price of corn has gone sky high? Might it be because there’s increased demand due to increased ethanol production? Corn (and grain and basically every other commodity crop) is sitll subsidized by the government and even with those subsidies, prices are going nuts. (I paid $2.39 for 6 eggs last night. Chickens are CORN FED!)
My point? Gas and food prices are linked now and insanity is the name of the game. Scarcity economics. Scarcity economics relies on the premise that people will pay whatever you ask them to if they think they won’t be able to get any tomorrow. Other markets that rely on this theory? College institutions, minerals and gems, and I think water could in 50 years.
In this day and age of mass consumption on a global level, it’s not surprising that we’re seeing an increase in markets ruled by scarcity economics. With all the doom and gloom talk we keep hearing (the planet is dying, you’re going to lose your house, you child will die from pesticide exposure), can you really fault anyone for thinking that they might be the only person left when the sun rises tomorrow? I’d stock up on everything if I bought into that logic.
Read here for more info about ethanol production (including molecular structure!):
Read here for the inspiration for this post:
ETA: Eric brought up a good point and I guess I just assumed it was implied in this post but to clarify….gas and food prices have been artificially low for at least the last 50 years, if not more. Government subsidies kept prices low so now, prices are probably a more accurate reflection of the true cost. Prices are still artificially low!
Here’s my question then: if the government is STILL subsidising gas and agriculture…where’s all the profit going from the higher prices?