Wednesday, March 12, 2008

Food Subsidies

"In Egypt, food subsidies have been part of life for decades. The poor can buy a loaf of bread for less than one cent, about a fifth the cost of an unsubsidized loaf. ... Scaling back could be risky. Across the Middle East and North Africa, 'this bread subsidy is so politically sensitive that it is very hard to dismantle,' says Akhter Ahmed, a senior research fellow with the International Food Policy Research Institute in Washington. ... Corruption is prevalent. In Egypt, a ton of subsidized flour cost less than a 10th of what it goes for on the black market", WSJ, 4 March 2008.

"China's central-bank governor said a stronger currency isn't the best or only way to fight inflation, countering widespread expectations that the yuan's gains will accelerate as the nation's prices rise at their fastest pace in more than a decade. ... Indeeed, in its October monetary policy report, the People's Bank of China wrote that 'Theoretical economic analysis and the experience of many countries both show that an appreciation of the currency helps contain domestic inflation'," WSJ, 7 March 2008.

The various countries of the world need to rationalize their farm policies, the US included. The first step should be an end to subsidies.

The People's Bank of China's (PBC) analysis seems to be more sophisticated than that of Helicopter Ben & Co. (HB). It would be nice for the PBC to send it to HB. Despite his Harvard and MIT degrees, he might learn something.

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