Guns or butter Gasoline or Eggs

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 Guns or butter Gasoline or eggs

The other morning we went to the store to buy eggs, and discovered that the cost of eggs had more than doubled since last year. This is largely related to two factors. The first is the increasing cost of oil, which had topped $100 a barrel when last we looked.

The second is the increasing cost of corn, to which eggs are more sensitive than most other food products. The cost of corn has gone up because an increasing amount of it is being diverted to make ethanol. Farmers are planting more corn to help meet the demand. Of course, in order to do so, they must cut down on other crops such as soybeans.

To add to the mix, we must also consider what is happening in China, the world’s second largest producer (and consumer) of corn. Although China is increasing its corn production, and has suspended further expansion of corn- based ethanol industries in favor of non-grain food stocks, it may cut exports, which will shift demand from Chinese corn to U.S. corn. Which will in turn put upward pressure on domestic corn prices.

Why is corn of concern to readers of ÆGIS? For a start, we eat, and should therefore be concerned about anything that can drastically change the percentage of income that goes to basic sustenance. Second, we drive, and should therefore be concerned about anything that can change the percentage of income that goes to transportation. Finally, we, more than most, tend to be concerned about unintended consequences when making policy decisions.

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