Global Food Crisis

C Peter Timmer , a Senior Fellow at Center for Global Development provides a very insightful commentary on the cause for the global food crisis that we are facing today. According to him, the four main reasons for the current food crisis are Demand from India and China, Mandate for Biofuels in the United States and other Developed Countries, Depreciation of the Dollar and Speculation.

Read more at Global Food Crisis

Read other articles on World Food Crisis

$2.99 Gas for Next three Years - Just buy a Chrysler Gas Guzzler

Chrysler, as part of its effort to overcome its dismal car sales in the last year, is introducing a new incentive program called Let's Refuel America. If you buy a new Chrysler, Jeep or Dodge vehicle, you will receive a gas discount to fill gas for $3 dollars a gallon for the next three years, irrespective of increase in the gas prices. The difference in price will be paid by Chrysler.
I think it is a short sighted strategy which is aimed at boosting sales of its gas guzzling SUV's and large trucks which account for most of the vehicles sold by Chrysler. Instead of adding more fuel efficient vehicles to its lineup, which most of the other car companies are doing, Chrysler is providing discount on gasoline and hoping that consumers fall into the trap of cheaper gas prices and buy these gas guzzling vehicles.
I hope that consumers dont get lured into this incentive as it is a bad deal for the environment, a bad deal for the consumer and above all bad a deal for Chrysler itself.

Read more at $2.99 Gas for Next three Years

Reliance Industries Shuts Down Petrol Stations

According to The Times of India, Reliance Industries , the largest publicly traded company in India has shut down all of its petrol dispensing stations. The reason being, in this world of high energy prices, it cannot compete with the highly subsidized prices of petrol and diesel from the state run Indian Oil, Bharat Petroleum and Hindustan Petroleum.

Also according to the article, these state run companies sells petrol at a loss of Rs 13.97 a litre and diesel at a discount of Rs 20.97 per litre. This revenue loss is made up by the Government through issue of oil bonds and subsidy share from upstream firms like ONGC and GAIL.

So in essence the Government of India is borrowing money to keep the prices of Petrol and Diesel artificially low. Where is the business sense in this? I am sure that with the coming parliamentary elections next year, the current government is not going to hike the fuel prices as this will be hugely unpopular among the electorate. If at all there is a fuel price hike, then the opposition will use it as a leverage against the current government and manipulate it meet its own needs.

Alas, most of our fiscal policies are dictated by politics and desire to cling to power rather then sound economic judgement and doing what is right.

Read more at Reliance Shuts Petrol Dispensing Stations

Tom Friedman is Back and He is Better then Ever

After a brief hiatus of five months, Tom Friedman is back as an Op-Ed Columnist for The New York Times. In his most recent Op-Ed Tom talks about how America is falling behind Asia and Europe in Research and Development, how the infrastructure of this country which used to be the best is now outclassed by Europe and Asia and how we are borrowing beyond our means. But nothing sums up the column more then these these few sentences.
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Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline.

We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation — work hard, study, save, invest, live within your means — have given way to subprime values: “You can have the American dream — a house — with no money down and no payments for two years.”

That’s why Donald Rumsfeld’s infamous defense of why he did not originally send more troops to Iraq is the mantra of our times: “You go to war with the army you have.” Hey, you march into the future with the country you have — not the one that you need, not the one you want, not the best you could have.
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Statement of The Day

This statement of the day was published in New York Times.
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“Morning Edition” is National Public Radio’s crown jewel. Nearing its 30th birthday, it draws 12.9 million listeners weekly, making it the third-highest-rated radio show in the country. (Rush Limbaugh’s is No. 1, in case you were wondering.)
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To be frank, I have listened to Rush Limbaugh once. It was the one which aired Operation Chaos. If Operation Chaos is what the number one radio show in the country advocates, then you have to wonder where this country is headed.


Read more about The New York Times Story on Morning Edition here

Cutting Federal Gas Tax a Wise Idea?

US Presidential hopefuls from both parties John McCain and Hillary Clinton have recently floated the idea of repealing the Federal Tax of 18.4 cents a gallon on gasoline. Their reasoning being, since gasoline is almost $4 a gallon, repealing the tax during the summer months (which is a peak driving season in the US) would make it a little bit cheaper for the average American. But here is where their reasoning fails.

Recent reports have suggested that due to record high gas prices in the US, there are clear signs of decline in demand for gasoline. If you are an environmentalist who is worried about Global Warming this is a very good sign. But artificially reducing the gas prices would probably increase the demand, ultimately driving up the prices again. All of that extra money would go into the already bloated coffers of the oil companies. So eliminating the gas tax during the summer months would bring about a short term relief if at all.

What about the cost to the tax payers? According to the the recent editorial in The New York Times, this temporary relief in gasoline tax would add another $9 Billion to the already huge budget deficit. Not to mention the administrative difficulties of turning off the tax in May and turning it back on in September.

In this era of global warming, it makes more sense to reduce the consumption of fossil fuel rather then encourage it. But eliminating the gas tax would do just the opposite.

Read Thomas Friedmans Op Ed on this topic.
Also read News Stories on this same topic.

$130 Billion Economic Stimulus Package - Where is the Money Coming From?

This week the check from the economic stimulus package will start arriving in peoples bank accounts and mail. But have you ever wondered where is this money coming from and how is the government going to pay for this?
According to a recent published report this years federal budget deficit will be about $500 billion, the highest on record. And the majority contribution for the deficit is coming from the $130 billion economic stimulus package. And in order to cover this deficit, the government is going to start issuing One Year Treasury Notes for the first time in seven years. That means the government is going to borrow money to pay for this stimulus package.
In a nutshell, this is what the US government is doing "Borrowing money to give it to consumers so that they can spend it, and hope that this which will jump start the economy". It doesn't get any better then this.

Read more at Where is the Money
Also read my previous post IRS Rebate Checks about the same topic.