Tuesday, June 17, 2008

Floods Raise Stagflation Fears

The current Mid-West flooding, described by some as the 500 year flood, has put millions of acres of prime farmland under water. This after a difficult Spring that left growers with only a few days to plant their crops. Well they got the job done and the crops in the ground only to see them innundated with record floods in short order. According to NPR & PBS, up to 20 percent of Iowa's corn and soybean production may have been lost to the weather. The same is true in Wisconsin and downriver in Illinois. And, it is not over yet.

Concern is rising about the effects of the floods on already inflated food prices. Read about it here. On top of record prices for gasoline, the increase in food costs is unwelcome at best, and a desperate blow to consumers at worst. Further, as the price of corn escalates, the price of corn-based ethanol goes up. That impacts the already crazy price of gas. Speculation in both oil and food has exacerbated the situation, as investors seek to profit from the volatility and turmoil.

What is even more alarming to economists and consumers alike is the prospect of Stagflation. This article in Slate explains the nature of the concern. Like we need this! So let me see if I have this right. Just as the most incompetent administration in the history of the United States has destroyed the economy and the American dream, prices on just about everything go up. Uh-huh. Just as record numbers of Americans are losing their homes to foreclosure and their jobs to recession and outsourcing, prices go up. Surprised? Just as the largest demographic group in history starts to retire, prices go up. One sector that is not at all upset about this sequence of events is "Big Oil." You know, the folks that sponsor George Bush and Dick Cheney. And if you think John McCain is any different, just watch this video.

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