Monday, March 03, 2008

Blueberries and the Death of Supply Side Economics

Yesterday I made Abbacchio Brodettato. I went to the store to pick up some fresh fruit to make dessert. Once in the Fresh Produce section I had a brutal surprise. Blueberries priced at $9 for a couple of ounces! Wow, it is a good thing that inflation is not the primary concern of our government. In fact, the price of Blueberries is emblematic of what is going on with all basic materials. The pundits will tell you the price increases are due to increased demand across the world. While this may account for about 10% of upward pressures the true culprit is the weak dollar.

Our government has destroyed the primary productive infrastructure of the United States shipping facilities and jobs to nations where quantity beats quality and producers can skirt US regulations. The result of “Supply Side Economics” better known as Reaganomics is that the US no longer produces even a minimal amount of what it consumes. The destruction of productive sectors has resulted in numerous speculative booms and successive busts. The most recent is the credit crisis. The failure of the housing and financial sectors has left the US naked to elements.

The government realizes the gravity of our current economic situation. Rising unemployment will be the final straw sending the US economy in a downward spiral. The traditional response is to forget inflation and drop interest rates. The FED acted according to plan and the dollar plummeted. Normally this would make US products cheaper and stimulate growth but in this era of Smoke and Mirrors where the US has no significant internal production, the result is simply increased prices.

Now to Blueberries. In a normal economy when Blueberries became a cash crop farmers would plant more Blueberries. The problem is that the farmers that would have produced Blueberries no longer exist having been driven into bankruptcy by shortsighted economic and trade policies. The farmers remaining in the US are conglomerates specialized in mechanized farming. Products that actually require work are now produced elsewhere.

Free markets would cause resources to go into the production of these high margin foodstuffs but farming is not like reallocating your 401k. It cannot be done by pushing a button. Farmers must be convinced that prices will remain sufficient for them to invest in new plots. They must plant, grow and care for their facilities for several years before they ever see a penny. Most farm products have the same characteristics.

Today prices are higher because of the falling dollar. Think what would happen if there were embargos or other types of political disruptions. America would not starve. We could always eat protein mush made from wheat germ and corn but it would be a different meal than what we are used to today. Unfortunately the commodities dislocations are not limited to fresh fruits and vegetables. Every basic sector from clothing to toys is under the same stresses.
Supply Side Economics is a bad idea. The proof is in the results. There is no need for discussion or debate. If a tree bears apples it is an apple tree even if the most persuasive of CEOs tries to tell you that those red juicy fruits are pears.








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2 Comments:

Blogger Library Lady said...

Blueberries aren't in season in March--they're imported from Chile. So of course they're incredibly expensive.

Take a look at the price of milk--something available locally year round--and you'll have a better basis for your theory.

12:02 PM  
Blogger Small Business USA said...

Library Lady You are right on. I did not intend to say that other products had not increased proportionally. I think we have become accustomed to the increases in other items while fruit is more seasonal.

I had not purchased fresh fruits since the fall so when looking for the early season things this just struck me as incredible.

Thak you for visiting and commenting!

5:48 PM  

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