onegoodmove

Thank god for Jim Sinegal and Costco. And thank god for the Albrecht brothers and Trader Joe’s.

Which God am I thanking?

You should be thanking the god of EDLP retailing. And it is god, not God. Pay attention. The devil is in the details.

There are two ways that grocers go to market pricing strategy-wise. EDLP and Hi-Lo. EDLP is Every Day Low Price. Companies that practiced this philosophy include Wal-Mart, Costco, Aldi, Trader Joe's, Food4Less, SaveMart and Publix. Hi-Lo grocers include the major chains: Kroger, Albertson's and Safeway. They use loyalty cards and change about 20% of their prices weekly. That alone makes them more expensive that EDLP retailers. The labour per store amounts to 2 FTE just to change prices weekly. You have to pay for that labour.

I should have added why ethanol from corn is such a bad bet. It has a very low ROI. It takes 7 BOEs (barrel of oil equivalents) to make 8 barrels of ethanol. The return is 14.2%. Pathetic. Sugar is better, closer to 35%.

Charles

For some reason, and I have no idea why I feel this way, I have a suspicion that this post will end up being a reason to not vote for Barack Obama. ;)

What Hillary Clinton had to say about ethanol when campaigning in Iowa. ;)

And uh, I didn't think that would be a good idea for a senator from New York and what I've been pleased about, and what I've had a roll in this was to create a much broader base for ethanol. You know, we now have ethanol plants in New York.. and so the idea that you would have only one part of the country and the transportation costs would be quite expensive because of the way that ethanol has to be transported uh is no longer a factor, so I have believe.. uh support corn ethanol, all forms of ethanol, research for uh ethanol, uh cellulosic biodiesel, I was at a plant today at Newton uh that is producing biodiesel out of soybean oil and uh, uh animal fat uh, and I think it's great that we're at a point now where we are seeing this market grow and that's what I'm in favor..

Hey JoAnn,

Why don't you post both positions so we can compare. Hillary's position is obviously terrible, is Barack's any better?

How about sugar cane based Ethanol?

Already a proven system in Brazil, it's way more efficient and clean than corn based, plus, it may actually amelliorate the diabetes pandemic in the US... :-)

Hi Charles, fellow Spaniard over here, pan con tomate, yum!

How about sugar cane based Ethanol?

Sugar cane does not grow in most of the US.

Hey JoAnn,

Why don't you post both positions so we can compare.

You mean the way that you have been posting both positions? ;)

Obama's position is clearly pro-ethanol. He is afterall, a senator from Illinois.

Hey, maybe we should all vote for McCain! He opposes ethanol... Well he used to, or still does or, er, uh...

McCain's farm flip

McCain has argued that government support for ethanol actually raises gasoline prices. He has claimed ethanol does nothing to make the U.S. more energy independent. He has even questioned the science behind making fuel from corn - contending that ethanol provides less energy than the fossil fuels consumed to produce it.

Putting ethanol in the fast lane Those may be reasonable positions for a senator from a nonfarm state like Arizona. They may even fly for a presidential candidate running as a straight-shooting maverick, as McCain did in 2000.

But for a front-runner - one presumably interested in getting his as-yet-undeclared 2008 Republican presidential campaign off to a winning start - opposing ethanol is political lunacy.

And speaking of presenting both sides. Everyone remember how Obama was criticized here at 1gm for not supporting Ned Lamont although Hillary Clinton didn't support him either? At least Barack Obama supported him during the primaries, although, like Hillary Clinton, he didn't support Lamont during the general election.

And guess what? Ned Lamont now supports Barack Obama

We Democrats are fortunate to have had many strong candidates running for President. As you may know, I was proud to work hard for Chris Dodd during his campaign. I have the deepest respect and admiration for Sen. Dodd - especially for his powerful calls to defend our constitutional freedoms by restoring habeas corpus, closing Guantanamo, and living up to the spirit of the Geneva Conventions. I know that Sen. Obama, a former professor of Constitutional Law, has been and will continue to be Chris' ally in fighting to protect our Constitution.

This has little to do with Obama, and though that case can be made I choose not to make it. Obama is a sardine in the grand scheme of things. I simply have bigger fish to fry. There is more to life than Obama, Obama, Obama.

Don't question my motives. This has more to do with the paucity of my wallet when I leave the supermarket. And having worked at two of the world's finest investment banks, Alex. Brown & Sons and Goldman Sachs, I have little tolerance for rogue traders. They are a menace that wreck havoc with people's lives. There are regulations in place to prevent such disasters but they are overlooked. Corporate greed is something that needs to be tackled. That rogue trader is responsible for a 25% swing in the price of red spring wheat. That affects more than just investors. It affects you and me. Unlike Gordan Gecko, I do not believe that "greed is good." It is rather evil and certainly in this case, it is going to affect a whole heck of a lot of people. A blip but still an effect.

Yes I noted ethanol from sugar is better than ethanol from corn. Here is an article on sugar ethanol in Brazil. Cuba has also done much with sugar ethanol.

http://www.nytimes.com/2006/04/10/world/americas/10brazil.html

We can have this discussion without referencing the Presidential campaign because frankly the problem is not Obama. The problem is Charles Grassley. The problem is the Farm Bill. The problem is that we allow Congress to make this really bad bets. We need to pay attention. You will hear that line from me over and over again. I will beat you senseful, not senseless, with it.

Oh if I use acronyms that people are not familiar please let me know.

DJIA= Dow Jones Industrial Average ROI=Return on Investment BOE=Barrel of Oil Equivalent

I do adore JoAnn however. Her zeal matches mine. We are just zealous over different things. She makes for a wonderful sparring partner and makes me question my rationale at times. In that, I can offer nothing but praise. She does pay attention. Big points in my book for that.

This can be about the merits of ethanol or about energy policy or farm subsidies or corporate greed or even the absurd strategy of the Federal Reserve. It doesn't just have to be about Barack Obama. I think Norm and certainly I wish that we can broach wider topics of social and economic concern beyond this political campaign. There will be another Farm Bill later this year. That would be a good time to touch base with your Representative and with our dear friend from Iowa and let him know corn subsidies up the wazoo is poor public policy.

Of course you can make it about Obama, I just don't need to do that on every thread. Especially since my position is well-known. Perhaps if I said nice about him. Let me see. . . . I like his stance on Constitutional issues. I think more than the others he would restore the rule of law. And that is not insignificant. Naomi Wolf, whom I respect and who worked for Gore in 2000, makes that point.

Oh one aside today on my personal living god (I'm kidding, just using Obama parlance) John Edwards asked that his delegates continue to stand with him. Very interesting.

At least Barack Obama supported him during the primaries, although, like Hillary Clinton, he didn't support Lamont during the general election.

A cornerstone of Barack's campaign was how he was anti-war from the start. Highlighting his lack of support was simply offered as evidence that he wasn't as anti-war as he claimed. If he wanted to differentiate himself from Hillary supporting the anti-war candidate while she did not would have been persuasive unfortunately he demonstrated that he was not much better than Clinton on the issue. Context JoAnn. ;)

A cornerstone of Barack's campaign was how he was anti-war from the start.

Supporting Lieberman doesn't challenge his anti-war stance.

I am sure the argument in at the time was that Lieberman could win in the general regardless and if he loses the primary and he might caucus with the republicans if he doesn't get to be a D. That could have cost us on a number of issues, including the war.

as evidence that he wasn't as anti-war as he claimed.

I mean, he probably supported Hillary's re-election too, what a hawk.

Charles does have a way with words. Quite the dry wit and very pointed commentary.

His retort to RedSeven is priceless. Rather clever.

I hope to hear more from Charles. Thanks Norm for such a great blog. And thanks Charles for making me pay attention.

With the US dollar hitting fresh lows against major world currencies, I can only scream my contempt at Federal Reserve Chairman Ben Bernanke who seems more concerned about the performance of the DJIA than he does about inflation and the collapse of the dollar.

I do not think this is fair to Bernanke. He is the only Bush appointee that I know of who has so far shown himself to be a professional, moderate, and competent public steward, one who unfortunately was appointed after most of the damage was already done, as you pretty much admit. Unlike Greenspan, he avoids taking political stances on legislation--other than in one instance, to point to the obvious, that making Bush's tax cuts permanent would not help the situation. He cannot control the U.S. dollar directly against other global currencies; he cannot directly control the rate of economic growth, other than by underwriting loans to banks and setting interest rates lower. What he can control indirectly is investment and the perception of risk.

At while we're bitching about the economy, I paid over five bucks for a half-gallon of milk on the Upper West Side a few weeks ago. (Although standard price in the city, at say, Duane Reade, appears to be 2.79). European bread is not a gauge of the economy--milk and butter are.

charles, i make no claims to expertise in the economic issues you are discussing here, and i'm sure you're quite right about all of it.but:

hearing a rich guy (sorry, i've seen your profile. to me, and most poor people, you are a rich guy) complaining about the price of designer bread is just as unseemly as your referencing your columbian roots, as if we're supposed to believe you spend your time on a burro, teeth stained and broken from chewing coca leaves to stave off hunger.

i'm aware there might have been a certain amount of intentional humor (maybe) in this, and i don't mean to imply you don't care about poor people- i'm sure you do. but the next time you want to use the example of anemic wallets and the price of staple foods, i wouldn't use your own wallet, or taste for designer foods as an example.

european cheeses indeed! you poor, poor man.

Adam writes:

I do not think this is fair to Bernanke. He is the only Bush appointee that I know of who has so far shown himself to be a professional, moderate, and competent public steward, one who unfortunately was appointed after most of the damage was already done, as you pretty much admit. Unlike Greenspan, he avoids taking political stances on legislation--other than in one instance, to point to the obvious, that making Bush's tax cuts permanent would not help the situation.

I did note that this is not a situation of his making which you sort of note. You call Bernanke professional, moderate and competent. I will argue that competent he is not. And I will look to you to argue the merits of his competence. And I do agree with on the difference with Mr. Andrea Mitchell. I look forward to that debate. Briefly, I will say this: we face a bubble not unlike the one faced by Japan in the early 1990s, one from which they have not yet fully emerged. We save that discussion for other posts. Fair enough?

You then write:

He cannot control the U.S. dollar directly against other global currencies; he cannot directly control the rate of economic growth, other than by underwriting loans to banks and setting interest rates lower. What he can control indirectly is investment and the perception of risk.

He is the Chairman of the Federal Reserve. He has an effect on the value of the dollar though agreed he does not fully have it within his power to determine it all by his lonesome. But he controls monetary policy.

You conclude by noting:

At while we're bitching about the economy, I paid over five bucks for a half-gallon of milk on the Upper West Side a few weeks ago. (Although standard price in the city, at say, Duane Reade, appears to be 2.79). European bread is not a gauge of the economy--milk and butter are.

Duane-Reade is an EDLP player. I worked on three of their deals while I was on the Street. They are now privately-held. I like Duane-Reade. The only other drug store of value is Walgreens (one of the best run companies in the United States). My loaves are not imported from Italy. They are baked in Oakland, California. It's Italian-style bread not Italian in origin. Is it upscale? I suppose. I also buy sliced bread now and then. But the point was not my own ability or inability to shell a few more dollars per loaf but rather that the cause of said fact is bad public policy and the impact of rogue traders.

And the price of bread has led to more than one revolution. The French Revolution for example hence the title of the post.

Charles

PS: I am looking to erudite defense of Bernanke. He's a nice guy in a tough place.

He is the Chairman of the Federal Reserve. He has an effect on the value of the dollar though agreed he does not fully have it within his power to determine it all by his lonesome. But he controls monetary policy.

I am not an expert in these matters, and am willing to accept factual correct from you, if by your lights I'm not getting it right. But I am at least aware of his title. What I said was that he does not DIRECTLY control the value of U.S. currency against other foreign currencies, although of course the FED sets the fed fund rate and manages the perception of risk (both domestically and abroad). This was a response to your complaint that

With the US dollar hitting fresh lows against major world currencies, I can only scream my contempt at Federal Reserve Chairman Ben Bernanke who seems more concerned about the performance of the DJIA than he does about inflation and the collapse of the dollar.

Bernanke is not a hero of mine; my claim was only that your criticism was not fair, that most of the problem was already created before he came into office at the very end of 2005, and that European bread and cheese are not necessarily good measures of overall economic health; what are good measures for the U.S. are basic, stably priced goods typically used by most Americans on a daily basis. (The Consumer Price Index (CPI), which includes plain ol' sliced bread, is used to measure inflation, as you surely know).

At any rate, he highlighted three large-scale problems in his most recent speech to Congress: the slowing economy, inflation, and the weakening of the U.S. dollar against other currencies (and of course the last can push up inflation by increasing the cost of imported goods). You seem to think his focusing most on the second problem at the moment is a cause for criticism. Some economists have raised this issue, but I'm not clear on your reasons for it. But if your worry is the little guy at the grocery store, which is what it seems to be, then of course there are dangers in the other direction too--if recession hits hard, so will unemployment. How do you pump more money into the system, control inflation at the same time, during a credit crunch principled caused by lender insolvency, while gas prices continue to sky-rocket? If you got an answer let me know. My hunch is, nobody knows--and since we've already gotten theological on this post, let me add: not even god-with-a-lower-case-g-- and Bernanke is doing the best he can.

Perhaps my argument for Bernanke's "moderation" draws heavily on the deficits of his predecessor, who was notoriously given to oracular declaration and loved to step into the middle of a big policy fight. Bernanke has avoided this, so far as I know, with the exception of an indirect criticism of the absurd proposal that somehow making the Bush tax cuts of 2001 and 2003 permanent will magically help the economy.

Jonathan Becker, or is it Bill O'Reilly, levels this charge at me:

hearing a rich guy (sorry, i've seen your profile. to me, and most poor people, you are a rich guy) complaining about the price of designer bread is just as unseemly as your referencing your columbian roots, as if we're supposed to believe you spend your time on a burro, teeth stained and broken from chewing coca leaves to stave off hunger.

You certainly have your right-wing talking points in order. The absurdity of your charge should be self-evident but apparently it's not. Perhaps your axe against me has more to do with my stance on Obama than my standard of living.

Yours is, of course, the charge that was leveled at John Edwards, that he was a phony because he got a $400 haircut or a fraud because of his line of employment.

While it bemuses me to a degree and no doubt caused my partner to roll over in laughter at the absolute silliness of your rather illogical statement, it also irks me. In the world according to Jonathan Becker, people of means are not allowed to have a conscience nor the right to opine on issues of poverty. And their own experience is not relevant because how can any one of means really feel economic hardship. That is a load of crap.

For the record, I averaged 70 hour weeks while working for Goldman and had weeks that approached 100 hours. I logged nearly 200,000 miles flying around the world for them annually. It was not an easy life and I earned every penny they chose to throw my way. And I voluntarily left Wall Street after a decade to work without salary for a non-profit. I get my expenses covered. My partner works so we can have health care. Otherwise we are up shit's creek without a paddle for reasons that should be obvious. Gay men living in San Francisco, you do the logic. So forgive me if I ain't Mother Teresa.

It is spelled C-O-L-O-M-B-I-A. Columbia is either a space shuttle or a university. Colombia is the country. Colombians don't chew coca. Peruvians and Bolivians do. Coca is not even native to Colombia, it is an imported menace. I don't think chewing coca stains teeth though the acid does lift the enamel. Betel nut does stain teeth. Juan Valdez might have been the more apt metaphor but you missed it. It might behoove you to learn just a bit about your neighbors to the south. Especially since they are on the move up. While you are getting poorer, they are generally getting richer. Granted they won't catch up for a few hundred years but still their lifestyles by and large are improving, yours is not. And your perceived image of Colombians is so rooted in ignorance that I don't even know where to begin. Try Gabriel Garcia Marquez or Fernando Botero or Juan Montoya or Shakira or Juanes or any of our fine footballers. Ugly Betty is a Colombian television show not an American one. Juan Valdez is a Madison Avenue trademark and very successful one. And Pablo Escobar is dead. He is the past. And his success was due solely to your consumption habits not ours. If Americans knew just a little more about the rest of us on this one planet of ours (ours not yours alone), perhaps they might be better liked.

And I might add that you google up a few of my ancestors: Jean Matheron and Francisco Jose de Caldas Those are my maternal antecedents. Jean Matheron found a utopian society and a leper colony. His father was a royal minister to Louis XV. Francisco Jose de Caldas was a friend of Thomas Jefferson. He has a state named after him. My mother was once the Chairperson of the Colombian Red Cross. Forgive me if I am indignant but I won't tolerate attacks on my motives nor my integrity.

Poverty is a moral imperative and the fight against is something that we as a family have done for over 250 years. Can yours match that? Or the fact the most of us have PhDs? Neither my still rather modest wealth nor my level education will prevent me from speaking out. It is because I am lucky that I can. It is as post-menopausal women can not comment on abortion rights because they are no longer able to bear children. Do I need divest himself of home and hearth to speak of behalf of the poor?

I am sure you too have an indulgence or two. One of mine happens to be food. After I was once a food writer and have a cook book to my name. You buy on Amazon. $13.00. A bargain at twice the price. And then my wallet might not be so anemic which I guess I can only add that satire is perhaps lost on you.

And your suggestion that I can not or should use my own personal experiences to drive home points is frankly the most ridiculous suggestion I have ever heard. Again that argument was used against John Edwards and his mill worker father.

Honestly hate me because I dislike Obama but be upfront about that.

And yes it was meant to be humourous. And most importantly I was not primarily complaining about cost of bread but rather the poor public policy decisions that have led to the rise in wheat prices and thus the cost of my loaf of bread as well as yours, designer or not. All bread products have gone up in price. So has pasta. So has beef, pork and chicken. All because of ethanol made from corn.

That I had to respond in this manner does not give any satisfaction because in the end my argument is lost. You made the discussion about me. Like the Edwards campaign over a stupid haircut, the cause of poverty gets trashed in its wake. I for one have had enough such silliness.

The problem is poverty, global and domestic, and as long as Norm allows me this platform, I will try to make you pay attention to issues that are relevant and within your power to amend. You can talk to your Congressman and let him or her know that ethanol made from corn is bad public policy.

This is the main point:

Enthusiasm for ethanol is not just misplaced – it’s flat-out destructive. Billions of dollars currently directed to corn subsidies could be better spent elsewhere.

And this was my secondary point:

Rogue traders are a menace and their actions effect you and me.

Can we please make the discussion about the issues Norm and I choose to tackle and not about him or me personally. Some of the comments that I have read about poor Norm at times are uncalled for. It took me an hour to write this reply, an hour in which I might have tackled something of greater importance.

Charles Lemos

Can we please make the discussion about the issues Norm and I choose to tackle and not about him or me personally.

i hope norm will allow me a response to your completely over the top reply to my small act of sticking my head in between all you big, over-educated geniuses to make a small point from the poor mans' perspective. i mean, "right wing talking points"? whatever are you on about? peace.

In the world according to Jonathan Becker, people of means are not allowed to have a conscience nor the right to opine on issues of poverty.

absolutely not true. and your point about the criticism of edwards haircut is not at all "self-evident". it works like this: "john, i agree with all your policies, and your haircuts are your business. but if you're going to pay 400 bucks for one, don't talk about it in front of the poor you champion."

you're right, this is basically what i was saying to you, and it's not a "right wing talking point", it's common sense.

your reply was emotionally based and over the top because i gave you the whole thing right up front. namely,

i make no claims to expertise in the economic issues you are discussing here, and i'm sure you're quite right about all of it

and

i don't mean to imply you don't care about poor people- i'm sure you do.

so for you to come back and compare me to bill oreilly, call my point silly and ridiculous, waste a whole paragraph trashing me for knowing nothing about colOmbia (to which i freely admit, but you know it wasn't my point), to imply that my real motivations are pro-obama or anti-hillary (!), and to direct criticism at me for being a "typical ignorant american" (i may be ignorant but only by birth and early education. i haven't lived there in over 20 years and mostly couldn't care less who the next president will be), well, THAT seems a bit ridiculous. i certainly had nothing to do with your decision to waste an hour on that post. it sounds to me like something you were saving up for the first "right winger" you came across.

well, i'm not one. just poor. so just relax. whether you want me there or not, i'm on your side. and i've enjoyed your posts- that is, the parts of them i can understand with my limited knowledge of american politics. best of luck.

btw, i know you want us to "pay attention". but if you wouldn't repeat yourself so much, you wouldnt' be wasting so much time on these posts.

Nowadays, the government is subsidizing farmers at about $28 billion per year. Where does the money, to the 10% richest of course.

Both Rethuglican and Demowimp congressmen are responsible. Corn subsidies,

http://farm.ewg.org/farm/progdetail.php?fips=00000&progcode=corn

Soybean subsidies,

http://farm.ewg.org/farm/progdetail.php?fips=00000&progcode=soybean

An example of congress bowing to super-rich "farmers",

"The subsidies demanded by the farm lobby would help big corn, wheat and soybean growers in areas where income is shattering records, credit is flowing and real estate values soaring.

Because of government ethanol subsidies and rising demand for grain in developing nations, grain farmers are enjoying such whopping price increases that food inflation is becoming a worry. U.S. bakers are even urging a restriction on grain exports to try to dampen prices.

"The idea that we're going to raise taxes at a time of rising energy prices, rising food prices, a housing crisis, on the eve of a recession, to give unlimited subsidies to millionaires is absolutely disgusting," said Scott Faber, head of federal affairs for the Grocery Manufacturers Association. "It just defies logic. ... I can't imagine why Democrats and Republicans of conscience aren't screaming from the highest rooftops."

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/28/MNMOV5QB7.DTL&type=politics

Adam,

In the sense that the problem is not of his making, it's not fair to him. But cutting interest rates has not worked so cutting them further only creates inflation and I think causes more stress than it solves. And in the sense that the solution to the problem is more in the realm of a political solution rather than a monetary one, then perhaps you are right, it is not fair to Bernanke. My fear is that we might end up with negative interest rates as Japan did. I have to refresh my memory on that problem.

I agree with you the problem is not of his making. And he's professional, moderate, and even competent. I am not sure his strategy can work. I have to read more on that subject. But I do know that he has angered other Central Bankers the world over for debasing the US currency of which they have billions of dollars of and in some case creating problems for them by overvaluing their currency. Again perhaps unfair because the root of the problem are Bush's deficits. In some sense, you're right Bernanke has been hung out to dry.

And I did put the blame squarely on the Bush Administration and Congress. Perhaps that point should have been clearer or stronger. Bernanke cannot and should not be blamed for the lack of a political will from the Administration or even Congress. In that case, I think one could argue that he is alone and trying to do the best he can. That is plausible. That argument might make sense.

You make a good point if that's the argument.

Inflation in a recessionary environment is not a good combo. We have not had to deal with inflation since the 1970s.

Thanks I like your posts alot. You always drive the discussion forward and offer cogent arguments. Bernarda also made some very valid points. Subsidies go to the wrong hands. That fact should not be lost.

At any rate the aim of the piece was to show the effect that ethanol production was having on wheat prices and how one rogue trader will make our lives little more costlier.

Adam,

One more quick thought. Bernanke is trying to jump start the economy or perhaps prevent it from sliding into recession. So by lowering interest rates he hopes to inject more capital into the economy. Problem I see is that you don't throw good money after bad.

The Dow lost 300 points Friday. The indices are off to their worst start since 1941. So capital is just evaporating. It just goes poof! Now let's face it, asset prices are overvalued. I am not sure at what forward PE ratio the market is trading at but my guess is that it is way above historical average of high mid teens for the S&P 500. My guess is that market is trading above 30x PE. I am too tired to look it up now.

The problem is that we have to pay for the war, Bush cut taxes and went to war. How stupid was that. And we have to pay for everything we import. To do that, we print more money. That spurs inflation.

Other than tighten our belts, I don't know how to solve the problem. Your thoughts?

You're right it isn't Bernanke's fault but do you think that lowering interest rates is working? Can that work? I read somewhere that asset prices (subprime mess + commercial real estate + bank losses) is in the neighborhood of one trillion dollars. Well that number is the total capitalization of all US banks. If that's the problem and that number is correct, it could take a decade to work through it. You can't write off a trillion dollars very easily.

Granted if you starve the economy of credit that presents the problem you mention, sluggish job creation. We had a 75 bp cut January 2 right? That did squat. And the market seems to expect another 100 bp cut. The unemployment rate is 4.9% but that doesn't capture the true numbers because the Bush Administration changed the definition. They are pretty heinous. I'm guessing it is closer to 6%. A guess.

I have a friend who owns a small store. Last year his sales were down 20%. This year so far down another 40%. That is quite a downturn. On the other hand, a hairdresser friend of mine tells me his business is fine. But he owns a fancy spa on Maiden Lane off Union Square. His clients are the wives of millionaires. Yahoo laid off 700 people late last year. It is hard choices time.

All this is off topic but your posts are very thought-provoking.

Becker = O'Reilly

I rarely take the time to read much of what you blather on about Charles, but you finally said something funny enough to pique my interest.

I'd tell you how lame your bread argument is, but my Quaker Oats are ready.

Arguing that increased corn production is the reason wheat prices are going up seems to make sense, but it's really just a hypothesis. An easily testable hypothesis.

For increased wheat prices to be caused by increased corn production, there would have to be a drop in the acreage of planted wheat and a resulting drop in harvested wheat.

So is that the case?

Wheat production

Winter wheat production

Hmmm... What we see is increased acreage devoted to wheat production, and increased wheat harvest at the same time as increasing prices for wheat.

Seems corn is not the culprit after all.

I guess I can't link directly to the charts. You should be able to find them from here

LOL Charles. Thank you! I enjoyed reading that comment this morning. ;)

I'm delighted that we can disagree and still remain civil towards each other.

As for this discussion about the price of wheat, it is something that I know nothing about.

According to some articles though:

Since Jan. 1, the average cost of wheat has surged 34 percent. Experts credit the spike to growing global demand, tightening supplies and extreme weather destroying crops in Canada, Argentina and India.

A global wheat shortage is the storm behind the current mania.

Poor weather in 2006 hurt yields in the U.S. and abroad, and now the impact of that shortage is rippling through foreign-trade policies, futures markets and grocery store aisles.

Domestic wheat stocks are at their lowest level in 60 years, the Agriculture Department said last week. Global supplies have sunk to a 30-year low.

Sowers said this phenomenon traces to March 2006, when droughts in Texas and Oklahoma reduced wheat harvests. Australian farmers endured droughts in 2006 and 2007, and wheat production in the European Union also fell because of weather problems.

That led traditional grain exporters such as Russia, Kazakhstan and Argentina to restrict foreign access to their wheat, hoping that would ward off inflation in their countries. Foreign buyers responded by flocking to America's markets, routinely placing large orders. In overnight trading Tuesday, Iraq alone bought more than 550,000 tons of hard red winter wheat.

"A Nigerian can buy wheat the same way as a Japanese trader or a miller in Iowa," Sowers said. "It's an open-access market."

As a result, organizations such as the American Bakers Association want the Agriculture Department to re-examine its export regulations in order to better protect national supplies.

The Agriculture Department trusts the invisible hand of the free market. It predicted that the high prices will cause farmers to plant greater quantities of wheat, improving the yield next fiscal year.

Becker = O'Reilly

I had to laugh at that too. But Cory/Syngas/Asshat, both you and jonathan are getting way too personal and are not helping to further the discussion.

I am familiar with jonathan and asshat's online personalities, though, and I realize that they enjoy teasing and perhaps Charles is not accustomed to how those of us who know each other a little here have engaged in a number of battles which have become a tad too personal, and yet we all get over it eventually.. ;)

Looks like marketwatch.com agrees with Charles.

Cory, It seems that Marketwatch needs your expertise as an investement tycoon! ;)

SAN FRANCISCO (MarketWatch) -- The fast and furious run in wheat prices resulted in a nearly $142 million trading loss Thursday, casting unwanted attention on the latest commodity bid up by investors seeking quick gains outside equities.

The run-up in wheat prices can be traced to tight global supplies. A series of bad weather in grain-growing regions around the world, including a drought in Australia last year and heavy rainfall in the U.S. and Europe, as well as more acres being devoted to corn for ethanol, have all severely limited output. AgResource's Basse said global wheat production last year fell 30 million metric tons short of the 630 million tons his firm had forecast.

both you and jonathan are getting way too personal and are not helping to further the discussion.

ah, go fuck yerself, ya fookin' hippie. :)jk

JoAnn, go reread charles' response to my short, single point post, and tell me again who's getting personal. i mean, i didn't even mention in my reply, but what was that whole thing about his bloodline, and connecting it with motive and integrity? he actually asked me if my family had the kind of "pro poor people" record that his has! are you familiar with the term "flummoxed"? personally, i think he was on drugs. which just makes me like him more. :)

LOL Jonathan!

Well, it's been an enjoyable morning learning about wheat futures and reading the back and forth between jonathan and Charles.

Peace!

(Oh, and fuck you jonathan! ;) )

(Oh, and fuck you jonathan! ;) )

see, charles, that's what you should have said in the first place. here's your oppurtunity.

charles, you made many points in your reply to me that i would just love to argue, but refrain out of respect for norms' rules about staying on topic (which you yourself obviously pay no attention to). as a "drug person", meaning that this is a topic i actually am qualified to talk about, this would have been a doozy:

Pablo Escobar is dead. He is the past. And his success was due solely to your consumption habits not ours.

maybe another time.

Charles said:

I agree with you the problem is not of his making. And he's professional, moderate, and even competent. I am not sure his strategy can work.

And:

Bernanke is trying to jump start the economy or perhaps prevent it from sliding into recession. So by lowering interest rates he hopes to inject more capital into the economy. Problem I see is that you don't throw good money after bad.

I agree, actually. As Krugman has pointed out, the problem is not just liquidity, which lower interest rates would certainly help. It's solvency: billions of dollars everyone thought existed turned out to exist only on paper, and complex debt transactions have made it really hard to see who lost what, and how much. So yeah, you nailed it: good money after bad. And plainly, if the problem is more than just liquidity, simply lowering rates won't address that issue.

At any rate, this is the topic I want to discuss; I only felt it necessary to defend Bernanke against your earlier charge of "incompetence." As you've dropped that charge, we can now talk policy and the situation it's a response to.

First, you ask:

Other than tighten our belts, I don't know how to solve the problem. Your thoughts? You're right it isn't Bernanke's fault but do you think that lowering interest rates is working? Can that work?[...]You can't write off a trillion dollars very easily.

We agree on this: stimulating the economy by injecting more capital threatens to solve one problem by exacerbating the other. It's at best a short term, stabilizing fix to a long-term, really complicated problem. Your worry seems to be that it will not solve the first problem at all, that capital is in a sense being thrown into a market void of bad debt. So let me acknowledge: that is surely possible, for the liquidity/solvency issues we both keep pointing to. Yet, to the extent that I understand the issue--and let me admit again that I'm not an expert--it is easier to get the economy going again than to control inflation. Acknowledging that solving one problem potentially undermines our ability to solve others, it's a matter of prioritizing and balancing.

What else can Bernanke do, in your view? The source of many of the problems are bad policy, and the energy issues you and others keep rightly pointing to.

This is so, first, because it is one major factor driving inflation. As you, Bernanda, and Joann have rightly emphasized, there's the corn-ethanol and grains issue: supply drops, the cost goes up on basic goods like bread. Another issue is oil, which is another supply problem that is driving up prices: to the extent that the cost of transporting goods goes up, the cost on those goods can also be expected to rise (this in addition to the other factors driving up the cost of basic goods). Notice that both of these are, at bottom, energy problems, which show up almost literally at every link in the economic chain: supply, due to corn being used for ethanol production; production, the oil need to convert corn to ethanol; and distribution, the gasoline required to transport agricultural goods long distances. Energy is the elephant in the room that no one in Washington wants to talk about. They just keep begging the Fed to tell them how magically to get things back to "normal."

For instance, Charles said above:

I should have added why ethanol from corn is such a bad bet. It has a very low ROI. It takes 7 BOEs (barrel of oil equivalents) to make 8 barrels of ethanol. The return is 14.2%. Pathetic. Sugar is better, closer to 35%.

To the extent that the ROI on ethanol from corn is bad because it require exorbitant oil consumption in proportion to the amount of usable energy created, we are quite literally chasing our own tail on trying to find a fix to the energy problems that are in part driving the economic problems (and vice versa). Worse, as (I think?) you also pointed out in another thread Charles, ethanol use is not much more environmentally safe.

Oh, and there is the massive debt caused by the war. If you are right Charles, that this was an effort to gain better control and access of energy resources, as you've suggested else where, all road begin to look like their leading to Rome: energy.

As you, Bernanda, and Joann have rightly emphasized,

Bernarda. Sorry! (Reaching for my afternoon coffee).As an aside,

Thanks I like your posts alot. You always drive the discussion forward and offer cogent arguments.

Ya, well, at first, I don't always understand all the issue you raise or their interrelationships, Charles. But pieces of your view emerge with every new comment, and it is very thought-provoking, I think. (And on a smaller issue, I now see, as I didn't before, that your appeal European bread and cheese was (mostly) stylistic, intended to elicit in a concrete way a situation most of us can grasp weekly when we go to the grocery store, so my insistence on other goods and the CPI was a little off base, even if intended to clarify). And it's elicited very thought-provoking views from Joann and Bernarda, too.

On some of the more personal remarks, I don't want to take either side, other than to state at first both made me laugh my ass off because they both struck me as pretty unfair.
At any rate: let's just ignore personal attacks and keep focused on the issues, yes?

Otherwise we are up shit's creek without a paddle for reasons that should be obvious. Gay men living in San Francisco, you do the logic.

Sorry, I try not to delve into the World of Charles anymore because it seems so unproductive. But after this comment I have to ask. Is there something I don't know about San Francisco? I know its expensive there and now with the high price of bread at Trader Joe's, and whatever ethanol and rogue traders are doing to the price of weed, so I am sure cost of living is insane, but Is it somehow harder in sanfran for gay men? I strain to think of a gay friend that hasn't vacationed in San Fran, so this baffles me.

Adam et al.

Well it seems on the very day that I laid into Ben Bernanke, he goes off and does something that just knocks down some of my criticism of him.

On February 29th, Bernanke spoke about the need to lower tariffs on Brazilian ethanol. That is, of course, something we need to do. So your defense of him is not for naught. You're right and I was wrong on being so critical of him.

I did ask my former boss, my mentor, for so many years during my time on the Street, the learned Jonathan Holland Ziegler for his thoughts on Bernanke. Here is his reply which I am sharing with you.

In response to your question, Bernanke is caught in a major Catch 22: Lowering rates stimulates inflation which reduces consumer spending - other than on gasoline - and thus causes economic pressures. I therefore am not in accord with the severity of his actions, perhaps a 1/4 point would have sufficed. I also do not believe in bailing out those who speculated and took risks by investing in Las Vegas condos with the intention of flipping. I do have some compassion, however, --after all I am a Democrat -- for those who bought their own residences in which to live.

And here some of you think Wall Street guys are evil incarnate. Perhaps overpaid, but we do care about the well-being of others. JZ, by the way, went to HBS with Michael Bloomberg. And he knows Ron Burkle, the financier tied to the Clintons.

To RedSeven who is perplexed writes:

Is there something I don't know about San Francisco? I know its expensive there and now with the high price of bread at Trader Joe's, and whatever ethanol and rogue traders are doing to the price of weed, so I am sure cost of living is insane, but Is it somehow harder in sanfran for gay men? I strain to think of a gay friend that hasn't vacationed in San Fran, so this baffles me.

Well we pay higher Federal taxes since we are denied the right to marry. We pay higher single tax rates. That's one. Our health care costs are higher. That is more what I was referring to. Just think about issues that affect gay men.

On personal attacks, I do have a thick skin but questioning my motives or my values is not fair game. I blog under my own name so I am learning to watch what I say to some extent because I do not want to offend my donors to my causes who by and large may not share my views on subjects that I write about, Obama for example.

The following should be noted:

I would treat your comments on the scale of peer review. Your comments help shape arguments and our political and social discourse. I take exception to the remarks that some of you made that run "I am no expert." Actually you are. You are consumers and citizens. Participation in the economy and in our democracy makes you experts of your own experience. Do not denigrate yourselves for in doing so you are abdicating your own voice. Letting others decide for us is a problem. The media already shapes the debate to an unfortunate degree. They obscure our democracy because they silence our voices. Norm in my mind is as much as hero as Thomas Jefferson. This blog and others are a powerful weapon in the search for truth and fair play. The Founding Fathers would applaud the blogosphere. We are the new pamphleteers. Thomas Paine would challenge every single one of you be citizens with a voice and a story to share. I cannot emphasize this enough. If we are afraid to be wrong, we will never get it right.

Perhaps not an expert, but most certainly a citizen,

Charles Lemos

Tonight there was a programme on CNN called "Scorched Earth" tackling corn ethanol. It makes my case against it and I suggest that perhaps you catch it.

Here are some tidbits from it. Subsidies for corn ethanol are slated to rise $17 billion a year from the current $7 billion. There are currently 139 plants in the United States that produce it.

The programme also tackles some the political rational as to why corn ethanol is such the rage right now. It mentions how every four years candidates come to Iowa for the caucuses and "kneel at the altar of corn ethanol." All candidates pray to this false god getting kumbayas from the Iowa electorate. The first in the nation role of the Iowa caucus impacts the candidates who must bow their heads in reverence. All the candidates, including my favorite John Edwards, fall down and worship. It is bad public policy as I and others have noted. Charles Grassley, the Senator from Iowa, must be stopped. I urge you contacting your Representatives and make them aware that you are paying attention.

Here are some links:

http://images.cnn.com/CNN/Programs/ http://envirowonk.com/content/view/57/2/ http://scitech.blogs.cnn.com/category/politics/

Charles Lemos

That is more what I was referring to. Just think about issues that affect gay men.

That all makes sense, the San Francisco thing didn't.

Cellulosic ethanol is the way to go. It shows real carbon reductions.