May 06, 2008... Of the Devil's own making.

It is now the popular mantra that the shortage and high price of food in poor countries including EU member-states such as Poland, is due to the following: There is an increased demand for food by the Chinese. The elevated price of oil is contributing to the cost of production. Droughts in Australia's wheat growing regions have badly reduced the wheat harvest. The rush to implement bio-fuel policies as a response to environmentalists' demands allied to political expediency, has diverted agricultural land from food production. Therefore, western governments must pump hundreds-of-millions of Dollars and Euros into the international aid system.

However, this is akin to throwing petrol on a fire, since such a remedy flies in the face of reality. But that never held government back in the past, so why should it now. Well, it should, if we do not want to end up with hundreds of thousands of deaths and innumerable conflicts across the world.

On a free market in which price will determine the quantity and quality of that which is produced, there would not be a shortage of food. This is simply because food would always be available at the price people are prepared to pay for it, and, as the price prepared to be paid increases, so will the supply increase to meet the demand. By this free market mechanism, the supply and demand for food will be met from local and international producers who are always seeking a better than the going rate of profit, and not simply a high price which is open to competitive challenge. When this free market mechanism fails to work, it is because of government interference by way of such impediments as price controls and/or protectionist policies.

On a free market in which money is not produced in greater quantities than the value of commodities that money is exchanged for, prices for food will not escalate. However, because the production of money across the world is running at a rate of between 10 and 50%, it only makes sense for holders of money to divert money into commodities such as food, in order to maintain value, by way of rising prices.

In other words, if the supply of that which is used in general exchange becomes greater in comparison to other things, its value decreases by dint of the fact that you need more of it to purchase the other things. The most contemporary example is the Zimbabwean Dollar, which is effectively values in the face of 200,000% inflation rate. The EU only has to contend with about a 30% inflation rate, cushioned by manufactured goods from China.

In the case of the international banking system, governments can print credit back into the system and pass the debt onto another generation, by eroding the right to the capital value of their property. No government has yet figured out how to print food. The consequences may be biblical.