Bernanke Is Not A Farmer

No one knows for certain why food prices around the world have risen so quickly. Ben Bernanke said the Federal Reserve’s Quantitative Easing program is not the cause. He argues that food prices are higher because people in emerging nations have richer diets than they have had in the past.

The UN reported recently that global food prices had reached an all-time high. It blamed worldwide weather problems and short supplies of many basic agricultural commodities.

No major agency, inside or outside the US, has come up with an explanation which has received widespread support. It is like global warming in that way. Opinions diverge. Scientists fight for answers and suggest solutions. The debate over food prices does almost nothing to solve a problem which is likely too complex and expensive to solve.

The fact is, and it is a sad fact for the poor and those who cannot afford higher costs of food, that the large agricultural producing nations each has an agenda of its own.  Some nations want to keep their crop yields at home to guard against inflation. In other cases, weather problems have reduced harvests. That happened recently in Russia. The problem could grow if cold weather across the northern part of the Western Hemisphere continues.

Global problems rarely yield global solutions. That has been proven recently in battles over currency values, trade imbalances, sovereign debt threats and financial regulations. No large and powerful nation is willing to take a first step because it may find itself alone on a policy island with no support from other developed countries and developing countries, especially India and China.

The food inflation fire will eventually blow itself out. Supplies may rise over the years as farmers better manage their crops.  Poverty and austerity programs which might include rationing could bring down demand. It is an ugly cycle, but one which is nearly unavoidable without a consensus about the causes and the solutions to the trouble.

Bernanke insists the Fed has not caused the price of food commodities to rise. His agency would be off the hook if there was incontrovertible evidence to support his claim. There is not. The fog of blame and indecision will keep any real answers, if they exist, shrouded.

Douglas A. McIntyre