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French PM vows to fight insane food prices

sarkozy headache

““We want regulation of primary commodity financial markets,” Sarkozy said in a speech in Paris overnight. “How can you explain that we regulate money markets and not commodities?” Without action, he warned “we run the risk of food riots in the poorest countries and a very unfavourable effect on global economic growth” — Sarkozy

French president Nicolas Sarkozy has warned that the world risks an escalation in food riots and weaker growth unless measures are introduced to curb speculation in commodity markets.

Sarkozy, who has recently taken stewardship of the G20, believes that curbing speculative activity in commodity markets will take some of the heat out of surging commodity prices. Wheat prices have almost doubled in the past six months since Russia banned grain exports due to drought. And oil prices have climbed by close to 30 per cent in the past four months alone, and are widely forecast to climb above $US100 a barrel this year.

There are worries that rising food prices will stoke increasing political uprisings, such as Tunisia’s “Jasmine Revolution”. Earlier this month, discontent over rising food prices combined with resentment over widespread corruption, unemployment, and a repressive state triggered a popular uprising which brought an end to the 23-year authoritarian rule of Tunisian president Zine al-Abidine Ben Ali.

Smaller protests, many triggered by rising prices, have also broken out in countries such as Morocco, Egypt, Algeria and Jordan.

Many Arab governments have scrambled to introduce measures to try to relieve pressure on food prices in a bid to quell popular unrest. Jordan has pledged $225 million to bring down food and fuel prices, while Libya has cut taxes on food products to reduce pressure on food prices. Egypt, which already spends around 20 per cent of its budget on providing food and fuel subsidies, has indicated that it might increase state subsidies for wheat, sugar and vegetables. Source (1)

Will this work?

If he plans to regulate speculation on food commodities so the price does not rise as much due to speculation, great.

But no-one should EVER try and put controls on food prices. Why? Because this will only guarantee that many more people will starve. If food prices are kept low while demand increases, there is no incentive for farmers to produce any more. The rising price is the signal to farmers to produce more to fill the demand — take away the price increases, and that demand does not get filled at all.

Okay – what is he proposing exactly? That price limits be placed on certain commodities?

Let’s say that in some distorted way, this is actually attempted. What will happen? Shortages in those commodities because everything else costs more and the cost of the “capped” commodities only reflect other prices … someone’s price is someone else’s cost.

The fact that every country followed the US’ lead to inflate their money supply (agreements in past G20 meetings) has nothing to do with inflated prices … or wait a minute, isn’t THAT the reason? That by making more money available, everything costs more?

If so, isn’t the G20 responsible for the increase in food prices? And why should we listen to their “remedies” if they are the ones who caused the problem?

Let’s be clear: any attempt to put price limits on certain commodities will cause the very thing our “leaders” are trying to prevent: food shortages and riots.

History is filled with examples of when governments over inflate a currency, as the worlds power have done in the last few years especially, and then try to disguise their monetary manipulation by blaming producers and speculators.

The fact is that the price inflation in an inevitable side effect of the monetary manipulation. What we need is a commodity based currency which does not allow for the political manipulation of the money supply Also a commodity based currency would not allow for the welfare / warfare state in which we live.


(1) Sarkozy takes aim at speculators

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