Artificially Mandated Demand Consequences

Supply and demand, the actual mechanism upon which economies run, rather than state, artificial, mandated laws, cannot be strait jacketed.  Attempts to strait jacket supply and demand, via the state, have consequences which ripple uncontrollably throughout economies, which cause the state tweekers to step in, once again, and attempt to regulate.  It’s a vicious circle, which in all cases simply causes additional economic problems, which we, as individuals, have to bear.

Ethanol is just one such example of this viciousness, and the fallacy of artificial supply and demand as mandated by the state.  The following headline provides an excellent example of just this.

Industry watchers fear ethanol oversupply

From the story.

“We expect the relentless supply of new ethanol production capacity will lead to a 70 percent decline in margins by 2009,” wrote Bank of America analyst Eric K. Brown in a report late last month. The report, “The Ethanol Floodgates Have Opened,” downgraded ratings on several ethanol-related stocks.

Researchers at Iowa State University also raised concerns about profit margins being battered by corn prices that, driven by ethanol, have risen from under $3 per bushel last summer to close to $4 per bushel lately. They say that will make it difficult for ethanol plants to make money. And as the ethanol supply grows, they predict, ethanol prices will drop relative to gasoline unless there’s a change in government policy to encourage more demand for it.

Note the final thirteen words of the above quote from the story, “unless there’s a change in government policy to encourage more demand for it.” Artificiality at its worse.

Further in to the article one finds the artificial demand target the so called “businessmen” will call for.

Tumbleson said corn growers are hoping to get laws changed to require even greater use of ethanol, such as a 20 percent mandate. He said America’s energy independence is at stake.

Even though the truth of the matter is that you cannot legislate supply and demand, fools at all levels will still attempt to do so.

Personally, I hope the entire ethanol industry crashes and burns with a bright, glowing fire.  It would be a just retribution for their use of state force to create artificial demand, while at the same time siphoning dollars out of yours and my pockets to build their false industry.

Posted by on 06/14 at 06:30 AM

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