You would think that after the big rise in agriculture prices, there would be a major cutback in farm subsidies. Think again. While there has been some movement to open up the markets, there EU still has not made adjustments broad enough. The overhaul is relatively minor and will last through 2013.
The importance of this is all the greater given the budget and economic crises occurring around the globe. For example, the Common Agricultural Policy of the EU now represent 40% of the EU budget even though farmers represent only 3% of the EU population. Talk about rent-seeking.
So who gets the money? would you believe that the queen of England, Prince Albert of Monaco, and the Duke of Westminster all receive subsidy payments? See farmsubsidy.org for more details.
So why should an investment guy care? Farm subsidies and ag policies have a distortion on prices and do not allow quick adjustments in production to affect higher demand. Prices will become distorted and will not be allowed to have their effect on market behavior. Subsidies also effect developing countries which may need export revenue. Anything that reduces price distortions will in the long-run be good for markets.
The importance of this is all the greater given the budget and economic crises occurring around the globe. For example, the Common Agricultural Policy of the EU now represent 40% of the EU budget even though farmers represent only 3% of the EU population. Talk about rent-seeking.
So who gets the money? would you believe that the queen of England, Prince Albert of Monaco, and the Duke of Westminster all receive subsidy payments? See farmsubsidy.org for more details.
So why should an investment guy care? Farm subsidies and ag policies have a distortion on prices and do not allow quick adjustments in production to affect higher demand. Prices will become distorted and will not be allowed to have their effect on market behavior. Subsidies also effect developing countries which may need export revenue. Anything that reduces price distortions will in the long-run be good for markets.
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