Quote of the Day: Politics Drives Social Divisions

The pathology of mass democracy translates into ugly social divisions. Great liberal thinkers from Bastiat to Mises have demonstrated that all classes have nothing to fear from one another in a market economy. Freedom of exchange results in the harmonization of interests. Politics, on the other hand, creates fissures that need not exist. Every minor issue becomes blown up into a Manichean struggle. This happens especially over relatively minor issues, because these are the only ones over which the mainstream politicians evince even a rhetorical disagreement. The truly foundational issues of our time—mass confiscation of wealth, IRS despotism, mass imprisonment, militarized policing at home and unending warfare abroad—unite both major parties behind an establishment agenda. They bicker instead over relatively small matters, each one of which becomes amplified into the greatest battle in the history of the world at election time.

This is from Anthony Gregory at the Independent Institute writing on US democracy.

This applies to the social democracy of the Philippines as well. Simply observe the scale of priorities from the way domestic media frames events. Or even the dominant pattern of comments on social media. Trivial matters are frequently moralized and sensationalized which becomes part of the national sports called politics. It’s pop culture that has been little different from the way gossip and slapstick entertainment have been aired on prime time. It’s also about Social Desirability Bias or the need to be seen favorably by others or status signaling. Yet most don’t realize that this obsession for the superficial makes us vulnerable to political manipulation. Politics does foster social divisions

Political Talk (Demagoguery) And Their Meanings

Economist Bob Higgs translates conventional politico-speak into their intended messages, in an article which he calls "When a Congressman Says X, He Is Thinking Y"

Some samples (includes my comments)

X : I will serve the people of this district to the best of my ability.

Y: I intend to look out for my own interest every step of the way, so unless you’re the highest bidder for my services, you’d better start saying your prayers now.

(my comment: corruption free government? That's utter nonsense. The more dependent people are on governments the greater the risks of corruption)

***

X: The people have spoken, and they have chosen me.

Y: The rich guys and well-heeled organizations that backed my candidacy picked me to run, and they coughed up enough dough to buy or steal this election for me. I’d be a damned fool to forget who put me in office.

(my comment: it's a political quid pro quo. That's if you grasp the reality that politics is an affair of people and not some delusional divine rights of political "masters")

***

X: America [or country X-additional remarks mine] needs A, B, and C.

Y: My critical electoral coalition stands to make a shipload of money off of A, B, and C. If I want to keep my sorry ass in office, I’d better do everything in my power to see that the government carries out A, B, and C.

(my comment: simply throw money at social problems to make politicians look good to win elections)

***

X: Thank you very much, ladies and gentlemen. Just let me assure you that I will continue to do my very best to prove that I deserve your continued trust and support.

Y: Money talks, bullshit walks.

(my comment: this is self explanatory)

Read more here

Why The Slack In Credit To Small Business In The US? Because Regulators Won't Allow Them

Politics can be characterized as a stratagem of saying one thing and doing another.

Here is a good example. US policymakers say that credit is vital to the economy and that all their efforts have been targeted at restoring the credit process.

But based on a report, what the left hand is doing seems being undone by the right hand.

From the USA Today, [hat tip: Douglas French Mises Blog] (all bold emphasis mine)

``Across the USA, banks say there's a big reason they aren't lending more: Regulators won't let them. Even as the White House exhorts banks to open the lending spigots, particularly for small-business borrowers who are key to job growth, banks say government field examiners are toughening their reviews in ways that discourage sound loans.

``Rep. Blaine Luetkemeyer, R-Mo., a former bank examiner, recently laced into top banking regulators. "We have this huge disconnect between what's going on here in D.C. (and) what's actually been going on out in the field," he told them at a joint hearing of the House Financial Services and Small Business committees. "Quite frankly, you guys are part of the problem."

``Bank examiners — including those at the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — don't approve or deny loans. However, bank executives say examiners are downgrading the ratings of performing loanssimply because the collateral — typically, commercial real estate — has fallen in value or the borrower is located in an economically distressed state. And they're making banks exceed the minimum levels for capital and bad-loan reserves. Those practices, they say, fail to consider banks' familiarity with their communities and borrowers. And they constrict lending."

So much for lack of demand.

It makes me wonder, are these being done deliberately so as to justify more intervention and inflationism?

Lessons From China-Google Schism

The China Google rift has given us some interesting insights.


This from the New York Times, (all bold highlights)

``The story behind the success of these companies is a simple one, some analysts say. The young people who dominate Web use in China are not just searching for information; they’re searching for a lifestyle. They are passionate about downloading music, playing online games and engaging in social networking.

``“Sixty percent of the Internet users here are under the age of 30,” said Richard Ji, an Internet analyst at Morgan Stanley. “In the U.S., it’s the other way around. And in the U.S. it’s about information. But in China, the No. 1 priority is entertainment.”

``Experts say American companies have largely failed here because they don’t have local expertise, are too slow to adapt and don’t know how to deal with the Chinese government.

``“Internet companies in China have to work so closely with the government,” said Xiao Qiang, of the China Internet project at the University of California, Berkeley. “And that means the government’s political agenda can become the company’s business agenda.”

``The need to censor Web sites, for example, can overwhelm smaller companies, Mr. Xiao said. “This becomes a growing business cost. So often, small companies don’t develop.”

``At this stage, analysts say the Web in China is less about innovation than about quickly delivering on the latest online trend.

``“People here are quick to see trends, and to clone and innovate,” said William Bao Bean, a former Internet analyst who is now a partner at Softbank China & India Holdings. “If one company is doing well, other companies will quickly clone it and roll it out.”...

My observations:

1. cultural difference in the use of the web: "And in the U.S. it’s about information. But in China, the No. 1 priority is entertainment.”

2. American companies outside the China's intrusion has failed to grab a substantial share because of the lack of local knowledge or expertise.

This is very Hayekian. From the Use of Knowledge in Society, ``But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation."

How does this relate to macroeconomics-alot!

Google's failure involves one of risk money plus a real attempt to establish or gain a foothold in China's market. Whereas people or even officials condemning China, have not been there nor have they a real or working knowledge of how things operate in China. All they base their polemics is on aggregate assumptions. If Google can be wrong how much more with personalities suffering from "fatal conceit".

3. Government intervention have limited competition to the locals and may have even politicized the distribution.

More insights from the New York Times, (bold highlights mine)

``One advantage local companies have is government protectionism. Because the Communist Party wants to maintain tight control over communication and the media, foreign Internet companies come under suspicion.

``For instance, YouTube has been blocked inside the country for over a year, ever since a user uploaded a video that was said to show human rights violations in Tibet.

``YouTube, which is owned by Google, had a large following here. But now online video in China is being championed by companies like Youku.com and Tudou.com. They may have dominated anyway, analysts say, but it certainly helps to have few big competitors.

``And without competition here from Facebook, which has not yet tried to develop a site for the Chinese market, a social networking site called Kaixin001.com has managed to register over 70 million users.

``But some experts say Google’s departure will leave Internet users here with fewer options, making the country’s Internet market less competitive and less open.

“The biggest loser is Netizens,” says Fang Xingdong, chief executive of Chinalabs.com, a research firm. “Google is a multilinguistic search engine, but Baidu is a Chinese-language one. Chinese information only occupies a small fraction of the Internet.”

Additional observations:

4. It's odd that the New York Times can be promoting competition (selectively though), apparently this depends on which interest groups benefits.

5. As the article suggests, government protectionism is considerably hindering the development of social networking sites. This translates to endemic disadvantages or obstacles from developing the local market (even if the Yuan appreciates!) and from attaining productivity enhancing facilities that would enable them to even be more competitive in terms of value-added products.

Put differently, in a world being revolutionized by Web 2.0, China will unlikely match the level of capital structure of economies that fosters open competition in the cyberspace that would lead to more innovation.

So unless China opens up, the pace of growth will be constrained by the current industrial framework. But she will lag in the advances of technology, which I think will be a significant growth driver for the world over the coming years.

4-Block World: Fawning Eulogies

From Tom McMahon's 4-Block World:

Let me add a quote from Professor Don Boudreaux, (all bold highlights mine)

``While Kennedy didn’t choose a life of ease, he did something much worse: he chose a life of power. That choice satisfied an appetite that is far grosser, baser, and more anti-social than are any of the more private appetites that many rich people often choose to satisfy...

``Instead, Mr. Kennedy spent much of his wealth and time pursuing power over others (and of the garish ‘glory’ that accompanies such power). He did waste his life satisfying unsavory appetites; unfortunately, the appetites he satisfied were satisfied not only at his expense, but at the expense of the rest of us. Mr. Kennedy’s constant feeding of his appetite for power wasted away other people’s prosperity and liberties".

Well learning from the above, such mawkishness (especially in the political context) should be avoided. And this should apply elsewhere including the Philippines.

Cartoon of the Day: Swine Flu or Pork Flu?

Nice one from the Investor's Daily...

Global Warming Debate: Oops…WMO says First Half of 2008-COOLEST in 5 Years!

From yahoo-Reuters (highlight mine),

``The first half of 2008 was the coolest for at least five years, the World Meteorological Organisation (WMO) said on Wednesday.

``The whole year will almost certainly be cooler than recent years, although temperatures remain above the historical average.

``Global temperatures vary annually according to natural cycles. For example, they are driven by shifting ocean currents, and dips do not undermine the case that man-made greenhouse gas emissions are causing long-term global warming, climate scientists say.

``Chillier weather this year is partly because of a global weather pattern called La Nina that follows a periodic warming effect called El Nino.

"We can expect with high probability this year will be cooler than the previous five years," said Omar Baddour, responsible for climate data and monitoring at the WMO.

"Definitely the La Nina should have had an effect, how much we cannot say."

Read the rest here.

My comment:

Yeah sure…if La Nina’s impact to global warming/cooling seems unclear even to the experts, how can we be confident that those advocating for a “man-caused” global warming climate can be said with certainty?

Yet, if mathematical models or the basis for the climate gloom and doom, have not predicted with efficiency the markets (1987 stock market crash-portfolio insurance programs and today’s quant "strategies") or even economic trends or aggregate human (social) behavior…why should I entrust the same to “professionals” whom are likewise susceptible to “cognitive biases” which may/can be influenced by ideology (socialism in green robes) or by power politics or by money (e.g. grants on research funds)?

As Dr. Patrick Moore, Co-founder of Greenpeace, Chairman and Chief Scientist of Greenspirit Strategies Ltd. in Vancouver, Canada recently said (highlight mine),

``Environmentalism has turned into anti-globalisation and anti-industry. Activists have abandoned science in favour of sensationalism. Their zero-tolerance, fear-mongering campaigns would ultimately prevent a cure for Vitamin A deficiency blindness, increase pesticide use, increase heart disease, deplete wild salmon stocks, raise the cost and reduce the safety of health care, raise construction costs, deprive developing nations of clean electricity, stop renewable wind energy, block a solution to global warming, and contribute to deforestation. How sick is that?”

Already too much of our mundane problems have been due to the unintended effects of "self-righteous- omnipotent-elixirs" based politics or by so-called populist political correctness.

Eventually delusions will be envisaged with harsh reality.

Study Says Happiness Comes From Freedom

Happiness is not mainly about wealth, it is about the freedom to make choices, that’s according to a study by Inglehart, Foa, Peterson and Welzel at the World Values Survey.

World Values Survey: Economic development leads to a shift in survival strategies

This from Robert Foa at the Financial Times (highlight mine)

``How is it that the world is getting happier? In the words of Thucydides, the secret of happiness is freedom. In each survey respondents were also asked to rate their sense of free choice in life…

``The world in which we live today is unquestionably a free one. For the first time in history, most of the world is governed democratically, the rights of women and minorities are widely acknowledged, and people, ideas and investment can cross borders. Since the study began in 1981, dozens of middle-income countries have democratised, relieving many from fear of repression: every country making a transition from authoritarian rule to democracy shows a rising sense of free choice…

World Values Survey: Socioeconomic change, growing freedom, and rising happiness: The human development path.

Implications?

Again from Mr. Roa,

``First, that the expansion of political and social freedoms over the past quarter of a century is vindicated. The open world in which we live is a fundamentally happier one. This may not surprise those who have argued in favour of a liberal global order. It will undoubtedly cause puzzlement and consternation among those who yearn for the false certainties of an earlier era.

``Second, the results may engender caution towards attempts to engineer happiness through public policy. The happy countries include social democracies such as Sweden and Denmark, and more laisser faire economies such as Australia and the US. What they have in common are not their policies but institutions: democracy, rule of law and social tolerance. People are largely capable of engineering their own happiness when given the means to do so.

``Third, the link from free choice to rising happiness suggests that the appropriate benchmark of development is not income per capita, but individual freedoms and capabilities. This is the human development perspective associated with Amartya Sen, the Nobel laureate. While income and well-being are closely correlated at early stages of development, once the threat of starvation recedes, social and political freedom appears to be as important.”

If the study is anywhere near accurate what it means for us is- we can’t be "free" unless we can decide what is best for ourselves- financially, economically socially and politically.

Olympics: Trend of Breaking Records Accelerates! What drives them?

From the Economist,

``TUMBLING world records are part of the Olympic experience, but just how much have swimmers or runners improved over the past 100 years? In Beijing, new records have been set in the most glamorous events in athletics and swimming—the men's 100m sprint and freestyle. Jamaica's Usain Bolt cruised to victory, taking his own 100m sprint world record down by three-hundredths of a second to 9.69 seconds. In the century or so since official records began, the quickest time has fallen by just under a second—a 9% improvement. But in the pool, Australia's Eamon Sullivan covered 100m in the heats (although he lost in the final) in a world-fastest time of 47.05 seconds, 19 seconds (and 28%) quicker than the record-holder of 1905."

Courtesy of the Economist

With these trends here are some questions we’d like to know…

-Has demographics or world population growth been a significant contributor to these developments?

Courtesy of Franklin Institute Science Museum

Or more people equals better odds for outperformance?

-or has rapid and sweeping advances in technology or “sports science” (sports gears, equipments, arenas-e.g. pool design, scientific training etc…) been the major driver?

Example, this from the New York Times (underscore mine), ``As swimming becomes more popular, it attracts better athletes, who often stay in the sport for more than one Olympics and have access to increasingly sophisticated sports science. Swimmers who once concentrated mostly on endurance now spend up to 50 percent of their training on refining the technical aspects of kicking, pulling, breathing and body position, said Genadijus Sokolovas, director of sports science for USA Swimming….

``American swimmers here are accompanied by four sports-science experts. Each race is videotaped. Immediately after a race, each swimmer has an ear pricked to test for lactic-acid levels. After a warm-down swim, video analysis is made immediately available to monitor stroke counts, distance per stroke, split times, and the biomechanics of takeoffs and turns.

Another example (HT: Forbes’ Josh Wolfe) Phil Mickelson’s Congressional testimony on the importance of Math and Science (emphasis mine)``I use math and science every day, and it's not just adding yardages to the pin. I actually practice based on statistics. I use course management based on numbers. For instance, I know that my margin of error is plus or minus 5 or 6 percent. So if I have a 200 yard shot, 6 percent of that is going to be 32 yards off line - that's going to be my margin of error. And there's even more science involved in equipment I use. Launch angles, spin rate, loft, deflection, initial velocity, the transfer of energy. I continually work with companies like Callaway and some of the most technical design processes to optimize the performance of my clubs.”

“I use statistics to maximize my practice. I do a drill with 3-foot putts. And I can make 100% of them. But at 4 feet, it's 88%, at 5 feet 78%, and at 6 feet, it's only 65%. So while I may not be wasting my time trying to add 20 yards to my drives, what I really need to do is hit my chip shots within 3 feet of the hole. That's the best way to lower my score."

-or has the global political economic dimensions of Olympics (globalization’s role-e.g. training abroad or migration trends; investment or financing of participants a function of markets or of government?; type of government and or social acceptability etc..) played a major role?

Wall Street Journal: Professor Johnson’s Medal Standing Prediction; Philippine Olympic Delegates of ONLY 15 Aspirants Reduces Odds For Gold!

The Wall Street Journal recently published the predictions of economist Daniel Johnson, a professor at Colorado College, on the possible totem pole rankings of medals among the participating countries in the Olympics. Professor Johnson was said to have accurately the outcomes during the past Olympic games (summer and winter) since 2000.

As for the basis of Professor Johnson’s model?

From WSJ, ``five basic pieces of data for each participating nation: GDP per capita, total population, political structure (democratic, authoritarian, military or communist), climate (the number of frost days) and home-nation bias.”

In short, economics, politics and environment were mainly used as gauges to predict outcome.

His prediction for the Beijing games?

Courtesy of Wall Street Journal

What significance from this exercise?

According to Professor Johnson as quoted by WSJ, ``what matters most isn’t comparing the take-home medal count of one nation compared to another but instead measuring it against the nation’s own expected performance, based on his metrics. “This is more of a benchmarking analysis than anything else,” he said, to gauge which nations are over- or under-performing their expected totals. Plus, the overall tally is obviously influenced by the size of each nation and how many athletes they train and send to the games. “One reason Botswana doesn’t win a lot of medals is they don’t send a lot of participants each year,” he said.” (highlight mine)

This blog has predicted that socioeconomic conditions seem ripe for the harvest of the ever elusive first Olympic dream gold medal especially in the realm of boxing as discussed in The Socionomics of the First Philippine Olympic Gold Medal-Thank You Manny Pacquiao.

Unfortunately, we learned that with only ONE boxing representative, Harry Tañamor, the odds for attaining such monumental goal vastly dims-(just learned that the others had lost in the prequalifying rounds prior to the Olympics).

Why?

Aside from economics and the sports itself, the quest for the Olympic gold is also about statistical probabilities as qualified by Professor Johnson.

In short, to INCREASE the odds of realizing such dream we need MORE qualified delegates to represent us. The more the entries, the bigger the chances.

Anyway, good luck to our athletes. We will need alot of them.

The Controversy Over Oil VAT (Visceral and Astigmatic Thinking)

``No government ever wants less government — that is, less of itself." Garet Garrett (1878–1954), Insatiable Government, American journalist and author

Populism is anything panacean.

Popular political demand has it that the lifting VAT on oil prices will provide relief to consumers.

No quibble on that- yes “automatic and short term relief” that is.

But, alas the thinking STOPS here!

Look at the table provided by ADB above (shown this last week).

It shows that Filipinos spends an insignificant 2.4% of their income on energy expenditures relative to the aggregate. This means food prices does more of the damage to household spending than energy/oil. It also means households are less sensitive (more inelastic) to price changes of fuel relative to food-and so is the reason why car sales remain buoyant instead of a retreat even under surging fuel costs.

In other words, given the accuracy of estimates in the table provided by ADB, what you see in the news reflects popular dissent over higher food prices than fuel. Thus, oil prices reflect more of the political dimensions (since it’s easy to pick on oil as a culprit knowing that this is PRIMARILY an external causality).

Will the magic wand of lifting VAT ease oil prices? Yes, as argued above-temporarily.

But economic logic tells us that lower prices INCREASES demand.

This means that if oil prices in the Philippines have not reached the threshold of “demand destruction”, increased demand will OFFSET any lowering of prices from the VAT suspension.

Essentially this brings us back to square one- High oil prices but with a gaping fiscal hole! What was deemed as a solution complicates the situation even more.

Hence, what then would be the next item to blame? Will the next political demand be "Nationalization"? (Hahaha!-Philippines import almost all of its crude oil requirements which should translate to a total havoc to the national balance sheets!)

One senator suggested that VAT be replaced with a hike in luxury items (particularly car sales). The honorable senator forgets the effects of high taxes on car sales: car smuggling or legal loopholes which has resulted to the recent brouhaha over “used” car imports from economic zones (see Diesel Roll Back For PGMA’s Sona, MV Princess of the Stars Tragedy, Economic Realities of Cagayan’s Used Car Trade).

Another venerable senator suggests "efficiency" in tax collection by curbing car smuggling. Wonderful, another ideal solution- yes (we agree)! But then again this is nothing new and has been a battlecry for almost every aspiring politician. Yet, such motherhood statements or grand nostrum of lack of “efficiency” goes back to the paradox of overregulation, legal loopholes and bureaucratic leakages and corruption.

So, in effect both Senators have been discussing solutions based on a chicken and egg perspective but don’t deal with the heart of the problem!

The principle of taxation basically is the funding of government expenditures (for whatever programs) derived from revenues levied from its constituents, us the taxpayers.

Rising government expenditures without the necessary funding will compel government to borrow and or print money which results to the deterioration of the national balance sheet or the fiscal deficit.

When government competes with or “crowds out” the private sector in raising money this raises the cost of money while at the same time reducing productivity which derails investments.

Over the longer horizon, if alternative options of borrowing and printing money under degenerating deficits become unsustainable, the government will again be forced to raise taxes furthering our economic agony of rising unemployment, lack of investments, higher cost of living and depreciating currency.

Yet beyond the public’s knowledge; the demand for “reckless” spending to accommodate populist causes could entail the risks of hyperinflation! You should look at the classic hyperinflation paradigm unfolding in Zimbabwe see The Race To Currency Destruction (Hyperinflation): Want to be a billionaire?

Tersely said, short term popular elixirs will only lead to longer term pain. A cure worse than the disease.

While everyone wants to be relieved of high oil prices and the burden of taxation, what people should realize is that cuts in taxes NEEDS TO BE ACCOMPANIED BY A CORRESPONDING DECREASE IN GOVERNMENT SPENDING.

What I am trying to say is that an abolition/suspension/moratorium of VAT should come with DECREASED spending and not shifting of burdens by imposing other taxes, which lead to more inefficiencies in the economy and avenues for more corruption.

None of our political officials have proffered such option because it takes away their inherent privileges of constituent dependency or the basic premise for their existence.

That’s why populism is almost always about intuition, vacuousness and immediate pacification instead of sound policies that ensures productive economic growth by accumulating capital.

The Race To Currency Destruction (Hyperinflation): Want to be a billionaire?

Courtesy of the Economist

From the Economist (highlight mine), ``HYPERINFLATION requires a good head for figures and a sturdy wallet to hold wads of low-value paper money. Governments have attempted to keep pace with hyperinflation by issuing ever-higher denomination banknotes to replace worthless notes that might as well serve as wallpaper. Last week Zimbabwe's central bank unveiled a 100 billion dollar banknote to cope with inflation running at 2.2m%. On Sunday July 27th the bank changed tack and announced it would be lopping off a string of zeroes on replacement notes, in what passes for economic reform in stricken Zimbabwe. But Robert Mugabe has some way to go before he can claim for his country the accolade of printing the highest-denomination banknote. A note issued in post-war Hungary came with a mind-boggling 19 digits.”

Courtesy of Associated Press

Because Zimbabwe’s inflation is 2,000,000 % a month, the Zimbabwe central bank plans to reform the currency by removing “zeroes”.

This from the AP, ‘Zimbabwe's bank chief plans new currency reforms — removing "more zeros" from the plummeting Zimbabwe dollar and raising the limit on cash withdrawals — to tackle the country's runaway inflation and cash shortages, state media reported Sunday.

“Previous currency reforms have failed to tame Zimbabwe's inflation — officially pegged at 2.2 million percent a year but estimated by independent analysts to be closer to 12.5 million percent. It also has become virtually impossible to get access to cash as the country's economic collapse worsens.

“Authorities last week released a new 100 billion dollar bank note. By Sunday it was not enough even to buy a scarce loaf of bread in what has become one of the world's most expensive — and impoverished — countries.”

How much that this money buy? According to the CNN

``It said a 4-pound (2-kilogram) bag of sugar cost about 20 billion Zimbabwe dollars ($1) at the government's fixed price, and 90 billion on the black market ($1 at the black market exchange or $4.50 at the bank exchange rate.)”. 20 billion dollars for a bag of sugar! Amazing. Yes, you have a billion alright but it buys practically nothing.

As the Economist have noted we’ve got a history of countries literally printing money in order to politically survive its corrupt and incompetent leaders.

Chart from Cato Institute/Steve Hanke

If the idea is simply to throw money to our socio-economic problems as a political solution, as many have suggested, then we should keep in mind the experiences of Zimbabwe, Yugoslavia, Hungary and Weimar Germany.

There is no free lunch.

Starve thy Neighbor: From Food to Fertilizers

The global “Starve thy Neighbor” policies continue. First, food exporting countries have been curtailing exports. Now, they are restricting sales of fertilizers, which may come at the expense of expanding output…

Excerpted from William Bi of Bloomberg,

“China, the world's largest grain producer, will increase export duties on all fertilizers and some related raw materials by 100 percentage points to ensure domestic supply for farmers during the main growing season.

“The changes will be effective from April 20 to Sept. 30 and will increase export taxes on fertilizer products to between 100 percent and 135 percent, the Ministry of Finance said in a statement on its Web site today. Current tariffs on fertilizers are zero, 30 percent or 35 percent, depending on the category, according to the site.

“China, grappling with soaring food costs, has boosted subsidies and grain prices to stem declining interest in farming. Lower exports from China, a major supplier of some products such as urea and ammonium phosphate, may further stoke global prices of fertilizers, with some trading at records on demand for food and biofuels.

``The government is sacrificing the fertilizer industry to protect farming,'' as grain production is critical to China's struggle with inflation, Xu Hongzhi, a Beijing-based fertilizer analyst at Beijing Orient Agribusiness Consultant Ltd., said in an interview yesterday.

“If China effectively restricts exporting fertilizers, it could be ``fatal'' to global supplies of some products, such as ammonium phosphate, as it supplies between 20 to 30 percent of global trade volume of the plant feed, Xu said.

Read entire link here.

Nonetheless fertilizer prices have skyrocketed as shown below…

Decyfer DAP Fertilise fob Gulf Coast courtesy of Fullermoney.com

Other fertilizer charts at fullermoney.com…Decyfer MOP Fertiliser Vancouver, Decyfer Sulfur fertiliser fob Vancouver, Morocco Phosphate Rock.

More restrictions equal increased marketplace tensions and political instability…