Thursday, October 09, 2008

The Price of Eggs in China

"What does that have to do with the price of eggs in China?"

That’s a phrase my Dad used to invoke when I would raise a question he didn’t care to answer—or did not feel was germane to an issue under review. Something would happen that displeased him, he would take appropriate action…which I would question, with typical adolescent-centric logic…and he would throw out that line.

Example: “You were late getting home last night,” he would note, before informing me my driving privileges were being curtailed.

“But I had to take (insert high school babe-of-the-week name) home after band practice,” I would explain.

“What’s that got to do with the price of eggs in China?” he’d shoot back, essentially shutting down any other negotiation on the issue.

It’s a great tactic—try it on your kids this week.
It’s also a more meaningful question in light of the current financial situation in this country—and others. In the wake of the coordinated rate cuts around the world, questions are now being raised about other associated the price of eggs, and a lot of other stuff, in China and elsewhere.

Here’s an example: Fuel prices have been coming down daily. As I remarked on-air months ago, I expected gasoline to be priced under $3/gal by Election Day. The comment was made from a then-cynical perspective of how the Federal Government has and does manipulate markets to manage behavior.

Everyone in Washington wants voters to think “their man” is responsible for relieving the pain at the pump, thereby garnering votes on November 7.

Guess what?
Today it came true, at least in my neighborhood.
Regular Unleaded at under $3/gallon, with 3-1/2 weeks to go until Election Day.

While it is true the pain at the pump has been lessened, the financial analgesic for one issue appears to be a fiscal narcotic in another: tax revenues. The credit calamity and crisis of confidence could leap-frog from the banks and bourses of the world to the state, county, and city seats of government.

High fuel prices have been a double-edged sword—we’ve hated paying them, but they’ve swelled the coffers of government with revenues for building roads, maintaining highways, and funding the things we’ve grown to expect from our regional governments. So be careful what you're cheering about. It may be (relatively) cheaper to fill up, but will there be another piper to pay in January when governments discover their balance sheets aren't as flush as they expected.

By the way, remember when we shunned oil companies and threatened to boycott gasoline stations when the price of fuel soared past $2/gal.? How's that pot of hot water feeling these days, fellow Toads?

It’s been said that when the United States sneezes the rest of the world catches a cold. Our domestic financial situation is contagious, and the rest of the globe has contracted financial influenza. And that’s what this has got to do with the price of eggs—and oil—in China.

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