The stock market can go into outer space, but people want to feel that the prices they pay match their perception of how much everything from a loaf of bread to a new house should cost.
A while back I had an opportunity to work with a very smart French engineer on a project for a very large company. There was a strong desire to make biofuels, and we were tasked with looking into the science and economics of such an undertaking. One day we made our way to Ashkelon, where the Israel Electric Corporation has a power generation facility. A researcher was given everything he could imagine to grow algae and convert their oils into biofuel. They gave him heated water tanks, directed CO2 from their smokestacks into the pools, provided him with staff and everything needed to go from algae to fuel. When we sat in the guy’s office, he gave me a bottle that had a stamp certifying that its clear liquid contents were algal biofuel. As I held the bottle, I asked, “How much did it cost to make this liter?” Crickets and a smile. I asked again and received the same response. I would guess that it cost no less than $100 to make that liquid, which would put a gallon at nearly $400.
One of the most important lessons I learned from my French friend was that one can reduce prices until he bumps up against the price of raw components. And this is where biofuels fell into the abyss. A famous professor at Harvard modified bacteria to eat sugar and produce octane. That kind of research is impressive and leads to papers, accolades and press. What it does not lead to is sales. The price of one ton of sugar is around $400, the price changing as per the market. When you take the price of sugar and include the low efficiency for conversion to octane and then the costs of recovery of the fuel, the price goes well beyond the $4 a gallon that was common when that research was performed. And this has been the story of many biofuel companies: unless your bio-sources are willing to eat coal (around $100 per ton), you can’t make an economically competitive fuel. Some professors think that success in the lab will translate into success in the market. Unfortunately, many things that work on a lab bench are too expensive or impractical for real world markets.
Other attempts at biofuels had more insidious implications. Fuels derived from corn and palm trees raised the prices of the base materials. Palm oil is one of the cheapest and most widely used oils in the world. When large parts of palm oil production were diverted to fuel, the price for oil went up, to the detriment of many who rely on this oil for their daily needs. The same happened with corn, as the alcohol produced and added to gasoline caused a rise in the price of feed corn and again skewed a human-directed food market. If gas ever goes over $20 a gallon, then maybe biofuels will make sense; before that, it is doubtful. And remember, the Obama military wanted to buy huge amounts of these expensive fuels so as to feel good about the environment.
One does not have to be an MIT Ph.D. to see that many goods in the US are still way too expensive. Sure, inflation is down, but the prices we see include the cumulative effects of Biden’s 9% inflation and everything that followed. From the post-Covid shock of too much demand to the excessive amount of money pumped into the economy, inflation ran wild. When I see a ribeye steak two or three times what it cost in 2018, that is not 2.3% inflation. That is a new level of pricing that makes me wonder if I want to put out so much money for the product. Someone on X recently suggested a Price Czar in the White House. I don’t like Washington having more czars than Russia ever had, but somebody over at Treasury should be looking at key staples to understand where and how prices might be brought down. Beef is a good example, and President Trump suggested that foreign meatpackers may be inflating prices. It is critical that the Trump team understand the entire price profile of key foods, materials and goods. In some cases, there may simply be nothing that one can do, as the price truly reflects supply and demand in a free market. In other cases, maybe there is a need for cheaper transportation or incentives for more efficient production. I am not suggesting that the government go into production or enforce price controls. I do believe that Treasury should try to understand why key goods are way more expensive than they were in the past and if there is any way that prices can be brought down.
One cannot overstate the effect of the current economy on the dissatisfaction of the American public. Yes, it is the economy, stupid. People flocking to Mamdani are saying with their feet that the most capitalistic city cannot provide affordable housing, food, transportation or hope. It used to be way back when that after college, people got married, took out a mortgage on a new home, bought a car and started a new life. Today, people leave college and wonder if they will ever own a home or afford to raise a family and send kids to college. The move towards the socialists by the Democrats, the complaints within the MAGA tent and the rise of antisemitism on both right and left are reflective not of a stock market at its peak but of unaffordable housing and food costing way too much. Before Covid, one could buy three 2 liter bottles of Coke for $3. Last I saw, one bottle was $3.49. Now multiply this effect by dozens of products and either you pay a lot more at the checkout or you bring a lot less to the checkout to pay what you used to pay.
Just as World War II completely reset the world order, Covid had a similar negative outcome. The Trump economy was humming along at the end of 2019, only to be completely upended along with all world economies by the engineered virus and the response to it. We have not fully recovered from Covid, from the health damage caused by it and the mRNA vaccines to the impact of closed economies followed by rampant inflation. While Treasury ponders if one can help bring down prices on key staples, the Department of Justice should be looking long and hard at Dr. Fauci and his colleagues who helped to engineer the virus, lie to the public as to its origins and misdirect in regards to masks, distancing and the vaccines. The bad actors going to jail will not make the price of ground beef go down, but it may discourage Bill Gates and others from playing God with viruses and human health.
Deflation as we experienced during the shutdown phase of Covid is not a good sign of economic health. But there needs to be lower prices on key goods that people buy and use with regularity. Rising salaries are not covering the much higher prices. Once there is a change at the Fed, interest rates should go down and the housing market might become more attractive to the many who want their own place. Cheaper oil should have an impact in both production of many goods as well as their transportation to market. People need to see a healthy economy to continue supporting Donald Trump and his policies. Yes, it’s the economy, and the economy needs some love right now.
Editor’s Note: After more than 40 days of screwing Americans, a few Dems have finally caved. The Schumer Shutdown was never about principle—just inflicting pain for political points.
Help us report the truth about the Schumer Shutdown. Use promo code POTUS47 to get 74% off your VIP membership.
Join the conversation as a VIP Member