The unseen victims of US protectionism

I recently read this article by Walter E Williams in the Orange County register and thought it was really interesting:  http://www.ocregister.com/opinion/sugar-259371-fructose-high.html

It is about how the US “Obesity Epidemic” is partly due to the enormous amounts of Fructose we consume as a sugar substitute in everything from syrups and candies to the US-only blend of Coca-Cola.  Studies have shown that this sweetener has been shown to promote fat cell growth around major organs, obesity, adult-onset diabetes, and heart problems over and above people consuming similar amounts of sugar-based glucose. 

Why do we use so much Fructose then?  US sugar quotas raise the price of sugar here to about 3x the world price, making sugar relatively expensive as a sweetener.  This also had the byproduct of crippling our candy manufacturing industries, which mainly operate in Canada and Mexico where sugar is cheaper.  So why do we have these quotas?  Because the negative affects aren’t all that visible to the average American, but the benefits are vast for politically connected special interests.  The Fanjul family in Florida (sugar producers earning $65 million/year from this policy) and ADM (large company producing fructose earning untold millions/year), pour millions of dollars to both the Republican and Democratic parties to keep this policy alive. 

I realize that this article in many ways has more to do with politics than investing, but such is the world of economics.  It is more well acknowledged in the US that the Chinese government policy can have a strong affect commodity prices – and it’s best to keep in mind that the US government is a big player as well. 

As a side note on this point – two very bullish political signals went out for gold.  The Fed, through delaying it’s planned balance-sheet reduction, is signalling low interest rates for a longer period and a continued easy-money stance.  Thus gold-holders have less of an interest-rate tradeoff for holding it over dollars, and more will see gold as a hedge to possible dollar depriciation (note that the dollar can depreciate against gold, oil, and foreign currencies even in a deflationary environment).  The Chinese govenment has just increased the trading and investing cap that Chinese banks have on gold, which will surely fill up as it is a very popular investment option in China.

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About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at gluskinsheff.com. Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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