Effects of Quantitative Easing on Food Prices Global Warming - Admission/Application Essay Example

of Learning: EFFECTS OF QUANTITATIVE EASING ON FOOD PRICES GLOBAL WARMING Introduction Quantitative easing is an outstanding monetary system largely exercised by central banks to stimulate the economy at the national level when the normal monetary system has become unfunctional. The global economy has been greatly affected by the rising prices of commodities, fuel prices, changes in monetary policies and global inflation (Smith 67). Quantitative easing impacts the prices of commodities globally relatively to the dynamic economic conditions. The quantitative easing is implemented by a central bank by buying the resources of economic value from the banks and other privatized organizations with the newly produced money in order to initiate a strong flow of money into the financial system of the country. Quantitative easing leads to an increase in the flow and distribution of money in a country hence a major determinant of the food prices globally. Effects of quantitative easing on food prices global warming The most immediate effect of QE is that it allows a quick introduction of a large amount of money into the country. Private Banks and institutional investors may present the cash received into lending to private businesses or individuals. Alternatively, they might decide to focus on acquiring assets in emerging markets. What usually happens is that the central bank buys assets from private organizations and individuals thus increasing its balance sheet subsequently increasing the liquidity of organizations from which the assets are bought. The liquidity increases the cost of giving loans by the banks to other businesses and institutions hence increase in the economy (Smith 98). The result of the above leads to inflation which forces the banks to increase the lending rates and afterwards the people who borrow money from the banks are rare factors that lead to a reduction of shares on demand thus increasing the cost of the less free shares on the market. Due to inflation, the banks may make people invest in shares on the market by increasing the charges on saving money with them which will deter most people to save hence an increase in demand of goods whereas a reduction in the food supply and this feature causes an increase in the food prices. The most commonly affected food crops include cocoa, corn, coffee, oil, cotton and wheat. Quantitative easing mostly leads to inflation due to the excess supply of money in the market, but mostly the outcomes are felt in the pricing of supplies like food, energy and clothes. Prices on products worldwide are increasing and in the coming future it will be difficult to handle the increase in food demand over the supply. It is believed that the stockpile of food products has decreased due to increased need of food, so prices expected to rice (Smith 61). Due to inflation there is an increase in demand for food especially the grains to meet the high demand and this automatically leads to an increase in the food prices. Inflation, which is as a result of quantitative easing, has mainly affected the developing countries as there will be a high demand for domestically manufactured goods which are rare and this may influence imports to satisfy their demand, which usually leads to a rise in prices of the available goods. Due to an increase in rate of importation of goods, there will be a high rate of unemployment in manufacturing industries domestically making the poor people in the developing countries to suffer due to not being able to afford the high priced products. The amount of earnings also increases in this case but no change on the wages thus affecting people’s daily lives in the developing countries as only the rich keep the flow of resources and limited to the middle class thus difficult to manage the property at the high prices which may cause riots and conflicts between the two social classes leading to an increase in prices of food and energy worldwide. Inflation, which is a result of quantitative easing, has led an increase in the supply and distribution of money thus depreciation of its value and thus a lot of the same money to get the same product, and this in turn makes the products very expensive and unaffordable. Because the food and gas prices increases due to quantity easing the less fortunate and middle class people are usually affected compared to the rich because most of them spent their money on food and energy in the form of gas almost daily. It is believed that if the quantitative easing and excessive government spending are not dealt with, it will cause riots globally (Smith 51). Climatic conditions globally caused severe weather changes, and this has greatly affected production in particular food types especially the cereals, like the prices of corn and wheat are increasing due to the reduction in their distribution as they have been affected by the effects of global warming. As most animals feed on the grain and their distribution has decreased due to increased demand, there will be an increase in prices of meat. Quantitative easing is thereafter required to be applied in such a case where there should be an increase in flow of money in order to obtain more products to meet the demands or encourage importation of the goods. In the developing countries quantitative easing lowers the wages of those working and straining to maintain their lifestyle. This may be most evident in pregnant mothers being anemic and emaciated children due to lack of enough supply of food since most of them cannot afford the high prices. Climate change which is usually as a result of global warming is negatively overwhelming developing countries where all the rainy patterns have been interfered with either making the rains come late or last longer thus reducing the rate of crop production as most farming patterns do not thrive in unexpected climate change patterns. The mostly affected crops with the climate change may include the cereals like rice, groundnuts, oilseeds and also sugarcane which are the most suitable crops to fetch high prices (Smith 71). Conclusion In conclusion, quantitative easing has greatly affected the poor and many developing countries as well as global warming as it has led to massive increases in food prices as most people cannot afford them. Quantitative easing has led to an increase in demand for the goods due to massive flow of money thus reducing their distribution and this still increases the food prices. Inflation which is as a result of quantitative easing has lead to a decline in the value of money thus forcing people to have many amounts of it to buy some commodities. Work Cited Smith, John. Quantitative Wheezing. New York: Lulu.com, 2010. Print Read More