Squeezing the water balloon

[Jamie (K)]

If you fill a balloon with water and squeeze one side of it, the other side will bulge up big.

You can see this happening in the world of economics lately.

Food is getting very expensive in some countries. I read an article a few days ago that gave part of the reason. Ukraine, Pakistan, India and some other countries have banned the exportation of wheat, and Russia has put a 50% export tariff on wheat leaving its territory. This makes wheat very cheap in those places, but it also means that countries that used to buy wheat from them can't anymore, so they go to the United States, Canada, Brazil and other countries that produce it. All this demand is raising the price of wheat on the world market until some people in some places can't afford food.

The US government demanded that companies start to produce biofuels, so now farmers are growing fewer crops for food and more for fuel. This is also making food more expensive not only in the United States, but all over the world.

In France, Canada and some other countries, they have capped the price of medicines. Government bureaucrats tell companies how much they can charge. However, artificially reducing the price of medicines doesn't reduce the cost of developing them. This means that the pharmaceutical companies have to recover their costs by charging more in the countries that don't cap the prices of medicines. This means that fewer and fewer people are paying the development costs, so the Americans and some others are really subsidizing the price of medicine for consumers in other rich countries.