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Garlic: Gold for only a few
By Joseph Christian (China Daily)
Updated: 2009-12-09 09:54
"Oh my god, your breath stinks," my girlfriend said to me as she turned her head away from my advances for an after-dinner kiss.
I had just finished eating a few cloves of garlic because supposedly, according to many of my Chinese friends, it helps fight off A/H1N1.
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In a classic case of supply vs. demand, some places in China have seen garlic prices shoot up by as much as 50-fold since this time last year. Demand has increased due to millions of Chinese wanting to ease their fears with grandma's home health remedy. Supply has decreased because many Chinese garlic farmers gave up on the pungent crop last year when low garlic prices limited their profits.
It doesn't take a rocket scientist to figure out what happened next. Everyone from jobless young men to coal mine bosses started snapping up all the garlic in sight. Some made hundreds of thousands, some made millions. There were new cars in the garage and cheek to cheek grins; but they were the lucky ones.
I hate to put a damper on the fun but any economics textbook tells us that too much liquidity in the market ripens the chance for speculation. And speculation is exactly what the garlic market reeks of right now.
Speculators with the bank's money or their own have driven garlic to an unreasonable price. To better understand, consider if this 50-fold increase happened with something we use every day like drinking water. Last year I ordered an 18.9 liter bottle of drinking water for 10 yuan. This year that same bottle of water would cost me 500 yuan. Who in their right mind is going to pay 500 yuan for 18.9 liters of water?
The only way a person could continue to feed this pricing frenzy is if they were so focused on making money that they turned off all cognitive functions in their brain. Hmm, sounds like a good definition of speculators.
Garlic prices are riding a bubble that is going to pop. I don't know where, or when, but it will.
My gut reaction upon hearing of garlic's rise was to get off my butt and go buy as much as I could. But then I had to sober myself with the reality of how outrageous the price of garlic already is. The fact of the matter is that it is too late in the game for the odds to be in the speculator's favor. Maybe a few months ago it was a different story, but not now.
It's time to take a lesson from physics...what goes up must come down. Don't get caught up in this foul mess because money has never smelled so bad. In the meantime, in every restaurant I go to I am going to eat as much garlic as I can to get the most bang for my buck. I might have stinky breath, but at least when I open my wallet my money will still be there.
