Saturday, January 05, 2013

"Please stop the price decline!"

An MP from PKS urges the government to stop the declining prices of crude palm oil and rubber (link here*). He points out, rightly, that the reason why prices are going down is because the demand is low due to the still weak global economy.

His solution is to get together with the other producers to form a collusive cartel so as to limit the supply and apply a monopolistic power.

But as he said, the problem is on demand. Limiting the supply might increase the price momentarily (or halt the decline), but as long as the purchasing power of the buyers is weak, that would not help.

His second solution is to force domestic consumption. Sounds like another call for the mighty Bulog?

*) It has come to my attention (thanks to @sillysampi on Twitter) that many of my links to Kompas were gated. My apologies. I try to link to non-gated ones from now on (if available); otherwise, I'll mark it as "gated".

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