(Yes, it’s long, but…it needs to be, and we need to know this stuff. Once again, there will be prizes for those who finish.) ;o)
Clearly the recent increase in food prices, and those expected in the near future, are due to a number of root causes and components. Many domestic and global reports have warned that by 2013 and 2014 high prices will reach critical levels in many developing nations. In the mainstream media, the reasons given are usually confined to: global areas of drought and flooding; corn being widely used as putatively ‘green’ biofuels; and depleted or non-existent national food reserves.
Less known as a cause is commodity manipulation by big banking and other forms of food financialization: hedge funds and index funds.
Some of the information in the videos and printed material in the links below contradict each other, but that may be down to America/UK variances.
In this TRNN program, Paul Jay interviews Tim Wise, the policy director for Tufts University’s Global Development and Environmental Institute on August 13. The subject is the advancing food bubble, climate change, and commodities manipulation:
For a deeper look into the manipulation subject, Jay interviews Michael Greenberger, University of Maryland School of Law and former US division * at the Commodity Futures Trading Commission (CFTC) and some connections with DHS. The subject is: Speculation and Criminal Manipulation of Food and Commodities Prices :
Greenberger’s doo-rah about ‘Obama ordered his DoJ to investigate, etc.’ (but, it didn’t happen) fails, of course, since if Holder failed to execute his ‘true wishes’, he could fire his butt. Instead, he proves once again which/whose side he’s on. (Enter my contest by taking a stab at the answer!)
Greenberger’s contention that ‘all ya need to do is have the FBI *open* investigations, and the manipulators would scatter like the cockroaches they are, prices would drop…”, falls far short of ‘Prosecute, and if found guilty: Jail ‘Em’, though. Cockroaches always return whn ya turn off the lights. greenberger’s political calculations at the end…readers may need to explain to me.
This next video is a 2011 animated explanation of how markets can be manipulated by commodity manipulators; sponsors of the video are named at the end. (You’ll notice that it was made at the time when some believed that the unfinished portions of Dodd-Frank might actually regulate the commodities and derivatives markets, or that regulators might give a good goddam about any fraud or law-breaking):
This is a piece from Feb. 2011 at Al Jazeera concerning a former UK hedge funder turned whistleblower explaining the extent to which food market manipulators really don’t care about world hunger, starvation, or food affordability. Warehousing vast quantities of commodities, *and* goofing markets. It’s brief, but probative; it’s easy to transpose the UK to US hedge fund practices.
So. What finally prompted me to pursue all this right now was the recent news from the UK that Barclay’s Bank made approximately £500 million on food ‘speculation’ during 2010 and 2011 according to the World Development Movement, which follows global poverty issues doggedly, and reported on Barclays Capital Commodities Division as to questionable practices in 2011. It’s a good website to bookmark for future reference; this page has a number of good videos on food speculation, plus various pages on tangential issues, and a primer for understanding commodity trading terminology.
Barclays claims that their food trades weren’t proprietary; they were just helpin’ out their clients.
So, Barclays, of LIBOR fame, was shown as conspiring with traders to manipulate the LIBOR rate in order to increase profits. We all learned a bit about why those rates were important to both the financial markets, pension funds, governments that bought interest swaps, and ultimately…even individual people (boatloads of civil suits against Barclays are in the works). It seems that oil is similarly ‘benchmarked’.
This page from WMD explains that, like LIBOR, the mechanisms through which conspiring traders are almost invited to the commodity manipulation table, in this case oil:
“Concerns around the reliability of oil prices–reinvigorated by the huge spike in gas prices earlier this year–continue to grow after a recent G20 report “found the market is wide open to ‘manipulation and distortion.’” Oil retailers use “benchmarks” to determine the price for future supplies. The benchmark rate is calculated by data companies (Platts & Argus) based on submissions from banks, hedge funds, energy companies, and others who trade oil daily. Similar to Libor, the integrity of this process depends on the honesty of firms to submit accurate data–firms that have an interest in manipulating prices.
The report, published last month by the International Organisation of Securities Commissions (IOSCO), noted that whole market is voluntary–that is, banks can choose which trades to make public–meaning “traders have opportunities to influence oil prices for their own profit.”
IOSCO’s website has this page with links on the right to their responses to the G-20s’ ‘concerns’. (okay.)
This is a link to Olivier de Schutter, the UN Special Rapporteur on The Right to Food from two bloody years ago: ‘Food Commodities Speculation and Food Price Crises - Regulation to reduce the risks of price volatility. Sigh and Grrr.
CNN mentioned food price increases recently, but…blames it on drought, but does manage to quote the IMF on the subject:
“However the World Bank has called on all countries to strengthen their policies and systems to protect the most vulnerable members of their population — such as safety nets to ensure poor families can afford basic staples, sustained investments in agriculture, the introduction of drought-resistant crop varieties, and keeping international trade open to the export and import of food.
“We cannot allow these historic price hikes to turn into a lifetime of perils, as families take their children out of school and eat less nutritious food to compensate for the high prices,” said Kim.”
Kim mentions ‘food market transparency’ as an afterthought; pretty bold stuff, there, my friend. But beware the ‘drought resistant corn’ idea; it may prove to be more dangerous than we know..
But Hello Mistah President:
There is plenty of food, even plenty to export? Excuse me? In your White House dining room, yes, and in Michelle’s garden; but not where most of US live, or the other ‘food insecure’ or starving people around the planet. What would the future look like had you made some of the suggested fixes before now, when it’s arguably TOO LATE? Yeah; that long hot summer CNN mentions might reach to a hell of a lot of ‘summers’.
The thing is, even if you don’t give a rat’s ass for the humans who are essentially supposed to be in your care, we all know that you know what sorts of social unrest, even riots, are caused when food and energy costs for a family are over 40% of their income. Yes, Mr. President: it’s known as a tipping point for revolution. We’re watching the world fray at the seams right now, due to needless and dangerous neoliberal austerity programs as the Big Banks and transnationals rake in the money to beat the band. You must be as clueless as the other MOTUs: you forget that one day soon, there won’t be any place for you to hide, either, as the planet chokes and wheezes, and clean water becomes impossible to find.
I hope we can save the world from you and your ilk before it’s too late.
(Call the White House today. All the President’s Men say they want to hear from you.) /s
(to be posted soon at kgblogz.com)