Frederick Kaufman
appetites not blame the United States, the rise in oil prices or genetically modified crops high food prices. Wall Street is to blame. The analyst Frederick Kaufman writes in the prestigious U.S. magazine Foreign Policy.
The supply and demand certainly matter. But there is another reason why the food around the world have become so expensive: the greed of Wall Street.
only had the brilliant minds of Goldman Sachs fell into account this simple truth: nothing is more valuable than our daily bread. And where there is value, no money. In 1991, Goldman's bankers, led by his prophetic President Gary Cohn, came up with a new type of investment product, a financial derivative that indiciario followed up to 24 commodities, from metals precious energy to coffee, cocoa, cattle, corn, hogs, soybeans and wheat. It weighted the investment value of each element, mixed and shuffled the parties, and reduced what had been a complicated set of real things to a mathematical formula, which will henceforth be known as Commodities Index Goldman Sachs (GSCI) .
For a decade, the GSCI remained a relatively static investment vehicle, because the bankers were more concerned about the risk and collateralized debt than by the things that could be planted or harvested. Then in 1999, the Commodities Futures Trading Commission [Commission for Trade Commodity Futures] deregulated the futures markets. Suddenly, banks could take, at will, positions in grain markets, before, since the Great Depression, only accessible to those who really had something to do with the production of our food.
Big changes were coming to the bags of grain from Chicago, Minneapolis and Kansas City, which for 150 years had helped to moderate the ups and downs of global food prices. Farming may seem bucolic, but it is an industry inherently unstable, subject to the vicissitudes of weather, disease and disasters. The trading system de futur
grain you came after the American Civil War led by the founders of Archer Daniels Midland, General Mills and Pillsbury, and helped establish the U.S. as a financial giant would end up beating Europe. Grain markets also protect the farmers and millers of the risks inherent in their profession. The basic idea was the "forward contract" means an agreement between sellers and buyers of wheat to put a reasonable price even before planting. Thus, the "future" of grains contributing to stabilize the price of a loaf of bread at the bakery, or later in the supermarket- while allowing farmers to protect themselves against bad times and invest in their farms and businesses. Result: In the course of the twentieth century, the real price of wheat was reduced (in spite of a setback or two, especially in the inflationary spiral of the decade of the 70), stimulating the development of U.S. agribusiness. After the Second World War, the United States routinely produce surplus grain, which became an essential element of their political strategies, economic and humanitarian, and he stops for granted that U.S. grain to feed millions of hungry people around the world.
Futures markets traditionally included two types of players. On one side were farmers, millers, wholesalers, market players have a real interest in physical and wheat. This group includes not only producers of corn in Iowa or wheat producers in Nebraska, but also to large multinational companies such as Pizza Hut, Kraft, Nestle, Sara Lee, Tyson Foods and McDonald's, whose shares on the New York Stock Exchange up and fall, according to his ability to take food at competitive prices to the windows of cars people and supermarket shelves. These market participants are called third parties in good faith, because I really need to buy and sell grain.
On the other hand, we have to speculator. The speculator does not produce or consume corn, soy or wheat, nor has a place to store 20 tons of cereals that could buy at one time. Speculators make money through the traditional market behavior: buy low and sell high. And the physical players in the future of the grains are generally welcoming traditional speculators of the market, as their constant orders and sales generate cash and offered to bona fide third parties a way to manage risk to allow them to sell and buy at your leisure.
But Goldman index perverted the symmetry of this system. The GSCI does not care about long-standing patterns compra-venta/venta-compra. This new derivative was made to buy commodities, and just shop. On the basis of this strategy that seeks only long positions (or buying futures) was intended to transform a commodity investment (formerly the competence of specialists) into something that looked a lot like an investment in shares: asset class in which anyone could make their money and let it accumulate for decades (such as buying General Electric or Apple). When the commodity markets began to resemble the stock market, banks would get new cash flows. But the strategy was flawed, at least from the point of view for those of us who eat: the GSCI not include a mechanism to sell the goods.
This imbalance undermines the fabric received from the commodity markets, the bankers need to buy and keep buying, regardless of price. Each time he approached the date of expiry of a futures contract on an index of commodities, banks were forced to "roll" their portfolios of billions of dollars in purchase orders to the following futures contract for the following two or three months. And just as the deflationary impact of "bridge" position was not part of the strategy of the GSCI, professional traders of grain could make a big deal anticipating the inevitable fluctuations that cause these "shot." "I make my living with dumb money," he said commodities trader to Businessweek Emil Van Essen last year. Commodity brokers employed by banks, which had created index funds for commodities, were brimming with happiness.
bankers recognize a good system when they see it, and dozens of speculators followed the example of Goldman and joined the game of commodity index, including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns and Lehman Brothers, minimal as only some of the sellers of funds commodity index. He had set the stage for inflation in food prices that, over time, taken by surprise at some of the largest mills, processors and retailers in the U.S. and worldwide impact.
Money talks. Since the technology bubble burst in 2000, has increased by 50 times the index fund investment in commodities. To put the phenomenon in real terms: in 2003, the market for commodity futures had a volume of only 13 billion dollars. But when the global financial crisis routed to investors in early 2008, and given that their dollars pounds and euros were no reliable destination, commodity-and particularly, food-appeared and suddenness as the last best refuge of cash from hedge funds, pension funds and SWFs. "There were people who had no idea what they were commodities, but even so, they bought," said an analyst with the Department of Agriculture of the United States. In the first 55 days of 2008, speculators poured 55 billion U.S. dollars in the commodities markets, and in July, turned over 318 billion U.S. dollars in the market. Since then, food price inflation remains stable.
And the money flowed, and the bankers had already prepared a new casino from food. With prices of oil and gas (the dominant products of index funds) in head, new investment products markets burned all other commodities index, causing a problem already well known to those versed in history of tulips, dotcoms and real estate flights: a bubble of food. The hard red spring wheat, which usually sells 4 to $ 6 per bushel of 60 pounds, broke all records by reaching the $ 25 future. And so, between 2005 and 2008, World food prices rose 80 percent, and rising. "We've never seen so much investment capital into commodity markets," said Keith Kendell, president of the National Grain and Feed. "There is no doubt that there has been speculation." In a recently published note, Olivier De Schutter, UN Special Rapporteur on the Right to Food in 2008 concluded that "a significant part of the rise in the price [of food] was due to the emergence of a bubble speculative. "
What was happening in the grain market was not the result of "speculation" in the traditional sense to buy low and sell high. Today, along with the cumulative index, the GSCI Standard & Poor's offers 219 different index tickers, and investors may turn their systems Bloomberg and bet on whatever they want, from palladium to soybean oil, biofuel or livestock. But the rise of speculative opportunities in grains, edible oil and cattle markets has created a vicious circle. The greater the price of foodstuffs, more money the bankers and more prices increase. In fact, between 2003 and 2008, the volume of speculation from index funds increased by 1,900%! "What we are experiencing is a demand shock resulting from a new category of participant in the futures market, "said Michael Masters, Manager of Masters Capital Management, before the U.S. Congress in the middle of the 2008 food crisis.
The result of the entry of Wall Street in grain markets, cattle feed and has had tremendous impact on world food production and distribution systems. Now the world's food supply not only has to face supply constraints and increases in demand for grain but this mechanism spurious artificial increase in grain prices created by the investment bank. Result: The imaginary wheat dominates the price of wheat real, since there are now four speculators for every third party in good faith (traditionally, it was only a fifth of the market).
Today, bankers and brokers are at the top of the food chain: the system are carnivores, predators of the world and everything in it. At the base, the farmers suffered, for him, the grain price increase should have been a fluke, but speculation has also created spikes in the prices of everything you need for farmers to produce grain, from seed to fertilizer, through the diesel. Immediately above them, the consumers. The average American who spends about 8 to 12 percent of their weekly salary on food, felt no immediate crisis. But for the nearly 2 billion people worldwide who spend more than 50 percent of their income on food, the effects have been devastating: 250 million people swelled the ranks of the hungry in 2008, which Food insecurity was beating exceeded one billion people, a figure unprecedented in history.
What is the solution? The last time I visited the Minneapolis Grain Exchange, asked a handful of wheat brokers what would happen if the U.S. government prohibiting investment banks transactions exclusively for the purchase of foodstuffs. His reaction: laughter. A phone call to a third party in good faith as Cargill and Archer Daniels Midland and a secret exchange of assets, and participation of a bank in the futures market, it is indistinguishable from that of an international buyer of wheat. I asked what would happen if the government bans all products only in long? Again, laughter. Problem solved with one phone call, this time to a commercial office in London or Hong Kong: the emerging markets of food products have reached proportions supra, and are beyond the reach of the law. Volatility in
food markets have also destroyed what could have been a great opportunity for global cooperation. The higher cost of corn, soybeans, rice or wheat, the greater should be the efforts made by the world's nations to cooperate among them to ensure that grain-importing countries do not cause infections increasingly dramatic inflation and political unrest. Instead, countries have responded with policies of "me first", from export bans and hoarding neo-mercantilist appropriation of land in Africa. And the efforts of committed activists and international agencies to curb speculation grain have not accomplished anything. The truth is that index funds continue to thrive, and bankers pocketing the profits while the poor of the world teeter on the brink of starvation.
Frederick Kaufman is an American specialist in food issues. His latest book, A Short History of the American Stomach (estógamo Brief History of U.S.).
source: SINPERMISO
only had the brilliant minds of Goldman Sachs fell into account this simple truth: nothing is more valuable than our daily bread. And where there is value, no money. In 1991, Goldman's bankers, led by his prophetic President Gary Cohn, came up with a new type of investment product, a financial derivative that indiciario followed up to 24 commodities, from metals precious energy to coffee, cocoa, cattle, corn, hogs, soybeans and wheat. It weighted the investment value of each element, mixed and shuffled the parties, and reduced what had been a complicated set of real things to a mathematical formula, which will henceforth be known as Commodities Index Goldman Sachs (GSCI) .
For a decade, the GSCI remained a relatively static investment vehicle, because the bankers were more concerned about the risk and collateralized debt than by the things that could be planted or harvested. Then in 1999, the Commodities Futures Trading Commission [Commission for Trade Commodity Futures] deregulated the futures markets. Suddenly, banks could take, at will, positions in grain markets, before, since the Great Depression, only accessible to those who really had something to do with the production of our food.
Big changes were coming to the bags of grain from Chicago, Minneapolis and Kansas City, which for 150 years had helped to moderate the ups and downs of global food prices. Farming may seem bucolic, but it is an industry inherently unstable, subject to the vicissitudes of weather, disease and disasters. The trading system de futur
grain you came after the American Civil War led by the founders of Archer Daniels Midland, General Mills and Pillsbury, and helped establish the U.S. as a financial giant would end up beating Europe. Grain markets also protect the farmers and millers of the risks inherent in their profession. The basic idea was the "forward contract" means an agreement between sellers and buyers of wheat to put a reasonable price even before planting. Thus, the "future" of grains contributing to stabilize the price of a loaf of bread at the bakery, or later in the supermarket- while allowing farmers to protect themselves against bad times and invest in their farms and businesses. Result: In the course of the twentieth century, the real price of wheat was reduced (in spite of a setback or two, especially in the inflationary spiral of the decade of the 70), stimulating the development of U.S. agribusiness. After the Second World War, the United States routinely produce surplus grain, which became an essential element of their political strategies, economic and humanitarian, and he stops for granted that U.S. grain to feed millions of hungry people around the world. Futures markets traditionally included two types of players. On one side were farmers, millers, wholesalers, market players have a real interest in physical and wheat. This group includes not only producers of corn in Iowa or wheat producers in Nebraska, but also to large multinational companies such as Pizza Hut, Kraft, Nestle, Sara Lee, Tyson Foods and McDonald's, whose shares on the New York Stock Exchange up and fall, according to his ability to take food at competitive prices to the windows of cars people and supermarket shelves. These market participants are called third parties in good faith, because I really need to buy and sell grain.
On the other hand, we have to speculator. The speculator does not produce or consume corn, soy or wheat, nor has a place to store 20 tons of cereals that could buy at one time. Speculators make money through the traditional market behavior: buy low and sell high. And the physical players in the future of the grains are generally welcoming traditional speculators of the market, as their constant orders and sales generate cash and offered to bona fide third parties a way to manage risk to allow them to sell and buy at your leisure.
But Goldman index perverted the symmetry of this system. The GSCI does not care about long-standing patterns compra-venta/venta-compra. This new derivative was made to buy commodities, and just shop. On the basis of this strategy that seeks only long positions (or buying futures) was intended to transform a commodity investment (formerly the competence of specialists) into something that looked a lot like an investment in shares: asset class in which anyone could make their money and let it accumulate for decades (such as buying General Electric or Apple). When the commodity markets began to resemble the stock market, banks would get new cash flows. But the strategy was flawed, at least from the point of view for those of us who eat: the GSCI not include a mechanism to sell the goods.
This imbalance undermines the fabric received from the commodity markets, the bankers need to buy and keep buying, regardless of price. Each time he approached the date of expiry of a futures contract on an index of commodities, banks were forced to "roll" their portfolios of billions of dollars in purchase orders to the following futures contract for the following two or three months. And just as the deflationary impact of "bridge" position was not part of the strategy of the GSCI, professional traders of grain could make a big deal anticipating the inevitable fluctuations that cause these "shot." "I make my living with dumb money," he said commodities trader to Businessweek Emil Van Essen last year. Commodity brokers employed by banks, which had created index funds for commodities, were brimming with happiness.
bankers recognize a good system when they see it, and dozens of speculators followed the example of Goldman and joined the game of commodity index, including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns and Lehman Brothers, minimal as only some of the sellers of funds commodity index. He had set the stage for inflation in food prices that, over time, taken by surprise at some of the largest mills, processors and retailers in the U.S. and worldwide impact.
Money talks. Since the technology bubble burst in 2000, has increased by 50 times the index fund investment in commodities. To put the phenomenon in real terms: in 2003, the market for commodity futures had a volume of only 13 billion dollars. But when the global financial crisis routed to investors in early 2008, and given that their dollars pounds and euros were no reliable destination, commodity-and particularly, food-appeared and suddenness as the last best refuge of cash from hedge funds, pension funds and SWFs. "There were people who had no idea what they were commodities, but even so, they bought," said an analyst with the Department of Agriculture of the United States. In the first 55 days of 2008, speculators poured 55 billion U.S. dollars in the commodities markets, and in July, turned over 318 billion U.S. dollars in the market. Since then, food price inflation remains stable.
And the money flowed, and the bankers had already prepared a new casino from food. With prices of oil and gas (the dominant products of index funds) in head, new investment products markets burned all other commodities index, causing a problem already well known to those versed in history of tulips, dotcoms and real estate flights: a bubble of food. The hard red spring wheat, which usually sells 4 to $ 6 per bushel of 60 pounds, broke all records by reaching the $ 25 future. And so, between 2005 and 2008, World food prices rose 80 percent, and rising. "We've never seen so much investment capital into commodity markets," said Keith Kendell, president of the National Grain and Feed. "There is no doubt that there has been speculation." In a recently published note, Olivier De Schutter, UN Special Rapporteur on the Right to Food in 2008 concluded that "a significant part of the rise in the price [of food] was due to the emergence of a bubble speculative. "
What was happening in the grain market was not the result of "speculation" in the traditional sense to buy low and sell high. Today, along with the cumulative index, the GSCI Standard & Poor's offers 219 different index tickers, and investors may turn their systems Bloomberg and bet on whatever they want, from palladium to soybean oil, biofuel or livestock. But the rise of speculative opportunities in grains, edible oil and cattle markets has created a vicious circle. The greater the price of foodstuffs, more money the bankers and more prices increase. In fact, between 2003 and 2008, the volume of speculation from index funds increased by 1,900%! "What we are experiencing is a demand shock resulting from a new category of participant in the futures market, "said Michael Masters, Manager of Masters Capital Management, before the U.S. Congress in the middle of the 2008 food crisis.
The result of the entry of Wall Street in grain markets, cattle feed and has had tremendous impact on world food production and distribution systems. Now the world's food supply not only has to face supply constraints and increases in demand for grain but this mechanism spurious artificial increase in grain prices created by the investment bank. Result: The imaginary wheat dominates the price of wheat real, since there are now four speculators for every third party in good faith (traditionally, it was only a fifth of the market).
Today, bankers and brokers are at the top of the food chain: the system are carnivores, predators of the world and everything in it. At the base, the farmers suffered, for him, the grain price increase should have been a fluke, but speculation has also created spikes in the prices of everything you need for farmers to produce grain, from seed to fertilizer, through the diesel. Immediately above them, the consumers. The average American who spends about 8 to 12 percent of their weekly salary on food, felt no immediate crisis. But for the nearly 2 billion people worldwide who spend more than 50 percent of their income on food, the effects have been devastating: 250 million people swelled the ranks of the hungry in 2008, which Food insecurity was beating exceeded one billion people, a figure unprecedented in history.
What is the solution? The last time I visited the Minneapolis Grain Exchange, asked a handful of wheat brokers what would happen if the U.S. government prohibiting investment banks transactions exclusively for the purchase of foodstuffs. His reaction: laughter. A phone call to a third party in good faith as Cargill and Archer Daniels Midland and a secret exchange of assets, and participation of a bank in the futures market, it is indistinguishable from that of an international buyer of wheat. I asked what would happen if the government bans all products only in long? Again, laughter. Problem solved with one phone call, this time to a commercial office in London or Hong Kong: the emerging markets of food products have reached proportions supra, and are beyond the reach of the law. Volatility in
food markets have also destroyed what could have been a great opportunity for global cooperation. The higher cost of corn, soybeans, rice or wheat, the greater should be the efforts made by the world's nations to cooperate among them to ensure that grain-importing countries do not cause infections increasingly dramatic inflation and political unrest. Instead, countries have responded with policies of "me first", from export bans and hoarding neo-mercantilist appropriation of land in Africa. And the efforts of committed activists and international agencies to curb speculation grain have not accomplished anything. The truth is that index funds continue to thrive, and bankers pocketing the profits while the poor of the world teeter on the brink of starvation.
Frederick Kaufman is an American specialist in food issues. His latest book, A Short History of the American Stomach (estógamo Brief History of U.S.).
source: SINPERMISO
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