Reply to topic  [ 4 posts ] 
How Goldman gambled on starvation 
Author Message
User avatar

Joined: Tue Feb 07, 2012 4:34 am
Posts: 762
Location: Beautiful Bryon Bay
Reply with quote
Post How Goldman gambled on starvation
How Goldman gambled on starvation - Johann Hari:

Speculators set up a casino where the chips were the stomachs of millions. What does it say about our system that we can so casually inflict so much pain?


y now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You're wrong. There's more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here's the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.

It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn't afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it "a silent mass murder", entirely due to "man-made actions."

Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami. "My children stopped growing," a woman my age called Abiba Getaneh, told me. "I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died."

Most of the explanations we were given at the time have turned out to be false. It didn't happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn't because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren't enough on their own to explain such a violent shift.

To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world's stomachs ache.

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.

If this seems mystifying, it is. John Lanchester, in his superb guide to the world of finance, Whoops! Why Everybody Owes Everyone and No One Can Pay, explains: "Finance, like other forms of human behaviour, underwent a change in the 20th century, a shift equivalent to the emergence of modernism in the arts – a break with common sense, a turn towards self-referentiality and abstraction and notions that couldn't be explained in workaday English." Poetry found its break with realism when T S Eliot wrote "The Wasteland". Finance found its Wasteland moment in the 1970s, when it began to be dominated by complex financial instruments that even the people selling them didn't fully understand.

So what has this got to do with the bread on Abiba's plate? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was already deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in food contracts based on theoretical future crops – and the speculators drove the price through the roof.

Here's how it happened. In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world's frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

When I asked Merrill Lynch's spokesman to comment on the charge of causing mass hunger, he said: "Huh. I didn't know about that." He later emailed to say: "I am going to decline comment." Deutsche Bank also refused to comment. Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that "serious analyses ... have concluded index funds did not cause a bubble in commodity futures prices", offering as evidence a statement by the OECD.

How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period – but only a fraction as much as the ones affected by speculation. Her research shows that speculation was "the main cause" of the rise.

So it has come to this. The world's wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. Their Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict so much pain?

If we don't re-regulate, it is only a matter of time before this all happens again. How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish. In the US, the House has passed some regulation, but there are fears that the Senate – drenched in speculator-donations – may dilute it into meaninglessness. The EU is lagging far behind even this, while in Britain, where most of this "trade" takes place, advocacy groups are worried that David Cameron's government will block reform entirely to please his own friends and donors in the City.

TO READ MORE - http://www.independent.co.uk/opinion/co ... 16088.html

_________________
"Let your life lightly dance on the edges of time like dew on the tip of a leaf"


Sun Mar 18, 2012 4:30 am
Profile
Site Admin
User avatar

Joined: Tue May 03, 2011 6:06 pm
Posts: 11843
Reply with quote
Post Re: How Goldman gambled on starvation
This kind of thing is a clear symptom of a pathological society molded by pathological leaders, also known as sociopaths.

_________________
It's not that we can't handle the truth. It's that they can't handle us if we know the truth.


Wed Mar 28, 2012 4:22 am
Profile
User avatar

Joined: Fri May 06, 2011 5:11 pm
Posts: 1400
Reply with quote
Post Re: How Goldman gambled on starvation
Thank you, Grats!

Many kudos for continuing to get the important stuff out on the table to be discussed.

The power pyramid psychopaths are always looking for advanced efficient killing tools in their agenda for population redux. Food market derivative instruments kill without impacting the environment.

The ghoulish triumph of economics over science, as it were ... the latter still trying to refine its technological methods of genocide, e.g. so that collateral damage to the environment is reduced.

Killing by Keynes, as it were ... by tapping into an infinite piggy bank that smiles and never makes sounds ... as if it only had air in it. Fiat money and the spiral chase down the screw to Helsinki.

By another name, Environment-Friendly Genocide (e.g. EFG ... h,i,j,k,l,m,n,o,p ...). Dirty intake. Clean exhaust.

_________________
Flight that sends into the clouds brings wings to rest upon the boughs. Then further down to the liquid lawn, to serve as sentries for the gliding swan. Curve, a perfect turning of the line between here and Heaven, with extensions into infinitum.


Wed Mar 28, 2012 3:02 pm
Profile
Site Admin
User avatar

Joined: Tue May 03, 2011 6:06 pm
Posts: 11843
Reply with quote
Post Re: How Goldman gambled on starvation
I was just thinking today how our monetary system enables and magnifies to epic proportions criminality. Monetary criminals thrive in a monetary system. Criminals are the ones that succeed and flourish in our society. Selfish greed is rewarded, and working to improve the common good simply cannot compete.

Even the punishment of petty criminals becomes a monetary pursuit. The legal system and the so-called "corrections" system become money-making scams that serve no other real purpose. They no longer serve their original purpose, that's for sure.

Government quickly follows suit. Its function changes from serving the people to dominating the people through monetary means. The natural progression down this path is to enslave the people. Do we not see it happening?

Here is a tiny case in point. I went to the Department of Motor Vehicles yesterday to re-register a car that I had put in storage six months ago, in an effort to cut my expenses. I now only register and insure a single vehicle, which is the one I use. The vehicle I have been using recently suffered engine failure, so I had to pull the spare car out of storage. Last year, they tripled the registration rates on all vehicles. Instead of paying $23 a year for an old car, it's now $69 a year. My bill came to $169! "Why so expensive?" I asked. There was a $100 late fee for letting the registration lapse!

I refused to pay and left. I will be returning to spend $7 instead to transfer title of the car to a new owner, my one-man business, whereupon I can avoid the $100 fine.

In my opinion, it's clear that this entire vehicle registration operation has become one of control and profit.

_________________
It's not that we can't handle the truth. It's that they can't handle us if we know the truth.


Wed Mar 28, 2012 5:41 pm
Profile
Display posts from previous:  Sort by  
Reply to topic   [ 4 posts ] 

Who is online

Users browsing this forum: No registered users and 2 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
cron
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group.
Designed by STSoftware.