Hi Michael,
At 09:05 23/09/2012, MG wrote:
Hi Keith,
I'm not a "professional economist" nor do I play
one in front of the Canadian media or as a PM in
Parliament (insider joke for Canadians
But I think you are being rather simplistic.
It is not I who is being simplistic but a simple
rule or law that every economist would agree to.
There's pone caveat, though.
Arbitraging/speculating produces
median/marketable prices only when there are
enough trades going on in a particular commodity.
Sometimes speculators can secretly accumulate
large quantities of commodities which don't rot
(it's constantly happening with silver or copper
or tin) but not usually with food where there are
many speculators in fierce competition and
because food rots. (Grain keeps quite well from
year to year but not forever. I suppose a
speculator who managed to buy up huge quantities
of tins of stewed steak from Argentina and Brazil
and America could force the price higher for a
while. [Mind you he'd do so at great risk of
being "restrained" by one government or another if he tried to do so!].)
Turning food into a basis for international
financier speculation where bozo's whoops
"BANKERS" are able to buy and sell abstract
simulacra of food as blips on a screen are as
subject to manipulation as any of the other
abstract blips on a screen and presumably are
probably even more subject to manipulation
given that they ultimately link into real needs for real people.
Barclays' outlay of £500 million was a mere blip
in the total food sector of the world. For the
reasons already outlined above, the price forcing
of (basic) food is never likely to happen. The
only successful speculators in food I can think
of in history were the Pharoahs' officials in
ancient Egypt who would store massive quantities
of wheat in good years and sell it (no doubt at
high prices) in bad harvest years. But then they
had the monopoly of one country one food growing
region and one consumer base. No-one, even the
smartest entrepreneur, could import cheaper grain from elsewhere.
(I seem to dimly recall from an earlier
(2008?) food crisis that in the post-mortum it
was found that various greedly leeches (whoops
"FINANCIERS" had bought and held back from the
market various commodities (rice? sorghum?)
precisely to boost up the price in a tightening
market
In China they have (or at least had in
the past) quite efficient, effective, and dare
I say socially appropriate ways of dealing with such excretia
It might be the case in some special
circumstances. I'd like to see evidence for it
happening with food for very long, or very
successfully, in any but fairly well-defined
largely inaccessible areas. But it certainly
happens time and again in any valuable commodity which doesn't rot.
Keith
M
From: Keith Hudson [mailto:[email protected]]
Sent: Sunday, September 23, 2012 8:32 AM
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION; michael gurstein
Subject: Re: [Futurework] FW: Barclays makes
£500m betting on food crisis - Outrage as bank
revealed to be major spec ulator while millions face starvation
Michael,
There is no doubt that Barclays has had the
nastiest and greediest of senior executives than
most other banks in the world in the last few
years. And it still remains pretty nasty today,
even though its CEO (Diamond) was shamed into resigning a few weeks ago.
However, ask 999 of 1,000 economists in the
world and they will tell you that although
Barclays may make a £500 million profit from
trading in food futures it is not the poor who
will suffer in any additional way (they will
suffer anyway through a basic world shortage of
food and also corrupt government officials).
Barclay's profit will only come at the expense
of the speculators on the other side of the trade.
In fact -- ask 999 out of 1,000 economists in
the world -- don't accept it from me, merely a
layman -- futures speculation in food prices, or
those of any commodity, is a form of
arbitraging, or smoothing out, which reduces
excess price pitches (high or low). As near as
possible (and bearing shipping costs in mind),
the price of food moderates to a median cost
anywhere in the world. A price very close to the
average price is not equally accessible to all
individuals in the world, obviously, but it is
accessible to any entity with enough money to
buy a sizeable consignment -- that is, governments or large supermarkets.
Barclays may have made £500 million in profits
in food in 2010 and 2011. It doesn't necessarily
mean that it will make the same in 2012.
Cleverer traders in another bank or a hedge fund may take them to the cleaners.
Keith
At 06:39 23/09/2012, Michael Gurstein wrote:
From:
<mailto:[email protected]>[email protected]
[ mailto:[email protected]] On Behalf Of Sid Shniad
Sent: Saturday, September 22, 2012 10:45 PM
To: undisclosed-recipients:
Subject: Barclays makes £500m betting on food
crisis - Outrage as bank revealed to be major
speculator while millions face starvation
<http://www.independent.co.uk/news/business/news/barclays-makes-500m-betting-on-food-crisis-8100011.html>http://www.independent.co.uk/news/business/news/barclays-makes-500m-betting-on-food-crisis-8100011.html
The Independent 1 September 2012
Barclays makes £500m betting on food crisis
Outrage as bank revealed to be major speculator while millions face starvation
Tom Bawden
Barclays has made as much as half a billion
pounds in two years from speculating on food
staples such as wheat and soya, prompting
allegations that banks are profiting handsomely from the global food crisis.
Barclays is the UK bank with the greatest
involvement in food commodity trading and is one
of the three biggest global players, along with
the US banking giants Goldman Sachs and Morgan
Stanley, research from the World Development Movement points out.
Last week the trading giant Glencore was
attacked for describing the global food crisis
and price rises as a "good" business opportunity.
The extent of Barclays' involvement in food
speculation comes to light as new figures from
the World Bank show that global food prices hit
an all-time high in July, with poor harvests in
the US and Russia pushing up the average
worldwide cost of staples by an unprecedented 10 per cent in a month.
The extent of just one bank's involvement in
agricultural markets will add to concerns that
food speculation could help push basic prices so
high that they trigger a wave of riots in the
world's poorest countries, as staples drift out of their populations' reach.
Nor has the UK escaped rising food costs. Shop
food prices have risen, on average, by 37.9 per
cent in the past seven years, according to the
Office for National Statistics, as the demands
of an increasingly affluent and growing world
population strain supply. Oils and fats have
soared by 63 per cent in the UK during that
period, fish prices by 50.9 per cent, bread and
cereals by 36.7 per cent, meat 34.5 per cent and
vegetables 41.3 per cent. In April, average UK
food prices were 4.2 per cent higher than a year earlier.
Oxfam's private sector adviser, Rob Nash, said:
"The food market is becoming a playground for
investors rather than a market place for
farmers. The trend of big investors betting on
food prices is transforming food into a
financial asset while exacerbating the risk of
price spikes that hit the poor hardest."
The World Development Movement report estimates
that Barclays made as much as £529m from its
"food speculative activities" in 2010 and 2011.
Barclays made up to £340m from food speculation
in 2010, as the prices of agricultural
commodities such as corn, wheat and soya were
rising. The following year, the bank made a
smaller sum of up to £189m as prices fell, WDM said.
The revenues that Barclays and other banks make
from trading in everything from wheat and corn
to coffee and cocoa, are expected to increase
this year, with prices once again on the rise.
Corn prices have risen by 45 per cent since the
start of June, with wheat jumping by 30 per cent.
Barclays makes most of its "food-speculation"
revenues by setting up and managing commodity
funds that invest money from pension funds,
insurance companies and wealthy individuals in a
variety of agricultural products in return for
fees and commissions. The bank claims not to
invest its own money in such commodities.
Since deregulation allowed the creation of such
funds in 2000, institutions such as Barclays
have collectively channelled an astonishing
$200bn (£126bn) of investment cash into
agricultural commodities, according to the US
Commodity Futures Trading Commission.
Barclays' dominance in commodities trading is
thanks to its former chief executive Bob
Diamond, who was Britain's best-paid banking
boss until he was forced to resign last month
following a £290m fine for attempting to
manipulate the Liborinterest rate. As boss of
Barclays Capital he boosted trading in agricultural products.
Dealing with the reputational headache
associated with high levels of food speculation
will be yet another item in the already-bulging
in-tray of Antony Jenkins, who was promoted to
become Mr Diamond's replacement on Thursday.
Christine Haigh, policy and campaigns officer at
the World Development Movement and one of the
analysts behind the research, said: "No doubt
the UK's biggest player in the commodities
markets is hoping it will do better this year by
cashing in on rising food prices. "Its behaviour
risks fuelling a speculative bubble and
contributing to hunger and poverty for millions of the world's poorest people."
Banks and hedge funds typically argue that
speculation makes little or no difference to
food prices and volatility and argue, correctly,
that no definitive link has been proved.
Barclays declined to comment on the amount of
money it makes from trading in agricultural commodities yesterday.
The bank defended its actions, pointing out that
trading in so-called futures contracts an
agreement to buy or sell a certain quantity of a
product, at a given price on an agreed date
helped parties such as farmers and bakers to
hedge against the risk of rising or falling
prices. "Our clients include investment
companies, food producers and consumers who,
among other things, seek our help to manage risks."
Barclays also declined to comment on whether it
thought large amounts of speculation pushed up
prices and volatility. A spokesman said: "We
recognise there is a perception held by some
stakeholders that participation in agricultural
futures markets by some participants can unduly
influence the prices of commodities. As a
result, we continue to carefully monitor market
trends and any research produced on this subject," a spokesman said."
Barclays Capital analysts admitted in a note to
clients in February that speculation did push up
prices. Barclays said: "The second key driver is
that commodity investors have begun allocating
to commodities again after beginning 2012
heavily underexposed to the sector." The other
drivers were the "health of the global economy" and "weather and geopolitics".
!DSPAM:2676,505e315125484087445285!
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Keith Hudson, Saltford, England
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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