The Scumbags Are Always With Us

It is deeply alarming that the greatest proportion of activity in the futures markets no longer involves those in the supply chain but is, instead, taken up by speculators. Food commodities are too important to be played about with by day traders and speculators
   — President of National Farmers’ Union Scotland

Some time ago I rejected the view that spikes in food and energy prices were entirely due to constrained supply. To be sure, food and crude oil resources are under strain in the early part of the 21st century due to geological limits (for oil) and a changing climate (for food stuffs).

However, another Great Truth of our time is that the global commodity markets are broken, meaning that these markets have become financialized to such an extent that we now have trouble distinguishing between actual resource shortages and the pernicious effects of gambling in those markets. I recently became so disgusted with unjustified price movements that I quit writing about crude oil.

Thus it comes as no surprise when we see articles like Barclays makes £500m betting on food crisis, which appeared in the UK newspaper The Independent on September 1, 2012.

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...

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.

I found the World Development Movement (WDM) report, called The Great Hunger Lottery: How banking speculation causes food crises (pdf). You can look at the WDM website, read the report, and read the rest of that Independent article about Barclays if you want more information about speculation in the food markets. There is also a remarkable article called The Food Bubble: How Wall Street starved millions and got away with it. This piece appeared in July, 2010 issue of Harpers magazine.

There will always be evil, amoral, unprincipled scumbags who seek to make a quick buck off the suffering of others. The Christian Gospels (e.g. here) contain a phrase which is often proverbialized as—

The poor are always with us

Another apt phrase, which is much discussed in the Gospels but does not appear directly therein, could be added to our list of common proverbs.

The scumbags are always with us

Residing at the very core of the Liberal notion of material and moral Progress in human history is the hopeful idea that scumbags can be kept in check—in modern terms, regulated—in order for this alleged Progress to proceed. We now live in a world in which the scumbags are not only with us, but appear to be running the show.

And until such time as some countervailing force—governments?, the people?, God?, aliens?—arises to rein in these ever-present scumbags, prices of the things people depend on for Life Itself (basically, energy of all types) will continue to be high and volatile, in so far as those prices are due to the reckless, amoral machinations of scumbags. Straightforwardly, this unhappy situation results in great suffering and death among the aforementioned poor.

This is our situation in the early decades of the 21st century. We might (and often do) wish the situation were otherwise, but wishful thinking will not fix it.

Comments

[Ken Barrows]

I have no disagreement, but I don't know that fixing speculation would do much. Say nothing could be bought in commodities or equities with margin. I am thinking prices plummet across the board. Then the question (with commodities) is what will happen with supply.

[John D]

This post reminds me of the comment by Matt Tiabbi in his book about Goldman Sachs: "If the world were going down the drain, GS would find a way to be the sink strainer." Barclays would find a way to charge for the water going down the drain.

One would hope there could be a system where only farmers were allowed to speculate on prices, as a hedge, but I suppose that is naive thinking.

[Wanooski]

Never met a trader/broker that I didn't want to strangle within five minutes of introduction.

[Joe K.]

<> Please, no more! I'm sick of this Liberal stuff and Conservative stuff. How about just "Common Sense notion..." I haven't seen any progress with the homeless whether it be Reagan, Clinton, Bush or Obama. Same with the wars.

Regarding poverty, how about some articles on good ol' willpower. Too much emphasis on helplessness and that defeats the human spirit. I've hiked trails in piss-poor Nepal and saw kids reading books on cold rocks. The problem is this Welfare System and the lack of civility and culture particlulary among the Blacks, Hispanics and Whites in that order, but there are inclusions for all races.

Same with our Justice System. You can't walk the streets without worrying someone clunk you on the head for money or just the pleasure of killing you. I will trade my system I live in for Singapore punishment. Beat them and kill them. I'm almost 49 and I'm sick of it and this ACCEPTANCE by the American people defies logic.

The only thing I can hope for these food speculators is that they lose their asses and that the govt. doesn't bail them out. Fat chance. Bush, Obama, Republican, Democrat-never happen! Need term limits or create our own with encumbents voted out after 2 years, but if guys like McCain and Reid getting reelected, the populace is lost as well.

What happened with Corzine and MF Global? This guy is walking around like nothing happened AND fund raising for Obama.

Yes, it is the Decline of the Empire. Appropriate title for your blog.

That's it. Have a nice day!

[Dave Cohen]

@Joe K

The term "Liberal" in this post is the historical term used to describe the belief in a march of Progress starting in the 18th century and carrying on to the present.

My use of that term in this post has nothing whatsoever to do with the terms "liberal" and "conservative" as used in contemporary American politics (except in this historical sense).

I know this is confusing for people who do not understand the historical reference. When I am criticizing American "liberals" or "conservatives" in a post, I will let you know it.

To understand what I'm talking about further, read Christopher Lasch's book The True And Only Heaven: Progress and its critics.

-- Dave

[Jack Leonard]

Wasn't Barclay's the big player in the recent LIBOR fix? That is it was discovered recently, apparently it had gone on for a number of years and cost investors and governments billions and maybe trillions.
"oh well" you can hear the regulators saying.

[PBD]

RE: “Barclays would find a way to charge for the water going down the drain.”

I still remember being most affected while watching the amazing (IMHO) documentary “The Corporation” ( http://www.thecorporation.com/ ) by the story of the privatization of water in Bolivia by Bechtel ( http://www.commondreams.org/views/071500-101.htm ).

While I guess that atrocity has since been reversed ( http://www.corpwatch.org/article.php?id=6670 ), I have no doubt that ever worsening outrages will populate our future.

I sure wish I could find a copy of that 1973 classic “Soylent Green” so I could watch it again. Although I had dismissed it at the time as just another unbelievable Charlton Heston “B”- grade science-fiction apocalyptic fantasy ( i.e. “Planet of the Apes”, “Omega Man”, “Ten Commandments”) – I now view it as one of the most prescient films ever made!

And it tastes great too! ( http://www.soylent-green.com/ )

[Bill McDonald]

Now that's something I would pay big bucks to see, even if I could only view it via webcast. Just imagine this scene: Jamie Dimon or Jon Corzine for example, after being given a fair trial, led into a room, having their pants removed, a protective padded belt put around their waist to protect the kidneys, strapped over a sawhorse- forced to wait for a few minutes while a very muscular martial arts expert limbers up with a brine soaked cane- then the signal is given and the cane is wielded with a sure and hard stroke right at the exposed backside of the miscreant, whose screams will be broadcast worldwide.

One can always dream I guess.

[Ben]

@ Bill McDonald

Why waste energy? Skip to the main course and, well, you know. Simple.”