i don't claim to know what caused the '08 spike in many grain prices, but this article is both poorly-reasoned and marred by errors. for example, the author writes:
"When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked well. 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."
anyone with the will and $ to do so has been fully able to "speculate in food" -- ie grain futures -- in america, uk, etc for well over 100 yrs, so the above statement is groundless.
"...64 percent of all wheat contracts were held by speculators with no interest whatever in real wheat. They owned it solely to inflate the price and sell it on."
yet this is the nature of liquid futures markets -- only a small % of contracts -- far < than the 36% implied above -- actually stand for delivery.
"If we don't re-regulate, it is only a matter of time before this all happens again. How long would it last then? How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish."
i have no idea what regulations he is talking about; anyone feel free to enlighten me if u can.
i'm certainly no friend of goldman sachs, but this author appears just to be a dime-a-dozen ideologue without much sense of obligation to truth, though i don't doubt he fully believes his twaddle. |
