The Bernanke Put

Goldman Sachs made more than a quarter of a billion pounds last year by speculating on food staples reigniting the controversy over banks profiting from the global food crisis.
Christine Haigh of the WDM said: "While nearly a billion people go hungry, Goldman Sachs bankers are feeding their own bonuses by betting on the price of food. Financial speculation is fuelling food price spikes and Goldman Sachs is the No 1 culprit."
British consumers have not been spared the impact of rising food costs – prices have, on average, risen by nearly 40 per cent in the past seven years.
Rob Nash, Oxfam's private sector adviser, said: "Oxfam is very concerned about food speculation, especially in the light of increasingly extreme weather conditions which can reduce supply suddenly and severely deplete stocks. The last thing we need is for that volatility to be exacerbated by speculation and exploited for short-term profit."

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.

A measure of net-longs for 11 U.S. farm goods jumped 13 percent to 401,134 contracts, the biggest increase since July 10, CFTC data show. The S&P GSCI Agriculture Index of eight products climbed 1.2 percent last week. Corn positions climbed 8.5 percent to 164,434 contracts, and those for soybeans 7.4 percent to 105,017 contracts, the highest in five weeks.

[P]erhaps a more revealing statistic is that speculative investment in these commodities in 2011 amounted to 20 times more than the total spent on agricultural aid by all countries combined.

The price bubble of 2007-2008 led to food riots in more than 30 countries, including Mexico’s “tortilla riots” and the overthrow of Haiti’s government, before prices peaked again in February 2011, during the Arab Spring.
Our research has found that food riots are most likely to occur when the Food Price Index, compiled by the United Nations Food and Agriculture Organization, rises above 210.

These “investors” face opportunity costs from stock and bond markets to their investments in financial instruments that track commodity prices. The investment dynamics that result show clearly how financial speculation causes price spikes.

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Michael Greenberger:
In 1997, Professor Greenberger left private practice to become the Director
of the Division of Trading and Markets at the Commodity Futures Trading
Commission (CFTC) where he served under CFTC Chairperson Brooksley
Born. In that capacity, he was responsible for supervising exchange traded
futures and derivatives