Commodity Speculation the real enemy of the West
@ 2008-03-12 - 21:24:49Oil at $100 plus per barrel, grain prices doubling. There must be shortages of everything these days!
Strangely there isn't. There is plenty of oil getting produced but the price just keeps rising. Australia has had a bad harvest but the rest of the world didn't. Despite this the price of wheat is soaring. Strangely farmers aren't rushing to plant more wheat. Lamely the rising food prices have been blamed on all the Chinese and Indian's eating too many cakes and buns. Nonsense.
The current sky high commodity prices are the direct result of market speculation. The stock market is yielding dismal returns so our financial friends have turned their attention to the less prestigious but potentially lucrative Commodities market. Huge stockpiles of basic commodities have been bought as investments by Hedge funds and venture capitalists.
The producers get little of the benefit of the soaring prices thats why farmers aren't rushing to plant wheat. Oil companies are benefiting because they are selling their oil for a significant profit and watching happily as the high price of grain is blamed on crops being grown for biofuel production. A very similar thing happened during the 1970's energy crisis just as the biofuels market looked like taking off.
The planet's future has always been prey to financiers seeking a fast buck. Governments need to step in and re-balance the commodities market before our speculator chums push us into a recession like the 1970s. Control of the financial sector is key to maintaining a stable economy. In the past five years Western governments have lost control of the financial levers. The sub-prime debacle is a classic example of just how little we can trust the financial sector. The very existence of a prime and sub-prime market in the US is the product of an earlier US Govt intervention into the financial sector. The prime mortgage market in the US is ultimately underwritten and financed by the Federal government because the US banking sector proved to be extremely unreliable throughout its history. Despite this level of control and security the US financial industry chose to sell sub-prime mortgages to high risk customers and attempt to offset the set by selling it in bundles to other institutions. Borderline fraud in simple terms. Northern Rock copied the approach and paid the price. Debt proved to be a dangerous commodity to trade.