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Lucas van Praag: "Don't Blame Goldman For The Food Crisis, Blame The Middle Class"

Tyler Durden's picture





 

Last week, an article by Fred Kaufman in Foreign Policy magazine ripped off a gangrenous scab: the topic of Goldman manipulating markets, a theme extensively dissected over the past two years, only in this case a rather sensitive one: that of food prices. Since the topic of Goldman being involved in market manipulation is nothing new to Zero Hedge, which first exposed the firm's prop trading shenanigans in 2009, a trope that was merely validated when Lucas van Praag responded to our allegations, to be promptly followed by Volcker making prop trading by banks semi-illegal, we were not surprised to read this piece. What did surprises is that Goldman once again exhibited horrendous PR sense by issuing yet another Lucas van Praag response, literally minutes ago, in the same venue. While van Praag does touch upon some valid points, the overall response is beyond weak and along the lines of the traditional excuse: "we generously provide liquidity/markets/capital, etc." which merely exacerbates the overarching theme: Goldman's relentless condescension, and assumption that it always is dealing with idiots who have no idea how the firm operates. As Goldman is about to find out, this will do nothing but generate a firestorm of angry responses by the "non-faceless" crowd which will now have a scapegoat to blame, since by taking he defensive, Goldman once again validates the allegation. What happens next to Goldman, and the GSCI, is unclear but will likely not be favorable in light of Obama's recent witchhunt against "speculators." Yet at the end of the day what can one expect from a firm that will always have to live with the following classical example of shooting itself in the foot: "When asked about these emails, Mr. Swenson also denied that Goldman had attempted to squeeze the CDS short market. He claimed that the cost of single name CDS shorts had gone too high, and the purpose behind Goldman’s actions was to restore balance to the market. Mr. Swenson could not explain, however, why in an effort to restore balance to the market, he used the phrases “cause maximum pain,” and “this will have people totally demoralized".”

From Lucas van Praag, Foreign Policy

Don't Blame Goldman Sachs for the Food Crisis

Blame the meat-loving middle class.

Frederick Kaufman's article "How Goldman
Sachs Created the Food Crisis," ignores a
number of important facts about the underlying economic, social, and political
factors that have driven the rise in food prices.

The assertion that Goldman Sachs introduced speculation into commodity
markets is incorrect. The Commodity Research Bureau (CRB) Index has been
investible since the early 1970s, and futures on the CRB Index have been traded
since 1986, five years before the creation of the Goldman Sachs Commodities
Index (GSCI). Gary Cohn, the president of Goldman Sachs,
was not involved in the creation of the index, contrary to the article's
assertion. The GSCI was purchased by Standard and
Poor's in 2007 and retains a connection to Goldman Sachs in name only.

More importantly, the article does not present any credible evidence
that commodity index investing is responsible for the rise in food prices.
Serious inquires, such as one conducted by the OECD in the wake of the 2008
price spike, have concluded that "index funds did not cause a bubble in commodity futures prices."
Rather than destabilizing futures markets, commodity index funds provide them
with a stable pool of capital, improving farmers' ability to insure themselves
against the risks inherent in agricultural prices. This, in turn, can allow
farmers to produce more food at a lower cost. The pension and endowment funds
providing this vital capital are investing the savings of individuals. They are
not faceless "speculators." They represent people, often pensioners, who seek
to protect the value of their savings
against inflation and rising food prices.

Finally, the article suggests that because commodity indices are
"long-only" they, therefore, inflate prices. This is not the case.
Futures contracts expire on a set date, meaning that "rolling" them over
simply
involves a re-investment of the original funds by selling one contract
and
buying another. This "roll-over" is akin to renewing home-owners
insurance from
year to year and is not like purchasing a
second or third home, which could inflate prices.

The real drivers of food inflation and food shortages are long-term
trends, like increased meat consumption by the growing middle class in emerging
markets and greater use of biofuels in the developed markets. Monetary policy,
climate change, and protectionism also play key roles. Historical facts and
demonstrable economic trends cannot be disregarded if there is to be a
productive discussion about this vital issue.

Sincerely,

Lucas van Praag
Managing Director
Goldman, Sachs & Co.

 

Frederick Kaufman replies:

Instead of working to undo the damage Goldman Sachs and other
banks have done by transforming our daily bread into nothing but a financial
product, and instead of elucidating the murky world of over-the-counter swaps
and baroque derivatives, Lucas van Praag has chosen to offer up yet another
example of the fact-twisting and blindness that have unfortunately become the
21st century banking industry's norm.

My article "How Goldman Sachs Created the Food Crisis" did not
accuse Goldman of introducing speculation to the commodity markets. To the
contrary, the editors at Foreign Policy
allowed a great deal of space for the history of American commodity markets,
including an explanation of the traditional role of bona-fide hedgers and
speculators. Of course, it is not traditional speculation that has sparked the
historically unprecedented rise in the price of food, but the demand-shock
Goldman and their industry followers introduced to the markets with their
long-only Goldman Sachs Commodity Index fund -- the two-decades-old food,
energy, and precious metals derivative that has come to be widely imitated
throughout the financial industry.

Regarding the role of Gary Cohn, we need only review his testimony
to Congress in September of 2008, in which Goldman's president articulated the
ideas and concepts that lay behind the birth of the GSCI: "There was
no natural long in the market," Cohn explained
to the Senate
. "The consumers are so fragmented that they don't
amalgamate to a big enough position. So we actually, as a firm, came up
with the idea in the early 1990s to create a long only, static investor in
the commodity markets." In other words -- and contrary to van Praag's assertion
-- the traditional buy/sell or sell/buy activity of the commodities futures
market did not satisfy Goldman, nor allow them nor their largest clients (in
this case, multinational oil firms) the market position they desired, a
position which had little to do with the long-standing price discovery function
of the futures market. Long-only indexes subsequently hijacked this role from
this market.

Van Praag's assertion that the index funds were created to help
"pensioners, who seek to protect the value of their savings against
inflation
and rising food prices" is a classic case of Wall Street posing as Main
Street. Spurred by the institutional sales force of Goldman and other
banks,
the weight of hundreds of billions of dollars of new money from hedge,
pension,
and sovereign wealth funds has pushed up the slope of the agricultural
price
curve. Meanwhile, the contango markets caused by the demand shock the
long-only indexes themselves introduced have created a negative yield for
investors -- who lose money five times a year as commodity prices surge and the
price-insensitive funds buy. The regular, 5-times-a-year "roll" of long
futures has given commodity insiders the opportunity for immense profit at the
expense of investors, and it is simply misleading for van Praag to compare the
unnatural, subversive market behavior of the banks to a responsible property
owner who regularly renews her home insurance policy.

While the OECD study has
turned a blind eye, both the United Nations and the Senate Committee on
Homeland Security and Government Affairs -- in their investigation of the role of long-only index funds as a threat to interstate commerce -- concluded
that these funds must bear some of the blame for the rising cost of food. Of
course, supply and demand matter, as do monetary policy, climate change, and
nationalistic policies of protectionism. But despite all protestations of
innocence, the long-only index funds have added regular doses of kerosene to
the commodity conflagration that has come to mark the new millennium. No
surprise, then, that both the U.S. Commodities Future Trading Commission and
the G-20 agricultural ministers have put long-only index fund speculation near
the top of their lists of the most egregious financial abuses.

 


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Tue, 05/03/2011 - 22:19 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

where did everybody go??

Tue, 05/03/2011 - 22:39 | Link to Comment topcallingtroll
topcallingtroll's picture

Every once in a while i have to take a piss.

Wed, 05/04/2011 - 00:22 | Link to Comment Yen Cross
Yen Cross's picture

Cute. Block writing is un-intelligent! Grammar posters? A little Grammer? Seee you all in London. Love those 10 YR. BUND prices! A smack in the ass they are!

Wed, 05/04/2011 - 03:41 | Link to Comment floydian slip
floydian slip's picture

THE QUESTION IS MOOT!

 

Glodman Squid tis but a tentacle

 

Tue, 05/03/2011 - 23:23 | Link to Comment Keri at Bankste...
Keri at Bankster Report's picture

Over to the Bloomberg archives, July 2010:

"Turning commodity futures into securities unleashed a much larger sales force -- stockbrokers selling a product many of them didn’t understand, he says. Passive buy-and-hold investors at one point in mid-2008 held the equivalent of three years of production of soft red winter wheat. Wall Street’s success in attracting those buyers boosted demand for futures contracts, which helped determine what consumers would pay for baked goods. 

Wheat prices jumped 52 percent in early 2008, setting records before plunging again, and sugar more than doubled last year even as the economy slowed, forcing Reinwald’s Bakery in Huntington, New York, to fire five of its 32 employees. “You try and budget to make money, but that’s becoming impossible to predict,” says owner Richard Reinwald, chairman of the Retail Bakers of America.

Cocoa futures reached a 30-year high early this year because of speculators, according to Juergen Steinemann, chief executive officer of the world’s largest maker of bulk chocolate, Zurich-based Barry Callebaut. At the airport, the new $25 charge for checking a suitcase exists partly because airlines have to set aside cash to hedge against sharper ups and downs in oil prices, says Bob Fornaro, CEO of AirTran Holdings. “This has been very, very good for Wall Street,” he says."

break

"With no job, Forero holed up in his home office, sifting through data with a Hewlett-Packard scientific calculator. He became convinced that the products UBS had sold were hurting investors and disrupting supply and demand for basic commodities. 

“I’ve always been a little naïve, and maybe I still am,” he says. “But how can the government allow that? People in our industry talk about it -- everybody knows about it. This has to come to light.” UBS spokesman Doug Morris declined to comment."

break. and my favorite:

"Goldman owns a global network of aluminum warehouses.  Morgan Stanley chartered more tankers than Chevron last year (2009), according to shipbroker Poten & Partners.  And JPMorgan Chase hired a supertanker to store heating oil off Malta last year, likely earning returns of better than 50 percent in six months, says oil economist Philip Verleger. “Many, many firms did this,” he adds, explaining that ETF investors created this “profitable, risk-free arbitrage opportunity” when they plowed into commodities. Futures are bilateral; if someone’s buying, someone else is selling. “And the only way to attract sellers is to offer them a bigger profit,” Verleger says. “So, ironically, passive investors have been sowing the seeds of their own defeat” -- and contributing to the contango that does in their funds."

The article is worth reading again.

http://www.bloomberg.com/news/2010-07-22/etfs-imperil-commodity-investor...

Wed, 05/04/2011 - 00:57 | Link to Comment theopco
theopco's picture

Wow.

Wed, 05/04/2011 - 08:41 | Link to Comment pan-the-ist
pan-the-ist's picture

Doesn't "passive investor" = "dumb money"?

Tue, 05/03/2011 - 22:17 | Link to Comment apeakunderthehood
Tue, 05/03/2011 - 22:22 | Link to Comment IdioTsincracY
IdioTsincracY's picture

 

...the topic of Goldman being involved in market manipulation is nothing new to Zero Hedge

...in light of Obama's recent witchhunt against "speculators."

 

Please, reconcile 'manipulation is nothing new' with witchhunt ...

Thnks!

Tue, 05/03/2011 - 22:24 | Link to Comment Tyler Durden
Tyler Durden's picture

One can "Speculate" without being a "hedge fund of scale", large enough to manipulate a market, and/or break established trading rules (as weak as they may be). Reconciled.

Tue, 05/03/2011 - 22:24 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Ah, you can speak quite well with an economy of words when you try!  Nicely said.

Tue, 05/03/2011 - 22:27 | Link to Comment IdioTsincracY
IdioTsincracY's picture

Still, i do not see a witchhunt ... no witch there, just all too real, as a matter of fact..

 

[BTW: Tyler, thanks for your all your work!]

Tue, 05/03/2011 - 23:26 | Link to Comment Stormdancer
Stormdancer's picture

Do you really believe that Obama is really going to go after the real manipulators of prices and markets in anything?

Since "witch hunt", in my mind, implies a concerted effort to lay blame on the innocent as a way to divert attention from the guilty, "witch hunt" is appropos.

Wed, 05/04/2011 - 00:17 | Link to Comment DaveyJones
DaveyJones's picture

Well said. Kauffman's reply handled it as well. The irony of the meat eating emerging markets theory is that its true and the last thing we should be doing in a world where food and food production is getting tighter is allow this kind of market makers

Wed, 05/04/2011 - 02:30 | Link to Comment Urban Redneck
Urban Redneck's picture

I think Kauffman's reply was a hell of a lot better than his original BS piece, which completely ignored Bernank's incessant money printing, and Wall Street's self-destruction/ponzi collapse of all their other fiat "investment" outlets.  In addition, as FP is a lobbying rag, it is convenient that Kauffman ignored the role of the CFMA in increasing speculation, I guess he didn't want to get on the bad side of anyone he might be lobbying next week.  In his original piece Kauffman also provided misleading statistics on commodity inflows in 2008, blurring the distinction between Goldman's role as an innovator of paper crap, and its role as one of countless Wall Street purveyors of paper products that seek a paper yield based on some "correlation" to the price movements of an underlying basket tangible assets.  Finally, the way he focused specifically on a wheat commodity roll trade makes me wonder  if his financial background doesn't include washing out of a Wall Street sausage grinder.  That said, I think van Praag's pathetic response which somehow missed a lot of the points mentioned above, provided Kauffman a wonderful opportunity to properly rip Goldman a new one.  

Wed, 05/04/2011 - 08:46 | Link to Comment pan-the-ist
pan-the-ist's picture

It is true, but it isn't the cause.  The market decides the price of a 16 oz Ribeye, but Goldman sux shouldn't be fleecing their clients just before that steak reaches my plate.

Tue, 05/03/2011 - 22:28 | Link to Comment topcallingtroll
topcallingtroll's picture

Then someone develop short only.commodity index funds?

Wed, 05/04/2011 - 01:08 | Link to Comment dcb
dcb's picture

sco or cmd, these double shorts I trade and try to make sure I have them around the roll over days for easy pickings. the easiest trade around.

Tue, 05/03/2011 - 22:27 | Link to Comment rocker
rocker's picture

+1  One can also trade overseas in mostly unregulated futures markets.

Wed, 05/04/2011 - 00:35 | Link to Comment Yen Cross
Yen Cross's picture

Most over seas markets are well regulated. It's about keeping money onshore. (USA) people are expatriating.

Tue, 05/03/2011 - 22:43 | Link to Comment Muir
Muir's picture

@Tyler

"One can "Speculate" without being a "hedge fund of scale", large enough to manipulate a market, and/or break established trading rules (as weak as they may be). Reconciled."

-

fuck that was good.

-

Wed, 05/04/2011 - 00:21 | Link to Comment Yen Cross
Yen Cross's picture

That hedge is RUSTY!

Tue, 05/03/2011 - 22:23 | Link to Comment zaknick
zaknick's picture

Amerika, the KKK empire!

Tue, 05/03/2011 - 22:24 | Link to Comment topcallingtroll
topcallingtroll's picture

What fantastically enlightened country do you live in?
Has any of your minorities ever been elected president?
Does your country even have elections? Or civil rights?

Tue, 05/03/2011 - 22:42 | Link to Comment zaknick
zaknick's picture

Dude, in my country minorities aré displaced from their homes by CIA authorized paramilitary drug traffickers. They are murdered by these same paramilitaries tgat work for Chiquita (Rockefeller) Drummond Coal, Shell (British Crown and Rothschild), Occidental Petroleum (Bush), Anglo Gold Ashanti (Oppenheimer/Cecil Rhodes money)....etc etc

guess who's coming to town this year?

Xe! wheeee... formerly known as

You really think OBH is just some regular Joe? How brainwashed!

Tue, 05/03/2011 - 22:51 | Link to Comment topcallingtroll
topcallingtroll's picture

U must be really embarrased about where you live if you wont give us the name.

I am sure that all of your problems are caused by foreigners, since you third worlders are so virtuous and perfect.

You give us trolls a bad name.

Tue, 05/03/2011 - 22:59 | Link to Comment zaknick
zaknick's picture

...,total redneck

lost cause... u drank deeply from their Kool Aid.

Tue, 05/03/2011 - 23:13 | Link to Comment topcallingtroll
topcallingtroll's picture

Like i said.

Give us the name of the third world shit hole you live in.

Tue, 05/03/2011 - 23:30 | Link to Comment topcallingtroll
topcallingtroll's picture

Creo que eres de Columbia, maricon.

Cuando yo estaba en Venezuela y Columbia yo tiraba con muchas latinas. Siempre ellas prefieren gringos, juevon.

Wed, 05/04/2011 - 02:06 | Link to Comment zhandax
zhandax's picture

My Spanish is a little rusty....you fucked a lot of them or you shot a lot of them?

Wed, 05/04/2011 - 08:48 | Link to Comment topcallingtroll
topcallingtroll's picture

It may just be a local venezuelan slang, but anyone from colombia would know what i said. Go to latin america , learn the language, and as an american you will be in poontang heaven.

I dont appreciate gratuitous insulting comments from a colombian who is angry he cant get a usa visa.

Wed, 05/04/2011 - 06:57 | Link to Comment IdiotsOutWalkin...
IdiotsOutWalkingAbout's picture

Troll you are plain dumb.

Colombia is a country. Columbia is a bunch of other stuff like schools and companies.

Your Spanish skills really suck. Get a clue. 

Wed, 05/04/2011 - 08:43 | Link to Comment topcallingtroll
topcallingtroll's picture

Hehehe.

I mispelled one word.

Very sorry!

Tue, 05/03/2011 - 23:26 | Link to Comment Stormdancer
Stormdancer's picture

Have you ever travelled more than 50 miles from your birthplace??

Tue, 05/03/2011 - 23:39 | Link to Comment topcallingtroll
topcallingtroll's picture

Quite a bit actually.

I just want him to answer the question.

Tue, 05/03/2011 - 23:50 | Link to Comment Stormdancer
Stormdancer's picture

You obviously didn't learn anything significant in your travels.  You are the epitome of the "ugly American" stereotype ....absolutely clueless as to the incredible rape second and third world peoples have experienced at the hands of US based international companies.

For a while I wondered why the various brown skinned people I came to know harbored such resentment toward the US.  It was easy to mark it down to "jealousy" for awhile.  But, as I got to know them and listened to their stories around meagre meals they sacrificed much to share with me, I found out different.  I thought I was carrying an M-16 for the love of God, Mom, apple pie and bringing freedom to oppressed people.  Boy was I deluded.

Wed, 05/04/2011 - 00:03 | Link to Comment topcallingtroll
topcallingtroll's picture

Ugly American?

I dont recall going to a south american website and making gratuitous insulting remarks.

I just want to know what country he is from.

Wed, 05/04/2011 - 00:09 | Link to Comment Stormdancer
Stormdancer's picture

Gratuitous??  ROFL....  you prove my point.  You don't need to know what country he's from.  There are dozens to choose from.  Anywhere in South America, the Middle East, India, most of  Southeast Asia and significant portions of Africa will do just fine.  You really need to do some digging into the hideous practices corporations routinely employ behind the wall of protection provided by US Army hobnailed boots.

Wed, 05/04/2011 - 00:34 | Link to Comment topcallingtroll
topcallingtroll's picture

I figured it out by his comments.

They were poor before we were even developed. They will be poor long after we are gone.

I am sure their own people and political systems have nothing to do with their backwardness.

It always feels better to externalize blame on evil foreigners. That way people never have to look inward.

Wed, 05/04/2011 - 00:43 | Link to Comment Stormdancer
Stormdancer's picture

It always feels better to externalize blame on evil foreigners. That way people never have to look inward.

There is none so blind as he who will not see.

Wed, 05/04/2011 - 00:38 | Link to Comment Stormdancer
Stormdancer's picture

If you really want to extend your education and get a clue how this world really works, start with Iran.

Just google "Mohammed Mossadegh", "Reza Pahlavi" and "Savak".  Had it not been for "our" choices (I use "our" very advisedly because most Americans are clueless about what was done in our name), and you'll see a tale of hypocrisy, murder, graft and corruption that is the back story and the fundamental reason for why Iran is what it is today.  We live in a very dangerous world...of our own making.

The same story has played out all across central and south America in so many iterations it'll blow your mind.  If you dare face truth. 

 

Edit:  Google "General Smedley Butler" if you care to get a clue what's gone on in South America ... and how long it's been going on.

Wed, 05/04/2011 - 00:40 | Link to Comment topcallingtroll
topcallingtroll's picture

r

Dude I speak spanish and spent quite a bit of time in south america and it is pretty funny how presumptious you are. I read smedley's book and dont get my education from google snippets

Wed, 05/04/2011 - 00:46 | Link to Comment Stormdancer
Stormdancer's picture

Then it is certainly true of you when it was said

"...ever learning but never coming to a knowledge of the truth."

Wed, 05/04/2011 - 01:06 | Link to Comment Stormdancer
Stormdancer's picture

I read smedley's book and dont get my education from google snippets

You have read Smedley's book and you speak Spanish.  Isn't that special!

Yet you cannot sympathize with or understand the righteous anger people feel after having their faces repeatedly ground into the dirt because in your judgement they're from some "third world shit hole"???

You are not human.  It's very likely that the same forces are in the process of turning this nation into one of those third world shit holes and you'll get an opportunity to experience some of the same injustices you currently blind yourself to.  I feel no joy in the thought, but there is a certain sense of justice about it.  Enjoy your share of the blowback.

Wed, 05/04/2011 - 02:12 | Link to Comment Redneck Makin-tosh
Redneck Makin-tosh's picture

Righteous anger never focuses on the guilty and is best endured with polite gratitude.

Wed, 05/04/2011 - 09:20 | Link to Comment bill40
bill40's picture

Love your comments but zerohedge is largely a morality free zone imho. Keep the faith.

Tue, 05/03/2011 - 22:59 | Link to Comment zaknick
zaknick's picture

Civil rights in Amerikkka? Only for white people and even then it's iffy with the paramilitarization of the police. What about the millions of blacks in prison for "drugs"(tgat the CIA brought in like crack)?

War on Drugs is part Jim Crow ethnic cleansing and part imperialism (a black market with its ensuing criminality and violence used to destabilize countries /old colonialism trick). 95% of "drug offenders" are blacks and Hispanics (see www.leap.cc ).

I know the states very well and a black actor as president doesn't fool me. The state dept does that too; use "ethnic" spokespeople to hide their ugly redneck thug faces. Most people don't know better and are fooled. Kinda like ur little imbecilic rant.

Schooled again.

Wed, 05/04/2011 - 00:51 | Link to Comment Stormdancer
Stormdancer's picture

It appears the schooling will be completely ineffective, but please keep trying.  Some will get it ... some are getting it.  It's very likely too late, but while I live I maintain hope that perhaps we can take back what was designed to be a great nation and a blessing to the world.  It can be again if we can get back to our roots and I truly believe most Americans would be appalled at what our wealth, influence and military might have really been used for.

Wed, 05/04/2011 - 08:51 | Link to Comment pan-the-ist
pan-the-ist's picture

Columbia -

You should move to a better country.  That one sucks.

Wed, 05/04/2011 - 09:58 | Link to Comment RKDS
RKDS's picture

If the war on drugs is really about ethnic cleansing, they're doing a ridiculously poor job of it.  All you ever seem to see or hear is more of those people moving in to this or that town/city/state.

Wed, 05/04/2011 - 00:55 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

Has any of your minorities ever been elected president?

That minority president is doing more to destroy America than any president before him.

Does your country even have elections?

Elections swap one criminal for another criminal, or keep a criminal in office another term.

Or civil rights?

Rights granted by government.  They can be changed or revoked at government's whim.

These examples don't make a very good case for America.

Tue, 05/03/2011 - 22:33 | Link to Comment takinthehighway
takinthehighway's picture

Never mind.

Trying to teach a pig to sing...

Tue, 05/03/2011 - 22:21 | Link to Comment knukles
knukles's picture

Lucas' back!
Fess mother, where you been Bogartin' dat pipe and Brillo?

Tue, 05/03/2011 - 22:21 | Link to Comment topcallingtroll
topcallingtroll's picture

Ok.....then someone develop short only commodity indices. This addresses the concern of Kaufman. He says long only funds are the problem.

Tue, 05/03/2011 - 22:22 | Link to Comment I am Jobe
I am Jobe's picture

Don't Blame Goldman Sachs for the Food Crisis

Blame the meat-loving middle class.

Frederick Kaufman's article "How Goldman Sachs Created the Food Crisis," ignores a number of important facts about the underlying economic, social, and political factors that have driven the rise in food prices

 

LOL

WTF eat IPAD bitchezzzzzzzzzzzzzzzzzz. 

Tue, 05/03/2011 - 22:23 | Link to Comment Dr. No
Dr. No's picture

Like the government, a good multinational will have propaganda ministry to make sure all "on the record" releases create enough cya paperwork for a substantial paper barrier in the case of Subpoena.

Tue, 05/03/2011 - 22:26 | Link to Comment I am Jobe
I am Jobe's picture

Fly that Socialist Flag and get this party started, I say. America death spiral has een in the making and will not come out of this crap till the system is cleaned out.

Wed, 05/04/2011 - 08:56 | Link to Comment pan-the-ist
pan-the-ist's picture

Are you American? Do you think that America is fascist?  Whe the shit hits the fan... you haven't seen anything yet.

Tue, 05/03/2011 - 22:28 | Link to Comment nomadhotel
nomadhotel's picture

Kaufman is saying that something odd is going on behind that curtain. Van Pragg just wants to point out that Kaufman and others are mistaken; that's not a curtain, those are drapes. Everything should be quite clear now.

Tue, 05/03/2011 - 22:34 | Link to Comment takinthehighway
takinthehighway's picture

The best drapes money can buy...

Tue, 05/03/2011 - 22:26 | Link to Comment Hedgetard55
Hedgetard55's picture

Don't put this on Goldman. Uncle Ben already told us what is driving food prices. Eaters are upscaling their diets on a global scale.

Tue, 05/03/2011 - 22:30 | Link to Comment rocker
rocker's picture

With Food Stamps !?! 

Tue, 05/03/2011 - 22:26 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

This "providing liquidity" horse shit has to be the most over-hyped pathetic excuse for greed and pillage that has ever existed. I was contemplating my own trading activities the other day and trying to find something wholesome that‘s ever came out of my endeavours, depressed and looking for something decent to affirm my humanity, and the only thing I could muster was “I’m providing liquidity”…needless to say I went back to fucking bed.

Tue, 05/03/2011 - 22:34 | Link to Comment Wannabee
Wannabee's picture

@scratch...

Well said. I nominate yours as post of the day.....! Hope there is a prize with that.

Tue, 05/03/2011 - 22:37 | Link to Comment equity_momo
equity_momo's picture

+ a snortle

 

-off to bed myself , i've provided my liver with enough Irish liquidity today.

Tue, 05/03/2011 - 22:28 | Link to Comment Hephasteus
Hephasteus's picture

Long only physical gold and silver. We learned it from goldman. Thanks teach.

Tue, 05/03/2011 - 22:34 | Link to Comment Yen Cross
Yen Cross's picture

Good luck taking delivery! Invest heavily in Brinks!

Tue, 05/03/2011 - 22:32 | Link to Comment plocequ1
plocequ1's picture

Shit, Its not my fault. I dont eat meat. I eat Tuna fish and Pancakes.

Tue, 05/03/2011 - 22:38 | Link to Comment plocequ1
plocequ1's picture

Theres always Pasta e fagioli then.

Tue, 05/03/2011 - 22:32 | Link to Comment Misean
Misean's picture

So, getting to be about time to launch the www.pithforksandtorches.com site, hopefully.

Tue, 05/03/2011 - 22:37 | Link to Comment equity_momo
equity_momo's picture

www.fat.com  is catchier and you may enlighten some armchair ,dorito eating , idol wathcing tubbies who thought your site was about food.

Tue, 05/03/2011 - 22:31 | Link to Comment buzzsaw99
buzzsaw99's picture

He picks up a bus and he throws it back down as he squirms through the buildings toward the center of town...

SQUIDZILLA!

Tue, 05/03/2011 - 22:36 | Link to Comment bob_dabolina
bob_dabolina's picture

Don't blame the banks. If taxpayers were willing to give me trillions of dollars how could I not accept?

YOU voted in representatives and a president(s) that enabled this environment to exist.

If you are upset and wish to place blame, you can only but look into the mirror. 

Tue, 05/03/2011 - 22:44 | Link to Comment topcallingtroll
topcallingtroll's picture

Cant blame me cuz i never vote.

It only encourages them.

Tue, 05/03/2011 - 22:32 | Link to Comment Global Hunter
Global Hunter's picture

If climate change plays a key role in food prices increasing lets hope the good folks at Goldman can provide liquidity to global carbon markets, that way we can deal with protectionism and take out 2 black birds with one stone.

Tue, 05/03/2011 - 22:40 | Link to Comment IdioTsincracY
IdioTsincracY's picture

Summary of replies so far:

Unregulated markets overseas

America = KKK

Eat Ipads

Fly the Socialist Flag

Pitchforkes and Torches

Squidzilla

Climate change

.... looks good!

Tue, 05/03/2011 - 22:45 | Link to Comment topcallingtroll
topcallingtroll's picture

Hey i had a serious question!

Kaufman says the problem is long only funds that automatically roll over contracts.

Someone just needs to start short only commodity index funds.

How about double inverse coffee?

Tue, 05/03/2011 - 22:49 | Link to Comment Muir
Muir's picture

 

-

Mrs. Gump: You have to do the best with what God gave you.

-

Wed, 05/04/2011 - 00:59 | Link to Comment 1fortheroad
1fortheroad's picture

Thats a keeper!!

Tue, 05/03/2011 - 22:39 | Link to Comment Misean
Misean's picture

It's humorous that a man who's name rhymes with frag can be so flippant...

Tue, 05/03/2011 - 22:41 | Link to Comment ninj4master
ninj4master's picture

Blythe Masters and the commodities team at JPM Chase, are all in the middle class ??? ^^

Tue, 05/03/2011 - 22:49 | Link to Comment sasebo
sasebo's picture

Goldman is a bunch of useless assholes. All they do is use some of OPM (a worthless medium of exchange) to steal money from other people by out gambling them just like a casino & keep the rest for themselves (bonuses). They have not designed the first product, built the first article for sale or grown the first plant, i.e., they're useless. When they should be using that OPM to lend to new business to create jobs & grow the economy.   

Tue, 05/03/2011 - 22:50 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

"It makes sense if you don't think about it"

Van Praag

Tue, 05/03/2011 - 23:00 | Link to Comment holdbuysell
holdbuysell's picture

Wow. As ZH points out, the fact that GS resorted to a 'food fight' is telling.

Maybe Obama should rip their heads off for speculating in food and forget the oil speculators for a the moment....oh sorry, that would be GS too.

Ouch.

Tue, 05/03/2011 - 23:02 | Link to Comment Crab Cake
Crab Cake's picture

Goldman has a stake in the Fed. That's all I need to know. Bernanke, Van Praag, Blankfein, the Democrats, the Republicans, amongst many other culpable parties, can all burn in Hell for what they've done to this country.

Wed, 05/04/2011 - 02:35 | Link to Comment zhandax
zhandax's picture

Exactly, and Lucas is dragging a sacred cow to the altar of truth in defense of GS's latest-uncovered shenanigans.

and greater use of biofuels in the developed markets

Wonder if he will get 'dissapeared' or scapegoated for pointing out the afterburners for corn's rocket ride?  When you lie for a living, you need to use the truth sparingly.  That statement is in easily referenced print now.

Tue, 05/03/2011 - 23:38 | Link to Comment Mercury
Mercury's picture

I'm generally a pretty big fan of 20th C. American capital markets but the assertion that the original incarnation of the commodities futures markets were entirely or even mostly responsible for America's becoming the bread basket of the world is...a little much.  Technology? better equipment? advances in fertilizer and irrigation science? bio-engineering? - no mention of any of that.

The commodity markets we're talking about here are denominated in $US - the same currency that is bouncing around multi-year lows as expressed by the DXY (another evil index no doubt).  Might that have something to do with commodity prices going up?  How about all those "developing" countries around the world (what have those crazy Chinese been up to?!) - are they utilizing pretty much the same amount of commodity foodstuffs and materials as they were 10-15 years ago?

I don't know Mr. Kaufman - I think Jimmy Rogers might be closer to the mark on this issue.

I'm not saying the premise is all BS here but let's see some real financial and market analysis.  This is political fluff.

Tue, 05/03/2011 - 23:08 | Link to Comment JR
JR's picture

Yes, sir, Mr. Van Praag, that long-only Goldman Sachs Commodity Index fund is working like a charm.

The speculating bankers are getting filthy rich, the farmers’ margins are getting squeezed because of higher input costs for fertilizer, and power, and fuel and utilities and seed…, and the awful meat-eating middle class can’t afford meat any more.

I knew eating would cause a problem; you could see it coming.  The minute Goldman helped everyone become richer, they started eating! That’s the mistake Goldman made.

And then Mr. Kaufman popped the scab off.  Thank you, Mr. Kaufman. And thank you, Tyler, for introducing Kaufman's article last week on Frontrunning.

Wed, 05/04/2011 - 00:29 | Link to Comment DaveyJones
DaveyJones's picture

The only thing more rude than a middle class who has the audacity to eat is a starving class who doesnt

Tue, 05/03/2011 - 23:23 | Link to Comment monopoly
monopoly's picture

Great article Tyler.

How does he find this stuff day after day after day. Must have a staff of 100 working their butts off.

And my next contribution to the site will be on its way. Unfortunately all, the truth is not free anymore. You find it here, support it. Not always right, but always honest. What a breath of fresh air.

good night gang.

Tue, 05/03/2011 - 23:23 | Link to Comment JR
JR's picture


For those who haven’t yet read Kaufman’s article, here’s my analysis:

“Commodity speculators may or may not be the vile criminals”…but how about the criminals who are not speculators but control the markets?

A Stalinesque financial price cordon around world commodities that people need to survive - and most heinously around the most basic vital essentials such as food - by Goldman Sachs may soon become known, as was The Ukrainian Famine premeditated by Stalin, as another Holodomor, meaning “death by hunger.”

It’s called the Goldman Sachs Commodity Index (GSCI). It is a derivative that tracks “24 raw materials, from precious metals and energy to coffee, cocoa, cattle, corn, hogs, soy, and wheat. They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation.”

In a new “Foreign Policy” article, “How Goldman Sachs Created the Food Crisis,” Frederick Kaufman writes: “Demand and supply certainly matter. But there's another reason why food across the world has become so expensive: Wall Street greed…

“For the roughly 2-billion people across the world who spend more than 50 percent of their income on food, the effects have been staggering: 250 million people joined the ranks of the hungry in 2008, bringing the total of the world's ‘food insecure’ to a peak of 1 billion -- a number never seen before," says Kaufman.

It has been a long, steep slide from the words of Adam Smith to the words of Leon Trotsky: “Where the sole employer is the State, opposition means death by slow starvation. The old principle: who does not work shall not eat, has been replaced with a new one: who does not obey shall not eat.”.

From the fruits of a free enterprise supply and demand economy that created mankind’s greatest miracle on earth, we arrive at today’s message from the representative of the would-be world rulers – Goldman Sachs and the Federal Reserve.

From the article (a must read):

”The structure of the GSCI paid no heed to the centuries-old buy-sell/sell-buy patterns. This newfangled derivative product was 'long only,' which meant the product was constructed to buy commodities, and only buy. At the bottom of this 'long-only' strategy lay an intent to transform an investment in commodities (previously the purview of specialists) into something that looked a great deal like an investment in a stock -- the kind of asset class wherein anyone could park their money and let it accrue for decades (along the lines of General Electric or Apple). Once the commodity market had been made to look more like the stock market, bankers could expect new influxes of ready cash. But the long-only strategy possessed a flaw, at least for those of us who eat. The GSCI did not include a mechanism to sell or 'short' a commodity.

"This imbalance undermined the innate structure of the commodities markets, requiring bankers to buy and keep buying -- no matter what the price. Every time the due date of a long-only commodity index futures contract neared, bankers were required to 'roll' their multi-billion dollar backlog of buy orders over into the next futures contract, two or three months down the line. And since the deflationary impact of shorting a position simply wasn't part of the GSCI, professional grain traders could make a killing by anticipating the market fluctuations these 'rolls' would inevitably cause...

“Bankers recognized a good system when they saw it, and dozens of speculative non-physical hedgers followed Goldman's lead and joined the commodities index game, including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns, and Lehman Brothers, to name but a few purveyors of commodity index funds. The scene had been set for food inflation that would eventually catch unawares some of the largest milling, processing, and retailing corporations in the United States, and send shockwaves throughout the world.

“The money tells the story. Since the bursting of the tech bubble in 2000, there has been a 50-fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities -- including food -- seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. 'You had people who had no clue what commodities were all about suddenly buying commodities," an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since.'”

http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis

Tue, 05/03/2011 - 23:54 | Link to Comment Bartanist
Bartanist's picture

My guess is that it has more to do with intentionally starving poor people to death as an elitist population control mechanism. The large international investment banks are after all distributors of money and implementers of the central banking policy ... and if the sociopaths running them make a few shekels along the way, what is the harm?

That would make Goldman genocidal murderers.

Wed, 05/04/2011 - 00:42 | Link to Comment Yen Cross
Yen Cross's picture

J.R. Your channel idea, RE:EUR/USD is not 1.525. It's 1.5165-.5199. On the weekly chart! Best Wishes. Say hello to Sue Ellen.

Wed, 05/04/2011 - 09:23 | Link to Comment JR
JR's picture

;-)

Tue, 05/03/2011 - 23:29 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Forgive them, they're just doing God's work.

Wed, 05/04/2011 - 04:06 | Link to Comment Shylockracy
Shylockracy's picture

Too bad the God they work for is Belphegor.

From Wikipedia:

"In demonology, Belphegor (or Beelphegor) is a demon, and one of the seven princes of Hell, who helps people to make discoveries. He seduces people by suggesting to them ingenious inventions that will make them rich. [...]"

 

http://en.wikipedia.org/wiki/Belphegor

Tue, 05/03/2011 - 23:31 | Link to Comment black calx
black calx's picture

I'm still trying to get over this whole "growing middle class" thing.

Tue, 05/03/2011 - 23:34 | Link to Comment wretch
wretch's picture

Last weekend riot police used tear gas and sound weapons against a bunch of partying WIU students.  The pigs are testing out their toys and getting in some street practice.  Here's the video.  This is no joke -- please pass this along.

 

http://www.youtube.com/watch?v=hLn4p_h4xUE&feature=youtu.be

Wed, 05/04/2011 - 01:47 | Link to Comment tip e. canoe
tip e. canoe's picture

soon coming to a 2012 national political convention near you

Tue, 05/03/2011 - 23:32 | Link to Comment AldoHux_IV
AldoHux_IV's picture

Goldman is the shining example of how we have not fixed our financial system and how its no longer a means to drive capital to the areas most in need to help balance our economy, but rather a self-serving gamed manipulated bullshit casino-- all semantics and legalese aside.

Tue, 05/03/2011 - 23:38 | Link to Comment FischerBlack
FischerBlack's picture

The slithering, forked-tongued minion Mucus Van Praag (sinister name for a sinister snake) again illustrates the abject cluelessness of the elite classes when confronted with the reality of what life is like for the so-called 'middle class' he condescends to. Pensioners, who in many cases don't get cost of living adjustments, don't see an extra penny when food prices skyrocket. Even if they do get COLAs, said COLA is overhelmingly based on CPI, a measure which doesn't include -- you guessed it dickwad -- food prices. Go back to your hole, you scumbag.

Tue, 05/03/2011 - 23:48 | Link to Comment JR
JR's picture

Strong letter follows. (+100)

Wed, 05/04/2011 - 00:21 | Link to Comment ebworthen
ebworthen's picture

Pus infected leech would be better, "snake" is too good for his ilk.

Wed, 05/04/2011 - 00:13 | Link to Comment Milton Waddams
Milton Waddams's picture

paraphrasing:  "only a few bad apples"

http://www.charlierose.com/view/interview/10989

Wed, 05/04/2011 - 00:24 | Link to Comment ebworthen
ebworthen's picture

 

Oh sure, providing speculative markets manipulable by computer algorithm's and legions of unemployed day traders playing craps in the cotton candy markets via light-speed binary data won't cause price volatility of historically valuable and physically tangible and necessary for life commodities.

*cough*

 

Wed, 05/04/2011 - 00:25 | Link to Comment topcallingtroll
topcallingtroll's picture

If volatility increases in commodities then I am sure government sachs would be happy to sell sugar hedges to bakeries and coffee hedges to dunkin donuts.

Wed, 05/04/2011 - 02:14 | Link to Comment ebworthen
ebworthen's picture

Yes, they love volatility and liquidity, like sharks love blood and blubber in the open ocean.

Wed, 05/04/2011 - 00:42 | Link to Comment michigan independant
michigan independant's picture

It is not in their nature? To leave us be until we are pressed to exercise our Liberty from the virtue they do not have. Historical amnesia is in essence it is that attitudes aren’t taught, they’re caught. Changes in a fundamental model or perception of events for me are a longer term survival tool from selfish motives. The sophism on this point consists in showing the public what it pays to the middlemen for their services and in concealing what would have to be paid to the state. Once again we have the conflict between what strikes the eye and what is evidenced only to the mind, between what is seen and what is not seen. Some economists are in general agreement with the proposition that market forces must be traced back to the plans of market participants, particularly the plans of entrepreneurs. Analytical differences arise over whether emphasis is to be placed on the expectations and decisions in which plans originate (an ex ante perspective) or on the experience the testing of plans provides (an ex post perspective). It seems to me that both perspectives are necessary for the analysis of dynamic economic processes, and that neither should be allowed to eclipse the other permanently.  Profit is then seen as the reward not for superior foresight but for the discovery of a piece of knowledge which others lack. Older issues are at play here and ZH has already covered it anyway. The true point is The Fed emulates what these jokers are doing and this malinvestment crack up boom is any one guess since the World lets say is not very nice since we get drug into to much as it is. Bottum line money is so big you cannot expect business who is 5 feet tall to compete with 10 feet tall players and this happened if you seen it or not to the Globalist View.

Wed, 05/04/2011 - 00:49 | Link to Comment Drag Racer
Drag Racer's picture

Blame the middle class is such typical BS once again spewing from the idiot class. Where's the rope? It is high time for a lynching of a few, or maybe more, of these scociopaths. If something drastic is not done soon, it will be too late.

Time is getting very very short. Warning, this video will piss you off.

http://www.youtube.com/watch?v=ufKv-5t0t4E&feature=player_embedded

Wed, 05/04/2011 - 01:08 | Link to Comment Kassandra
Kassandra's picture

"Blame the middle class". Isn't this a bit like blaming the victim? The middle class has shrunk to the point it about qualifies for minority status.

Wed, 05/04/2011 - 01:48 | Link to Comment amanfromMars
amanfromMars's picture

"... to be promptly followed by Volcker making prop trading by banks semi-illegal,..." ? 

Semi-illegal? Is that in the same class of nonsense and crazy make-believe as a little bit pregnant?

Wed, 05/04/2011 - 02:08 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

"providing liquidity" = "creating bubble"

Fed provided massive liquidity for real estate 2001 - 2007 and created the biggest real estate bubble in American history.

Fed now believes they must provide liquidity for the stock market. And they're creating the biggest stock market bubble in American history.  Dow 13,000 today in this economy is way more of a bubble than 14,000 in 2007 in that economy.

Wed, 05/04/2011 - 06:38 | Link to Comment Baptiste Say
Baptiste Say's picture

You think these guys (Fed, big finance) are not aware they are creating a bubble?

 

  • "Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”- PIMCO's Paul McCulley (as quoted by Krugman).

 

They are not only aware but they long for bubbles because it would be impossible for a small group to calculate and allocate such large portfolios succesfully otherwise.

 

On the otherhand you have the likes of Krugman who's strict adherenance to the ever contradictionary Keynes leaves him to deny we are in a bubble (and deny a bubble is bad when denial becomes futile).

 

Again the beliefs of the Krugman types is not surprising given this is straight from the text they worship:

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater."

 

I too love when they're creating bubbles because it makes making huge returns too easy (so long as you don't get too greedy and end up caught out).

Wed, 05/04/2011 - 11:29 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

"bubble" = "pump-&-dump"

That's what they're really doing. 

The '29 crash was a pump-&-dump operation.

The '87 crash was a pump-&-dump operation.

The '01 tech stock crash was a pump-&-dump operation.

The '01 - '07 housing bubble and '08 crash was a pump-&-dump operation.

This current stock bubble is a pump-&-dump operation.

Pump-&-dumps are done to transfer wealth from people to bankers, from the ignorant masses to the elite few.

Establishing a central bank with control over  currency and interest rates made pump-&-dumps possible.

Pump-&-dumps must have a target asset class that's very popular among the ignorant masses.  

In '29 it was stocks. In '87 it was stocks.  In '01 it was tech stocks.  '01 - '07 it was real estate. 

This time it's stocks again.  This is the pump phase. The dump is coming.  It always does.

But this time is a little unique. The dump may come in the form of a dollar collapse, not a stock collapse. 

But the effect is the same.  Massive wealth is transferred from the ignorant masses to the elite few, from the people to the bankers.

That's the purpose of pump-&-dumps.

Wed, 05/04/2011 - 06:44 | Link to Comment Baptiste Say
Baptiste Say's picture

"There is room for the Fed to create a bubble in housing prices, if necessary, to sustain American hedonism. And I think the Fed has the will to do so, even though political correctness would demand that Mr. Greenspan deny any such thing." - Paul McCulley

 

 

Wed, 05/04/2011 - 02:21 | Link to Comment Jovil
Jovil's picture

The puppet masters and their banksters will get away with anything.

The Pyramid of Capitalism - Where are we?

http://lonerangersilver.wordpress.com/?s=pyramid

Wed, 05/04/2011 - 02:53 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

...what did ''they'' mean by ''moral hazard''?

Oh yeah, corruption rules and your labor is worthless. Middle Class? How about liberty, freedom and justice for all!!!

Judgment shall come upon all Chairsatan's ''short term'' prophets. Foodstamps, unemployment, zero interest and war is the manna of the Mad Cow for now but, that is about to ''change''. What is next? http://www.youtube.com/watch?v=MruQpCI_5i0 How shall the innocent escape Pharaoh this last time? What is written that will be repeated? What is Pharaoh's goal? Well, is it not ''to establish a global new world order and peace with Israel and all the nations''? How in the wide world of sport could that come to pass this time around, if not by a ''crisis'' large  enough fiscally and geopolitically?

The nations around Israel are weak suddenly. The seal of debt is upon the entire world, and labor will not escape the mark. There is enough weakness now and military strength in place to assure that no advances are made by any minor players or the Great Wal Mart of China gang members, ...so; could it be a WMD event or some kind of ''plague'' or even another multi disaster that has both in play? It's clear that is what will happen, what must happen, is it not? There is always a ritual slaughter of some kind, the ''moral hazard'' defines the rule of political will and bank robbery that consumed labor and put the mark of debt into the Euphrates like wormwood flowing into the host. The bitterness of the illiquidity defines the strong delusion, ...and security dried up long ago.

You know what happened when the river dried up, the armies crossed and now the armies are in place ...so, any time from this point on would it really be a suprise to see another 911 event?  ...one ''10 years to the day'' that takes out a city? That sure has been what ''they'' have said will happen. All this Middle Class'' finger ''blame game'' bullshit and dump a muslim at sea is just pathetic noise. http://www.youtube.com/watch?v=9WtBbwgMHsQ

Wed, 05/04/2011 - 08:38 | Link to Comment IdiotsOutWalkin...
IdiotsOutWalkingAbout's picture

...what did ''they'' mean by ''moral hazard''?

Green Acres is beyond ham.

Wed, 05/04/2011 - 03:28 | Link to Comment michigan independant
michigan independant's picture

Russia, for example, imposed an export ban on wheat in August after drought and fires devastated the wheat crop. Prices shot to a two-year high. All other things being equal, a rising population increases demand for food. The world population is now 6.8 billion, more than double the 3 billion in 1960.

U.S. reserves of field corn are at their lowest levels in 15 years. The demand for corn for ethanol is now at 4.9 billion bushels per year. Corn prices have almost doubled, from $3.49 a bushel in July to $6.10 in January. "We're going to be going into next year's harvest with really no surplus inventory at all, so the size of next year's crop becomes critical,

http://www.ers.usda.gov/Briefing/FarmIncome/2009incomeaccounts.htm#commodity

older news: ScienceDaily (Apr. 20, 2011) — Researchers meeting at a scientific conference in Aleppo this week reported that aggressive new strains of wheat rust diseases -- called stem rust and stripe rust -- have decimated up to 40% of farmers' wheat fields in recent harvests. Areas affected are North Africa, the Middle East, Central Asia and the Caucuses, including Syria, Egypt, Yemen, Turkey, Iran, Uzbekistan, Morocco, Ethiopia, and Kenya. Even I have been watching for many years. The point is a few pages from this spin is atypical from some one removed from reality called common sense also. Of course its all our fault being Americans. Even Green Acres is past him and yes it shows.

Wed, 05/04/2011 - 04:36 | Link to Comment BlackholeDivestment
Wed, 05/04/2011 - 04:41 | Link to Comment williambanzai7
williambanzai7's picture

Wed, 05/04/2011 - 14:31 | Link to Comment DaveyJones
DaveyJones's picture

ah William, very nice

Wed, 05/04/2011 - 06:25 | Link to Comment Baptiste Say
Baptiste Say's picture

"Blame the meat-loving middle class."

 

Yeah, blame the useless eaters

 

Swenson falls into the Malthusian trap here. It is obvious to even high school students of the economy that as demand increases price signals will lead to an increase in supply, more land will me dedicated to beef, more cows will be bred, more meat will end up on tables, more efficient grains will be used.

 

Does he really think that a middle class popped up in the 24 months since the commencement of QE1? Then again he is likely a Keynesian so I would not be surprised to hear that he thinks QE1 and QE2 did increase wealth and create a middle class.

 

edit: oh yea, as 'michigan independant' correctly points out food price increases also stem from a diversion of grain to ethanol where by subsidies and laws interfere with the price signals demanding more feedstock but to blame the rises over the last 24 months on beef eaters or on ethanol is missing the bigger picture.

Wed, 05/04/2011 - 06:34 | Link to Comment Bitch Tits
Bitch Tits's picture

Methinks all our Emperors wear no clothes.

Wed, 05/04/2011 - 06:46 | Link to Comment Baptiste Say
Baptiste Say's picture

Why should banks be made to provide complementary short index funds if they are convinced food prices are heading up (due to monetary policy and ethanol subsidies which Kaufman dismisses as a mere sidenote)? Wouldn't it be immoral for them to promote such a fund if they feel prices are heading upwards?

Wed, 05/04/2011 - 08:32 | Link to Comment IdiotsOutWalkin...
IdiotsOutWalkingAbout's picture

Commodity Ponzi and we all get to play.

Wed, 05/04/2011 - 08:44 | Link to Comment SoNH80
SoNH80's picture

I hope Mr. van Praag chokes himself engaging in auto-erotic asphyxiation on his next Provincetown junket.  "You great unwashed will simply have to do with less MEAT these days.... (*snorts coke*, #wipes nose#).... cliiimate chaaange, you knooow."

Wed, 05/04/2011 - 14:36 | Link to Comment DaveyJones
DaveyJones's picture

it is time grasshopper

Do NOT follow this link or you will be banned from the site!