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Lies, Damned Lies, And Banks: Deutsche Bank Caught Again

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Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

Deutsche Bank, long coddled by the German government, is mired in a swamp of costly “matters,” such as the Libor rate-rigging scandal or the carbon-trading tax-fraud scandal that broke with a televised raid by 500 police officers on its headquarters. It’s writing down assets and setting up reserves to settle these allegations.

Co-CEO Jürgen Fitschen insinuated more gloom was to come. The bank, he said, would “be confronted with more developments in these and other matters” [The Putrid Smell Suddenly Emanating From European Banks]. And now, one of these other matters seeped to the surface: the bank had known for years about the impact of commodities speculation on food prices and the havoc it wreaked on people in poor countries. And it had lied to the German Parliament about it.

On June 27, 2012, David Folkerts-Landau, head of Deutsche Bank’s DB Research, educated a parliamentary commission about the dire consequences of food price inflation—and what didn’t cause it.

“In developing countries where often up to 90% of the income must be spent on food,” he said, “price increases of wheat, corn, and soybeans in the years 2007-2008 and 2010-2011 had devastating consequences.” Volatility made it worse. “Even spikes of only a few months are a serious threat to food security.”

While the volume of options and derivatives in agricultural markets had been ballooning in recent years, “primarily in search of higher yields,” he said, there was “hardly any sound empirical evidence” for the assertion that any of it “led to price increases or higher volatility.”

He cited the big players. The US Commodity and Futures Trading Commission (CFTC) had received “no reliable economic analysis” that showed that excessive speculation influenced the markets. US Department of Agriculture came to the same conclusion in 2009. And the Bank for International Settlements (BIS) pointed out as early as 2007 that there was “no convincing causal relationship” between speculation and price increases. That the BIS would say that makes sense: it groups together 58 central banks, including the most prodigious money printers. On its board: Fed Chairman Ben Bernanke, NY Fed President William Dudley, ECB President Mario Draghi, etc. etc.

Thus inspired, Folkerts-Landau concluded that “commodity prices are primarily determined by fundamental demand and supply factors,” not speculation.

Alas, foodwatch, an independent non-profit, has obtained four studies by DB Research and two studies by German insurance and finance conglomerate Allianz that showed that both companies had known for years that commodity speculation—one of their major business activities—drove up food prices.

In September, 2009, a DB Research study pointed out: “Speculation has also contributed to price increases.”

A year later, DB Research found that speculation could be “distorting the normal functioning of the market,” which “can have grave consequences for farmers and consumers and is in principle unacceptable.” It argued that it was important for the proper “functioning of the food chain” that commodity derivatives serve their original purpose of price discovery and hedging against volatility. And it suggested that more regulation of derivatives would “be helpful in avoiding excesses.”

In January, 2011, DB Research—shocked that high food prices had at least in part triggered social unrest in a number of countries in Latin America, Asia, and Africa—admitted that “in some instances speculation might have added to the price movement.”

Two months later, DB Research acknowledged that in developing countries where “consumers spend over 50% of their income on food,” price increases can be devastating and “hollow out the right to food.” While there was no consensus on the role of derivatives, the study nevertheless fingered speculation: “When speculation drives prices to a level that is no longer consistent with fundamental data, this can have serious consequences for farmers and consumers.”

Hence another scandal: large banks have known for years that commodities speculation and related products that they sold to their clients caused immense damage to people in developing countries and hurt people even in rich countries. foodwatch points out that even short price spikes can cause permanent damage to already mal-nourished children—and can lead to death. Yet banks “deceive the public, even lie to Parliament, to continue without scruples to profit at the expense of those who are starving.”

But the banks are just a link in the chain. Central banks have cranked up their printing presses and flooded the world with speculative capital, causing asset bubbles left and right. Their stated policy goal is to cause inflation, but when food-price spikes wreak havoc around the world, it’s of course someone else’s fault.

Deutsche Bank is flailing to get this under control. There have already been noisy demands that it remove those financial products from the markets that bet on price changes of agricultural commodities. But the bank is the bedrock of the German economy, and Germany must soldier on. All hopes rest on it: its vibrant economy teeming with globalized, ultra-competitive, export-focused companies is supposed to drag France and other Eurozone countries out of their economic morass. But then, there’s an ugly reality. Read....  What If Germany Gets Bogged Down Too? Or Has It Already?

 

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Tue, 02/26/2013 - 08:54 | 3277052 Mediocritas
Mediocritas's picture

Reminds me of this one from Bruce,

http://brucekrasting.com/blame-the-fed-for-commodity-speculation/

I agree, banks absolutely cause geopolitical instability. It's about time the Pentagon shut Bernanke down as he is, afterall, vastly more of a threat to national security than any terrorist.

Mon, 02/25/2013 - 22:53 | 3276356 robertocarlos
robertocarlos's picture

There was a good article in the Globe and Mail about pigs. A farmer selling a pig direct to the consumer said he needed $200 for feed, $200 for the butcher, and $200 for himself. High grain prices have killed the medium sized producer. You have to be big and make money on volume,  or small and make money by diversifying. 

Mon, 02/25/2013 - 20:32 | 3275910 Its_the_economy...
Its_the_economy_stupid's picture

I am very angry. This article has brought it home to me. I understand that the futures markets were created to shear the producers and the buyers on the other side of the trade. But now, in understanding the human price in the food market, I am enraged.

Am I wrong to to agree that all participants in the futures markets must be made to stand for delivery, and liquidity be damned?

Tue, 02/26/2013 - 09:08 | 3277091 Mediocritas
Mediocritas's picture

Problem is that they often do take delivery then park it to artificially restrict supply. Particularly for durable commodities.

Mon, 02/25/2013 - 19:27 | 3275700 SmittyinLA
SmittyinLA's picture

Everybody wants to debase their currency without consequences and blame it on "avoiders" whom they call "speculators" 

Mon, 02/25/2013 - 17:34 | 3275230 Radical Marijuana
Radical Marijuana's picture

Ah, another article tickling the macabre sense of humour with the recognition of how perfectly hypocritical "hedging" becomes.

OF COURSE, in the real world, the actual effects of "commodity derivatives" do NOT "serve their original purpose of price discovery and hedging against volatility," but rather increase volatility towards causing chaos, while those doing that are able to profit from every evil thing they can possible do.

The basic problem is that the established language about "the fundamentals" IS ALL BULLSHIT. 

Money is backed by murder.

Of course, the manipulation of the monetary system, when looked at objectively, from the perspective of SOCIAL FACTS, always has consequences, which include death controls. However, the people doing that have gradually developed to become the BEST BULLSHITTERS about what they were doing.

The whole world is controlled by systems of legalized lies, backed by legalized violence. The idea that the economy is based on production may be correct, from an oversimplified point of view. However, the reality is that PRODUCTION IS CONTROLLED BY DESTRUCTION.

"foodwatch points out that even short price spikes can cause permanent damage to already mal-nourished children—and can lead to death."

The particular problem in the world caused by the lack of protein in the diet of poor children could be best dealt with by the cultivation of more hemp seeds, which are the cheapest and best plant source of protein.

OF COURSE, the fascist plutocracy has therefore asserted that "marijuana is almost as bad as murder," and therefore criminalized all cannabis cultivation.

The ways that hemp, which is the single best plant on the planet for people, was rebranded as "marijuana, that is almost as bad as murder," and therefore, all hemp was prohibited, is merely the single most extreme example of the ways that everything else actually works.

Furthermore, there is no way to avoid those facts that the world is controlled by legalized lies, backed by legalized violence, because there are real limits, and therefore, there MUST BE REAL DEATH CONTROLS.

Our monetary system is runaway fraud, causing murders, because something has to do that, and those who do that the most and the best are the people who currently dominate the established systems, and they are able to do what they do BECAUSE they are the best professional liars and hypocrites regarding what they are doing.

The greatest of the "damned lies" is that there does not have to be some murder system. What actually exists is a combined money/murder system, operated by those who are the best at maintaining the maximum deceits about what they are doing.

The only genuine solutions are alternative murder systems. Since that is the last thing that will be addressed or admitted, there are apparently no ways towards any genuine resolutions to these problems.

The established systems operate their debt/death controls through the maximum possible deceits regarding what they are doing. The established ruling classes profit from how their systems of organized lies and robberies operate. Their controlled opposition promotes the impossible ideals that there should be no such systems.

In that context, where those operating the real systems are the best at lying about what they are doing, and they are publicly opposed by people who base their criticisms upon absolutely impossible ideals that no murder systems whatsoever should exist, we therefore continue to get bigger systems of organized lies, operating organized robberies, benefiting fewer people more fantastically, while more and more suffer worse ...

All of that is on a runaway exponential growth curve, without any reasonable limits which are practically possible, due to the bogus dialectic between the ruling classes, and their controlled opposition, which BOTH operate within the same set of impossible ideals, which are based on deliberately ignoring the laws of nature and social facts, as much as possible.

To return to an oversimplified example, we COULD feed poor children best through more hemp cultivation, BUT, then, what would be new system of death controls become to prevent their total population continuing to grow to the point where nothing could continue to feed them?

It fits in the overall established systems that the single best source of food for poor children comes from a plant whose cultivation was criminalized on the basis of huge lies, and that the murders that are being caused by the spiking of food prices is done within a social system which is able to disconnect the monetary system effects causing that from the basic necessarily existing manifestations that something MUST cause there to be real limits to the population.

We have managed to generate a social language based on the maximum possible deceits regarding the real death controls, whose most maximal expression of that deceit is the notion that there should not be any death controls at all! OF COURSE, that collapses back to causing the worst possible systems of death controls, such as malnutrition, leading to dismal death, for millions of poor children, and that is almost certainly going to get even worse in the foreseeable future.

To more fully understand the problems driven by the biggest banks, one should face that fact that money is backed by murder, and that it must be! Without that greater understanding, then no better resolutions to these problems can ever be possible.

Mon, 02/25/2013 - 19:18 | 3275646 Optimusprime
Optimusprime's picture

You say,   " Their controlled opposition promotes the impossible ideals that there should be no such systems."

 

Well said.  Would this be Libertarianism?  Daily Bell? Lew Rockwell?

 

Daily Bell seems to be revealed recently an obfuscating apologist for Zionism/Jewish supremacism (long gone are the days when they focussed on the Rothschilds).  Who would've thought?

Rockwell?  What do you think? 

Mon, 02/25/2013 - 22:47 | 3276325 Radical Marijuana
Radical Marijuana's picture

Sorry, Optimusprime, but I am not sure what to think about particular people, or even less about any general groups of people. Furthermore, it seems usually impossible to me to get away with anything else, other than "it depends."

Although, I am relatively familiar with the names you mentioned, I never feel confident enough to label anyone else as the "bad guys." Instead, my overview is that there are NO "good guys," only different kinds of "bad guys."

Mon, 02/25/2013 - 16:19 | 3274859 Widowmaker
Widowmaker's picture

Obviously, Wolf didn't get the memo that banks can do whatever the fuck they want, whenever the fuck they want.

Justice and lawlessness are just words for pussies that die in vein.

Mon, 02/25/2013 - 16:17 | 3274845 Temporalist
Temporalist's picture

OT but same theme of scandals:

Britain’s Top Catholic Resigns as Vatican Faces Scandal

Cardinal Keith O'Brien "Britian’s most senior Catholic cleric resigned amid allegations he behaved inappropriately toward priests in the 1980s, casting a shadow over Pope Benedict XVI’s final days in power before retiring on Feb. 28."

"The Vatican is struggling to manage its message before next month’s secret conclave to elect the next pope... It’s also facing questions over Cardinal Roger Mahony of Los Angeles, who’s insisted that he’ll attend the conclave even after U.S. court documents showed he helped cover up sex abuse by more than 120 priests."

http://www.bloomberg.com/news/2013-02-24/pope-begins-last-days-in-power-...

Mon, 02/25/2013 - 14:48 | 3274560 steveo77
steveo77's picture

In the meantime, get free platinum, LOL 
The Liberty coins folks really outdid themselves for this month. Guess the March closing price for Platinum futures and win a free 1/4 ounce US Eagle Platinum. 
 
What could be better than free silver! Well, free Platinum! Use the link below, OR the Silver contest button on the right, which takes you to the contest, which is now FREE PLATINUM 
 
http://oahutrading.blogspot.com/2013/02/win-free-platinum-enter- contest-here.html

Mon, 02/25/2013 - 16:44 | 3274988 espirit
espirit's picture

Hey Steve O, take a hike.

www.kissmyasscontest.com

Mon, 02/25/2013 - 14:40 | 3274537 walküre
walküre's picture

The truth is out.

Elites have only one tool left in their shop. Propaganda 24/7 to "educate" people on the benefits of the EU, the Euro, QE, the Fed, Obamacare, gun control, gold and silver "bubble" and so on and so forth.

They are at their wits end. Among the elites however, there is no universal or global agreement in all financial or political matters. Soon the cracks will be wider among the elites and the lack of trust or faith will surface and then the ponzi will collapse. Pax Americana is in its final stages. The contestants are better equipped and better situated today than they were 10 years ago. Waiting patiently for their move.

The "strong Dollar" argument is short lived. Maybe the Western oligarchs are moving from Yen or Euro into Dollar but the East is buying precious metals. There is absolutely no doubt where we are headed. The Chinese own US paper and they want to continue to collect or they will abandon the paper. That will be the end of the USD. The US can try and satisfy the debt with diluted paper but the Chinese won't accept that forever either. What choice does the US have other than a huge debt deflation, harsh austerity and wealth confiscation to satisfy the lenders? The Fed holds much of the debt and the Fed can pretend it has the means to extend this charade for a while longer but in fact, the Fed is also at the end of their game(s). QE has helped the elite to recapitalize and become wealthier than before but at the expense of the general population, a huge balance sheet and a government that cannot cover its expenses unless it takes on more debt. Courtesy of our American elite.

In order to salvage the US fiat, the American elite will have to give and make huge concessions. J6P will suffer but has not much left to contribute to the process. The elite does and if they want to keep their status quo, they will be asked to put up. Simple game of currency, wealth and economic faith. Capital controls are in place to prevent capital outflows from the elite. The Fed has their man in office to sell the bloodletting by the elite to the plebs. The elite will squirm and squeel but they've got no other choice but to part with some of their wealth.

That is the only way the US and the US Dollar can survive and the lenders will remain patient. I'm not saying that I approve of the policy or even that I'm in favor of the survival of the current crop of fiat. Just saying that there is no other alternative because printing more of the same is neither going to be encouraged nor tolerated.

Interest rates will remain where they're at because the lenders will not kill the goose that lays their golden eggs. The lenders have asked about higher interest rates but they've been told that they cannot have their cake and eat it. Not in the US. In Greece the lenders took haircuts in exchange for higher interest. That was doable relative to the size of the Greek economy and debt. The US doesn't have that option because of the status of US fiat. It may change eventually and then all bets are off but until then, the lenders are getting what the US can afford to give them. Low returns in exchange for a hard(er) currency.

Mon, 02/25/2013 - 16:21 | 3274864 Widowmaker
Widowmaker's picture

Nonsense, the only truth is lies fly.

Sucker.

Mon, 02/25/2013 - 14:38 | 3274522 BlueCheeseBandit
BlueCheeseBandit's picture

What about the farmers committing suicide in India and the UK? What about farmers that can't get loans? What about farmers who can't make money?

High prices are good for producers. And it's not like farmers have had it made in the shade the past few decades; many struggle to get by themselves. With growing demand from a growing population and rising emerging market incomes, coupled with numerous supply constraints and an aging and shrinking farm population (avg age of developed world farmers is around 60; <1% of the US population farms, etc) it may be that the world has to pay more for food going forward and less for booze and marginally improved iTrinkets. Sad, I know. But I don't see what natural law says farmers must be poor and bankers and computer programmers must be rich.

So, yeah, speculation can drive prices up. It can also drive prices down. But blaming it for insufficient food supply (food inventories globally are the lowest on record) is shooting the messenger. If speculators don't drive up food prices today, we won't have any food tomorrow.

Don't like it? Become a farmer. I am.

Mon, 02/25/2013 - 22:51 | 3276345 Mr. Hudson
Mr. Hudson's picture

This will be a great year for the small farmer.

Mon, 02/25/2013 - 15:50 | 3274746 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Good luck with that "rich farmer, poor banker" thing. Hasn't worked yet anytime in history. Nice lifestyle though

Mon, 02/25/2013 - 17:55 | 3275342 BlueCheeseBandit
BlueCheeseBandit's picture

Ever hear of southern planters?

By "history" do you mean in the US since 1980? Rethink your sample size.

Mon, 02/25/2013 - 14:31 | 3274517 waterhorse
waterhorse's picture

 "Yet banks “deceive the public, even lie to Parliament..."

No different than what is happening here when Blankfein and Dimon were fellated (oops, I mean "grilled") by CONgress.

Mon, 02/25/2013 - 14:27 | 3274509 orangegeek
orangegeek's picture

George Costanza:  ...just remember, it's not a lie if you believe it.

Mon, 02/25/2013 - 16:47 | 3274996 espirit
espirit's picture

...and it's not criminal unless you're caught.

Tue, 02/26/2013 - 00:07 | 3276547 Teamtc321
Teamtc321's picture

.....it's been caught, just not prosecuted.

Mon, 02/25/2013 - 14:12 | 3274476 anonnn
anonnn's picture

Who says the Third Reich "ended"?

Perhaps "morphed"?  "evolved"?  Re-opened under another name?  Went underground?

 

 

Mon, 02/25/2013 - 13:42 | 3274392 Volaille de Bresse
Volaille de Bresse's picture

"That is the definition of TBTF"

 

Until when? The Third Reich was supposed to last 1000 years, how long will last this new "clean" banking fascism?

Mon, 02/25/2013 - 13:38 | 3274377 Bicycle Repairman
Bicycle Repairman's picture

"the bank had known for years about the impact of commodities speculation on food prices and the havoc it wreaked on people in poor countries."

Let's have no more nonsense here about the effect of speculation on important commodities.  Or about the supposed value of speculation.  It is parasitic behavior.  EOS.

Mon, 02/25/2013 - 15:14 | 3274629 Thisson
Thisson's picture

Nonsense.  Hedgers cannot exist without speculators, and vice versa.  They are symbiotic, not parasitic.  What is parasitic are the manipulators, a different genus/species.

Mon, 02/25/2013 - 15:22 | 3274661 Bicycle Repairman
Bicycle Repairman's picture

Limit the market to producers who hedge and those who provide the hedge to producers.  Participants must stand for delivery.

Mon, 02/25/2013 - 16:37 | 3274952 11b40
11b40's picture

+1000 BR.....been beating that drum for years.  You know, implementing change that works FOR the general population.  Only then will we discover the real price of a barrel of oil, bushel of wheat, etc.

Mon, 02/25/2013 - 17:36 | 3275236 Bicycle Repairman
Bicycle Repairman's picture

The ability of markets to set undistorted prices is a pillar of capitalism.  No pricing function = pseudo-capitalism at best.  When I say we have not had even rudementary capitalism for a long time, this is part of my meaning.

So why is it like this?  The distortion is used by powerful parasites to game the market and to hide their intent.

Mon, 02/25/2013 - 13:34 | 3274360 Orly
Orly's picture

Excellent research.

Any idiot who has said since '07 when Goldman ramped oil prices that this loose money has no effect on real prices is a fool.  But our illustrious government just looks the other way and takes the handouts.

Nice place, huh?  Killing kids to make a buck.  It's just sad.

:/

Mon, 02/25/2013 - 14:39 | 3274539 ThirdWorldDude
ThirdWorldDude's picture

Schizophrenic much, blondie?

 

I wonder how what you just stated adds up to this thing you said about your chicken breasts...

Mon, 02/25/2013 - 14:41 | 3274546 akak
akak's picture

Bingo!

I guess it is not just me, after all, who noticed that as well.

 

PS: Don't expect any logical response --- if you get any response at all.

Mon, 02/25/2013 - 15:25 | 3274673 NoWayJose
NoWayJose's picture

No bingo- Bunga!

Mon, 02/25/2013 - 14:55 | 3274579 jimmyjames
jimmyjames's picture

Bingo!

I guess it is not just me, after all, who noticed that as well.

***********

If you had a clue about what she was saying-both yesterday and again now-it would defeat your complete bullshit theory of dollar weakness/inflation being the sole cause of high food prices-

Taxpayers bailed out the likes of Goldman etc. with real cash--they are funneling that money into the futures markets and holding the price of food up-

Where would the price of food be without "your" tax dollars being used to keep prices high?

Orly made you and your green arrow minions look like pups--you just don't know it-

Mon, 02/25/2013 - 16:56 | 3275030 espirit
espirit's picture

If you buy 10 whole chickens at a $1.00 lb, conceivably the breasts could be priced a buck per pound, but the legs might be more like $3 per lb.

Matter of perspective, eh?  BTW - you suck also.

Mon, 02/25/2013 - 17:13 | 3275130 jimmyjames
jimmyjames's picture

Matter of perspective, eh?

**********

Did the cost of a pound of ground beef come from the farmers input or the mother cows milk or the grass and grain that it took to fatten it--what about the butcher-

I'll leave you to try and split hairs with your grocery reciepts--

Mon, 02/25/2013 - 18:11 | 3275426 Bay of Pigs
Bay of Pigs's picture

Perspective? Orly is a douchebag on inflation. 

Mon, 02/25/2013 - 19:25 | 3275684 jimmyjames
jimmyjames's picture

Bay--this ongoing dispute about "rising food prices" being caused by a weakening dollar due to inflation alone has been debunked in this report-

{{Alas, foodwatch, an independent non-profit, has obtained four studies by DB Research and two studies by German insurance and finance conglomerate Allianz that showed that both companies had known for years that commodity speculation—one of their major business activities—drove up food prices.}}

I agree all currencies are weakening-but the availability of them to the people is also shrinking and prices "should" adjust the the availability of the money supply available to consumers-

Take out the banks speculating with taxpayer money and prices would fall-it has little to do with inflation-we're sure as hell not getting much if any of that newly printed money-look at commercial bank reserves--look at velocity-

Mon, 02/25/2013 - 20:09 | 3275832 Bay of Pigs
Bay of Pigs's picture

Well, how do you explain the fraud ridden CPI numbers which have understated rising inflation for over two decades?

Seriously, I dont how the deflation theory gets any traction here on rising food and energy costs. It's ridiculous.

Mon, 02/25/2013 - 21:41 | 3276123 jimmyjames
jimmyjames's picture

Seriously, I dont how the deflation theory gets any traction here on rising food and energy costs. It's ridiculous.

***********

Did you read the article Bay--what would food prices do if insolvent investment banks (except for the grace of taxpayers) not allowed to speculate and hold prices up-with your money?

I suspect they would come down from here-it has little to do with inflation or deflation although deflationary forces are in play--money is tight for consumers--look at recent retail sales for Walmart-copper is down--oil is down-stock markets look toppy-50 million on food stamps-that is not an inflationary scenario-

I don't think the D word should be scoffed at as ridiculous and not even worth discussion--

Mon, 02/25/2013 - 22:51 | 3276324 Orly
Orly's picture

Thanks, jj, but it appears these guys don't understand that there are only two true types of inflation: input-cost inflation from the front-end, or wage-demand inflation from the back-end.

Let's just get the simple one out of the way first, shall we?  If you work for The Man, you ain't getting a raise.  Chances are, he's cut your hours and you got a fi'ty cent piece in each check.  Wages have been stagnant for basically decades.  That much is a given.  Therefore, increased wages cannot draw demand forward, causing inflation.

The input-cost variable is a little more complicated, especially when you're talking about commodities.  Either way, though, the results are the same.  There has been no disruption in the supply of the raw materials to create products, the machinery is still in place.  The only difference is that someone came along and decided to corner the market on pork bellies and the price of bacon goes through the roof. If the FTCC decided to prosecute (ha!), that artificial rise would go away literally overnight.

But are these speculations really inflation?  No, they're not.  The reason is that the rising cost is artificial and not systemic.  Only systemic price rises are called inflation.  The others may be called "spikes" or "seasonal fluctuations."  Some would call it gaming the system.

Systemic input-cost inflation causes the worker to go and ask for more money.  Certainly not the case here.  If there is no wage inflation to match the input-cost inflation, the rising prices die in the vine and merchants must get around raising prices for their products for fear of losing market share.

This is not inflation, y'all.  It is deflation.  Why else do you think the FED is blowing the bubble so hard?  To keep prices down?  Open your eyes, please.

I really wouldn't worry about it too much, jj.  These guys just have a fantasy about being Mad Max and having all the chicks and cool bikes and trucks because they have gold.  What they don't know is, I am going to trade their entire "stack" for forty gallons of gasoline and a mule.

:D

Mon, 02/25/2013 - 23:35 | 3276483 jimmyjames
jimmyjames's picture

Orly--i agree with your reasons for rising or falling prices/wages--As far as inflation and deflation go-i use it in a monetary sense--increase or decrease in the credit and cash supply-of course we know they've been cranking up the printing presses but that money has not made it into the broad economy "except" in the stock and futures market like this thread refers to-it's mostly sitting in banks which deposit it in the Fed account/bonds and recieve free interest-which amounts to zip for an economic driver-

As far as credit goes with ultra low interest rates-it's easy to see that the fed has been trying to blow more bubbles but other than student loans which is dying and corporations that borrowed and hold it on their balance sheets as cash-it is still only debt by any other name and those corporations are not investing it in the economy--they're holding it in case of another credit freeze up and as you say-wages are flat to falling-unemployment is high-hours are being cut-making 2 or 3 part time jobs out of one to help mask the real numbers and holding prices high to make it look like deflation "can't happen here" is exactly what bernanke's trying to do-besides stuff banks full of money-

btw.. i like gold simply because i believe it is money and money is king in deflation-which is where i think we're headed-but that's just my opinion-

 

Mon, 02/25/2013 - 23:28 | 3276448 akak
akak's picture

Admit it, Orly --- you are just Karl Denninger in drag.

The input-cost variable is a little more complicated, especially when you're talking about commodities.  Either way, though, the results are the same.  There has been no disruption in the supply of the raw materials to create products, the machinery is still in place.  The only difference is that someone came along and decided to corner the market on pork bellies and the price of bacon goes through the roof.

Hmmmmm .... sounds rather like a "conspiracy theory" to me --- kind of like all those kooks who keep going on about surreptitious government suppression of the prices of gold and silver.  Yep, those guys are kooks all right, but when it comes to the price manipulation of other commodities, why, that is just common knowledge and acknowledged fact!

Funny how all this 'market cornering' has been going on for around 80 or 90 years now.  I'm sure, though, that it has NOTHING to do with the devaluation of fiat currency.

Mon, 02/25/2013 - 23:19 | 3276442 Bay of Pigs
Bay of Pigs's picture

"rising cost is artificial and not systemic"

LOL, you're stupidity is only rivaled by your rudeness and condescending attitude.

No sense debating your wild ass theories anymore. You don't seem to understand economics or monetary history at all.

Mon, 02/25/2013 - 14:45 | 3274554 falak pema
falak pema's picture

two different markets operating on two different paradigms.

Third world rape is not the same model as middle class rape in USA; it ain't that easy...and the local network has more competitive reaction to oligarchy play. 

Mon, 02/25/2013 - 15:03 | 3274593 ThirdWorldDude
ThirdWorldDude's picture

Not quite, falak. Your "first world" produces around 1/4 of world's food...

Ever been to a "third world" country, like S. America, SE Asia or E. Europe? People living in resource rich regions don't give a rat's ass about commodities' futures manipulation, what they don't produce they buy on the local bazaar and eat fresh food.

First result of inflation in food products was the "Arab Spring", as those high prices hit import-dependent countries hardest... and you can't say you haven't felt the package-shrinking-price-hiking in your beloved France, cause I know you have.

Mon, 02/25/2013 - 16:37 | 3274870 falak pema
falak pema's picture

I spent ten years on and off working as oil executive cum project manager on projects in third world.

There were two food markets there : imported fare which were are 200% of local prices in France to take into account the import costs of luxury food. We ate that stuff in our luxury hotels and compounds as expats. Then there was the other market, the local stuff, dirt  cheap that fed that market on min wages for people working as slaves for the Oil/ forestry/infrastructure industry.

ALL concentrated on exporting the RM of country. So yes, I KNOW THAT MARKET and it hasn't moved an INCH since those early days of the 1970s of my working life. France even imposed a surrogate currency, CFA, to rob those people with an exchange rate manipulated on value of FF/EURO on floating markets; needless to say the CFA devaluated faster over twenty years than mother currency. Thank you very much neo colonial France, you knew how to debase them twice over!

I felt dirty and ashamed being a french engineer knowing we were ripping them off 100%; all the oil rent going to French OIL/political oligarchs running Francafrique and their surrogate chosen head-men now rich as Cresus, they and their clans that ran the country; the local 1%. All of west Africa on same page, officially free ex colonies, in reality all puppets on strings and treated like fellow illuminati in, (wait for it its the icing on the cake, Freemason conclaves where the creme de la creme treated their fellow black surrogates like "fellow bretheren"!) And those ex-french bureaucrats or army sergeants, promoted heads of State by witch Doctor Foccart, de GAulle's point man in FREE Africa, loved it! 

Since globalisation, ALL their natural production has been twisted in a double economic spiral imposed on them : devaluation of local money as the country is by definition  perpetually bankrupt; all the goodies stashed in Caymanista land by Franco-African buddy- buddy oligarchy since the 1970 oil hike; AND, their local produce in competiton to  match prices of exports of massive food surpluses DUMPED on their markets by foreign commodity oligarchies.  Best way to destroy local competition from local networks! 

Selective dumping of OGM staple from abroad killed local production. None of the local producers had the guts or ammo to withstand the swings and roundabouts of CONCOCTED speculation. It was a merry go round organised to bring local production to its knees and allow multinationals to introduce their control on local food and agri supplies; like a squid and its tentacles. 

DOes that ring a bell?

All these economies now fukked beyond lucidity and reason, like in a porn movie, rendered their arms to the BWANA culture. Easy pickings. Then the price manipulation can begin BOTH on local products and imports; you have the country and its elites by the balls. Game over.

And I have seen this fall of third world economies time and time again. The western squid has no match locally, except its  own hubris...

As the hubris now makes the first world countries part of the same mind set; yes I know how the Squid corporate mentality is now suffocating markets of first world.

But, in this strangulation of increasing oligarchy control, there is a pecking order and some countries, like the USA, will be the last to feel that whiplash effect; not that its hasn't already begun since 2008; little by little the noose tightens. Orly says she doesn't feel it yet in her supermarkets...and we all know that you cannot strangle the whole world, 'cos the oligarchy needs slaves to feed the empire...until its falls under it's own dead weight; like in 476 AD. So local patterns don't always follow the matrix. There can be step changes. There is only one rule that counts : whatever the theory the real, local facts must first be checked. No big deal lets not split hairs, but lets not be DOGMATIC. 

BTW, I like to move fast over centuries. its my poetic licence. Sorry! 

 

Mon, 02/25/2013 - 18:39 | 3275525 RazvanM
RazvanM's picture

I live in a 3rd world country in Europe - Romania. And this scenario was played here over and over again during the last 23 years.

Mon, 02/25/2013 - 17:03 | 3275068 Orly
Orly's picture

Thanks for the narrative, falak.  It was quite enlightening.

:D

Mon, 02/25/2013 - 16:54 | 3275022 Fuh Querada
Fuh Querada's picture

impressive FP. Sounds similar to the IMF asset stripping plays.

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