Tag: speculation

And now everyone is implicated . . .

Updated 7 June 2011: I can find no evidence that any of my TIAA-CREF funds are holding Glencore.  So far, so good . . .

aaannnnddd

No Glencore in my Vanguard 2025 Fund (kid’s college fund).  Sadly, though, there is Gazprom.  And probably a hell of a lot of other problematic stuff . . . nobody is clean, I tell you.

 

 

As a geographer, I spend a lot of time thinking about interconnections – how events and processes in one place influence events and processes in other places.  I use these interconnections as a teaching tool in my courses, to help students understand how, for example, our levels of consumption here in the US preclude similar levels of consumption for the rest of the world (not enough resource out there to make that happen).  I am always careful to make sure that the students understand that I am as bound up in these linkages as they are – I certainly do not live off the grid, walking/riding a bike everywhere and eating only food I grow (or that is grown locally).  But it still hurts every time a find a new way in which I am bound to, and therefore a cause of, some of the processes I find most frustrating in the world.  So, this excellent post on FairPensions was a bit tough.  Simply put, Glencore, a well-known problem company that trades heavily in the food commodities markets (and appears to be making those markets, as it were, to its own advantage) has been fast-tracked into the FTSE 100, and therefore is now likely part of a lot of the mutual funds and pension plans to which we all make contributions.  I’m going to have to check on this, and pray that TIAA-CREF has some sense, but . . . dammit.
For an earlier discussions of food insecurity and the commodities markets, see here, here and here.

Posted on by Ed 0

Hang on, here we go!

Via Resilience Science:
International wheat prices are up 60-80% since July.  And according to the Food and Agriculture Organization of the United Nations (FAO), this price increase is not a standard market function – despite some crop failures, “Global cereal supply and demand still appears sufficiently in balance” to have much more stable prices.  So what, pray tell, is driving the increase?  Well, the FAO blames “national policy responses and speculative behaviour.”
Garry at Resilience Science does a great job of covering the obvious rebuttal: “Oh, the FAO is another organization out to demonize markets – this argument isn’t based on evidence.”  Um, not so fast . . . in a discussion paper for the International Food Policy Research Institute (IFPRI) – and by the way, the US is a major funder for IFPRI – Bryce Cooke and Miguel Robles appear to have demonstrated quantitatively that various proxies for speculation and activity on futures markets best explain the dramatic price rises for food in 2008.  To quote:

“Overall, we conclude from our time series analysis that when taking the four commodities analyzed here there is evidence that financial activity in futures markets and/or speculation in these markets can help explain the behavior of these prices in recent years. Other explanations are only partially supported for the particular case of one agricultural commodity or not supported at all. We do not claim, however, that these other explanations should be disregarded; all that we can say is that in using the variables considered in this study and the particular time series models herein, we do not find such evidence.”

Well, looks like Frederick Kaufman (see this earlier post) was at least partially right . . . in this case, the futures markets are causing more problems than they are solving.  Put another way, these studies demonstrate empirically that the manipulation of these markets is killing people – literally.  This is not market failure, people.  This is human moral failure.  But we wouldn’t want to regulate those markets, now would we?
Sigh.

Posted on by Ed 5