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| Food Speculation |
Excerpts, editing
by Carolyn Bennett
From
Professor Michael Greenberger’s comments in interview today with The Real News
Network’s senior editor Paul Jay: “Speculation and criminal manipulation of
food and commodities prices — ‘Weak regulations on speculators swamping markets
and lack of enforcement of existing laws on criminal intent, are driving up
prices’”
RECAP: Al
Jazeera report May 2011
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| Don't gamble with our food |
“Glencore
controls more half the global copper market and almost ten percent of the
planet’s wheat trade [Reuters]. It is the world’s largest diversified
commodities trader — now planning a $11billion share sale [2011 figures],
likely the largest market debut ever seen on the London Stock Exchange.…”
The “rapid
rise in food, fuel and commodities prices [though] a bonanza for multinational
trading firms such as Glencore” has disastrous consequences for the world’s
poor. Critics have charged that this singular commodities trader [unchecked] issuing
stock causes spikes in food prices.
‘Stability
is to be prized’ but that is ‘the last thing Glencore wants, as it is
instability that is most profitable — for those who have the inside knowledge
to exploit it’ [David Green of Oxfam].
“To make
money betting on food, metals and energy, Glencore – like other trading in houses
and hedge funds – relies on one crucial commodity: Information.
‘[Glencore
has] offices all over the world and unique access to information about
production and distribution. When the people who have that information are also
the ones speculating, there is grave cause for concern; they can purchase
forward contracts when they know prices are going up’ [Food security
researcher Devlin Kuyek with GRAIN, a non-profit international organization
working on food security].
The Real
News Network 2012
There are
two kinds of speculation, Professor Michael Greenberger told Senior Editor Paul
Jay, that the Dodd–Frank law (in the U.S. Senate, July 2010) intended to limit
and constrain “but the place that there is vulnerability is in the futures
market, where you actually hold a contract for future delivery rather than own
the underlying commodity. If that market is overwhelmed by speculators, it will
drive up the price of the commodity and therefore not only will people benefit
from having futures contracts that pay off big-time; but if they
correspondingly hold the physical—the aluminum, the copper, the wheat, the oil —
that price goes up as well.
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| Stock Market |
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| White collar crime |
ANOTHER PROBLEM
is that “some of these participants … adversely affecting the price — are
actually not just swamping the markets with investments but are working with
each other to drive the price up. That is a criminal problem.”
The crime is
criminal manipulation of prices. “That is why the president of the United
States — once in April 2011 and once in March 2012 — asked the Justice
Department to investigate these markets to see if there is criminal wrongdoing.
Those of us who watch these markets believe, despite the innocent flooding of
these markets of speculators … there are speculators out there who, with a
criminal intent, are driving the price up.
“One remedial
process, limiting speculation to a reasonable part of the market, failed because
of Wall Street lobbying. The second part
is failing because of prosecutorial laxity, the failure to go after people who
are criminally working with each other to drive the price up.”
[Jay: Is
part of the problem the political power … paralyzing this process?]
Greenberger continues:
“The banks have already checkmated one of the principal limits in Dodd–Frank,
which did not require showing criminal intent; [the legislation] just said speculators’
participation in these markets should be drawn down from 80 percent of the
markets to about 30 percent of markets, the historical average.” The lobbyists
on Wall Street (together with an inattentive public) have run roughshod over
that but you cannot run roughshod over a prosecutor. What is missing is “serious
investigation” by the U.S. Justice Department.
Speculators
as bank robbers
“My view and
the view of many academic experts,” Greenberger said, “is [that] if the Justice
Department would seriously investigate the criminal manipulation, the price
would come down dramatically — not just the price of oil, not just gasoline,
not just of heating oil, but the price of agricultural products as well, because
the same things are happening in those markets.…
“If we did not investigate bank robbers, there would be a lot of profits made from going in and holding up banks. But we enforce burglary laws and theft laws in bank robberies. The same thing is happening in the commodity markets, and the prosecutors and de facto police have blindfolded themselves, stuffed their ears, and held their noses, and appeared to the public as if nothing is going on.
“If there were a serious investigation undertaken, if the FBI was called in, if records were subpoenaed, if market participants were interviewed and the Justice Department at least gave an indication, as they did when they went after the Enron conspirators in the early 2000s, if they were serious about this — just the appearance of a serious investigation would cause the criminal speculators to scatter like cockroaches scatter when lights are turned on. If indictments were brought down, the public would be educated about this.”
Sources and
notes
Al Jazeera
2011
“Glencore: Profiteering from hunger and chaos —
The world’s largest commodities trader is issuing a stock sale, and critics say
the firm causes spikes in food prices” (Chris Arsenault), May 9, 2011, Al
Jazeera and agencies, http://www.aljazeera.com/indepth/features/2011/05/20115723149852120.html
Jay and Greenberger 2012
“Speculation
and Criminal Manipulation of Food and Commodities Prices (Michael Greenberger: ‘Weak
regulations on speculators swamping markets and lack of enforcement of existing
laws on criminal intent, are driving up prices,’” April 13, 2012 [Watch full
multipart Speculation and Criminal Manipulation of Food and Commodities Prices]
In
Washington Paul Jay, Senior Editor, interviewer, The Real News Network, Transcript
Site DISCLAIMER: Please note that transcripts for The Real News Network are
typed from a recording of the program. TRNN cannot guarantee their complete
accuracy. http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=8134
MICHAEL
GREENBERGER
Michael Greenberger
is Technical Advisor to the United Nations Commission of Experts of the
President of the UN General Assembly on Reforms of the International Monetary
and Financial System. He has recently been named to the International Energy
Forum’s Independent Expert Group that provided recommendations for reducing
energy price volatility to the IEF’s 12th Ministerial Meeting of March 2010.
Professor Greenberger was a partner for more than 20 years in the Washington,
D.C. law firm of Shea and Gardner. There he served as lead litigation counsel
before courts of law nationwide, including the United States Supreme Court.
Professor Michael
Greenberger is on the University of Maryland School of Law faculty where he
teaches a course entitled “Futures, Options and Derivatives.
PAUL JAY,
SENIOR EDITOR CONCLUDES: “… Commodity
traders and big banks are making such fabulous profits out of all this. The top
commodity traders are making more money than the biggest telecoms’ netting more
profit than the Microsoft/s and the Apple/s. … Unless you read the financial
press, where you see some of this, reading the popular press would give you no
sense of the extent of money being made by the big banks, commodity traders, on
commodities and speculation, the two together.”
DODD-FRANK overview
excerpt [July 2010]
“BRIEF
SUMMARY OF THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT: Create
a Sound Economic Foundation to Grow Jobs, Protect Consumers, Rein in Wall
Street and Big Bonuses, End Bailouts and Too Big to Fail, Prevent Another
Financial Crisis
Years without accountability for Wall
Street and big banks brought us the worst financial crisis since the Great
Depression, the loss of 8 million jobs, failed businesses, a drop in housing
prices, and wiped out personal savings.
The failures that led to this crisis
require bold action. We must restore responsibility and accountability in our
financial system to give Americans confidence that there is a system in place
that works for and protects them. We must create a sound foundation to grow the
economy and create jobs.”
http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf
Images
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on hunger, eco-storm.com
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