Busted: Bankers and The Global Economy

September 24, 2010

U.N. Says World is at the Brink of Food Crisis through Speculation

Environmental disasters and speculative investors are to blame for volatile food commodities markets, says UN’s special adviser

The United Nations warned that the world is likely on the brink of a major new food crisis caused by environmental disasters and rampant market speculators today at an emergency meeting on food price inflation.

The U.N.’s Food and Agriculture Organization (FAO meeting in Rome, Italy, on September 24 was called last month after a heatwave and wildfires in Russia led to a draconian wheat export ban while food riots broke out in Mozambique, killing 13 people. U.N. experts heard that pension and hedge funds, sovereign wealth funds and large banks who speculate on commodity markets are likely to be responsible for inflation in food prices being seen across all continents.

In a new paper released this week, Olivier De Schutter, the U.N.’s special rapporteur on food, says that the increases in price and the volatility of food commodities can only be explained by the emergence of a “speculative bubble” which he traces back to early this decade.

“[Beginning in] 2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,” De Schutter writes. “The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the U.S. housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behavior of food commodities and other refuge values, such as gold.”

He continues: “A significant contributory cause of the price spike [has been] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”

A near doubling of many staple food prices in 2007 and 2008 led to riots in more than 30 countries and an estimated 150 million extra people going hungry. While some commodity prices have since reduced, the majority are well over 50% higher than pre-2007 figures – and are now rising quickly upwards again.

“Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia – faced with massive wildfires that destroyed its wheat harvest – imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds are witnessing significant price increases,” said De Schutter, who spoke today at The U.K. Food Group’s conference in London.

Gregory Barrow, of the U.N. World Food Program said: “What we have seen over the past few weeks is a period of volatility driven partly by the announcement from Russia of an export ban on grain food until next year, and this has driven prices up. They have fallen back again, but this has had an impact.”

Sergei Sukhov, from Russia’s agriculture ministry, told the Associated Press during a break in the meeting in Rome that the market for grains “should be stable and predictable for all participants.” He said no efforts should be spared “to the effect that the production of food be sufficient.”

“The emergency U.N. meeting in Rome is a clear warning sign that we could be on the brink of another food price crisis unless swift action is taken. Already, nearly a billion people go to bed hungry every night – another food crisis would be catastrophic for millions of poor people,” said Alex Wijeratna, ActionAid’s hunger campaigner.

An ActionAid report released last week revealed that hunger could be costing poor nations $450 billion a year – more than 10 times the amount needed to halve hunger by 2015 and meet Millennium Development Goal One.

Food prices are rising around 15% a year in India and Nepal, and similarly in Latin America and China. U.S.  maize prices this week broke through the $5-a-bushel level for the first time since September 2008, fueled by reports from U.S. farmers of disappointing yields in the early stages of their harvests. The surge in the corn price also pushed up European wheat prices to a two-year high of €238 a ton.

Elsewhere, the threat of civil unrest led Egypt this week to announce measures to increase food self-sufficiency to 70%. Partly as a result of food price rises, many middle eastern and other water-scarce countries have begun to invest heavily in farmland in Africa and elsewhere to guarantee supplies.

Although the FAO has rejected the notion of a food crisis on the scale of 2007-2008, it this week warned of greater volatility in food commodities markets in the years ahead.

At the meeting in London today, De Schutter said the only long term way to resolve the crisis would be to shift to “agro-ecological” ways of growing food. This farming, which does not depend on fossil fuels, pesticides or heavy machinery has been shown to protect soils and use less water.

“A growing number of experts are calling for a major shift in food security policies, and support the development of agroecology approaches, which have shown very promising results where implemented,” he said.

Green Party Parliament Member Caroline Lucas called for tighter regulation of the food trade. “Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organization,” she said.

You can read this article by Guardian environmental editor John Vidal, with reporting by various news agencies, in context here: http://www.guardian.co.uk/environment/2010/sep/24/food-crisis-un-emergency-meeting-rome

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July 26, 2010

Plague of Home Foreclosures in U.S. Continues

The miraculous recovery that has been proffered by the Banking Elite hasn’t happened. Central Bankers and Wall Street profiteers believed that they could continue to operate with wild speculation while reaping the results and encouraging more of the same. The financial wizards have not proved their financial literacy. Their speculative downfall started with bundling speculative instruments tied to U.S. housing debt that never should have happened to begin with. Hundreds of thousands, maybe millions, of Americans bought homes that never really qualified. The hot market was bolstered until the superheated financial bubble burst, leaving a worldwide recession based on what amounts to Wall Street gambling on highly leveraged contracts that have bankrupted the system. The reality is that the problem isn’t with foreclosures themselves, but with the bundled securities and expected profits that are tied to the failing mortgages. No doubt, these securities have been packaged and sold dozens of times even though they are worth nothing now.

More than three years into a U.S. housing crisis that started a worldwide recession, home foreclosures continue to further the devaluation of the U.S. economy. The waves of foreclosures no longer come from sub-prime loans that have defaulted. Foreclosures come from formerly respectable borrowers that have lost their jobs in an impoverished and drained economy that no functions to support a nation of hard-working Americans, but functions only to serve the Banking Elite.

In the first half of 2010, more than 1.6 million U.S. properties are in the midst of foreclosure filings, which include bank repossessions, default notices and auction sale notices. This is an 8 percent increase from the first half of 2009 which puts the United States on target to reach 3 million filings this year. These numbers show the fragile state of housing and real estate investment, which has been decimated. Government programs have been ineffective at stopping the national hemorrhage. Little has changed except that more Americans are living in rentals, with friends and family, in tents or on the streets, depending on their financial fortunes.

The U.S. government and banking profiteers built a house of cards on the idea that the cost of housing would always rise and that the profits would never cease. After massive bailouts, they are still stuck without a financial course to chart and exploit, beyond tapping government bailouts. The Federal Reserve holds trillions in useless notes and obligations in the hope that someday they will be worth more than the paper they are printed on. The economy continues to spiral downward despite limited attempts by big money multinationals to bolster the market.

Corporate multinationals and banking bigshots aren’t here as charities. They demand to make money for shareholders. For decades they have profited from U.S. tax law and from the backs of manufacturing slaves in the third-world. Now they seek to hold the bottom line and to keep their organizations alive. Now they are cannibalizing inept governments to sustain themselves. Stagnation is preferable to loss as the United States becomes the new third-world in their great plan to level the national playing field through globalization. Welcome to the brave new world of globalism, where everyone is equal except for the corporate oligarchy.

It isn’t pretty, but is pretty much as advertised.

June 13, 2009

Financial Racketeering: Send Corrupt Bankers to Prison

bankers to prison
Buy your own t-shirt and tell the world you want justice!

As a protective corporate reaction to the economic and fiscal banking crisis that corrupt bankers have brought upon the nation and the world, bankers have sought to hide the true nature and scope of the toxic assets that they hold. The government has been frustrated in its attempts to truly grasp or know the true situation because of corporate trickery and subterfuge on the part of many banking institutions as bankers often continue to operate their own protection racket. Yet, once bankers have been bailed out by the federal government for their short-sided thinking and the development of corrupt speculative banking instruments, some have sought to pay the debt back with the hopes of continuing the banking gravy train for themselves including unsupervised and virtually unlimited pay perks. From the reaction of the Federal Reserve, accounting standards appear to be lacking as bankers continue the attempt to operate their own private corporate racketeering.

With the expectation of countermanding this continued rebellion by bankers, the Federal Reserve has issued new accounting rules which will have a material effect on banking organizations’ accounting for off-balance sheet vehicles. The legislation will take hold in 2010 to address weaknesses in accounting and disclosure standards for off-balance banking instruments.

The Fed is also reviewing regulatory capital standards for bankers based on their experience in the banking bailout which they expect to apply to banking institutions, further cramping the style of many bankers. As a result of the review of new banking capital standards for bankers, the U.S. government is not eager to immediately accept paybacks of bailout money. The U.S. government apparently believes that the bailout has functioned as a fairly reasonable control lever in temporarily reigning in the ongoing greed within the banking community. ~ E. Manning

February 23, 2009

PM Brown: New Global Economy

pm-brown-berlusconi-romeBritish Prime Minister Gordon Brown has stressed the importance of April’s G20 ‘Economic Recovery Summit’ in London in the bid to strike a “global deal” that will “speed up the recovery of the world economy”. He and other European Union members are advocating a new global financial system, but have backed off somewhat due to the reluctance of U.S. support. His recent statement in Rome revealed that all nations need to inject resources into their own economies as well as agree on ways to reform international institutions.

Currently, he is recommending new policies that he calls ‘fairness principles’ against “old excesses” in the banking community, a standard of stewardship instead of speculation. In the meantime, Brown and other European Union members are advocating unity in opposing moves towards protectionist trade policies. They see the U.S. as a major opponent where such policies are concerned.

Back in the United States, international bank holding company, Citigroup continues its precipitous decline. The U.S. government is looking at boosting its’ controlling interest in the banking firm to boost confidence and maintain solvency from toxic debt, part of the speculation that PM Gordon Brown was referring to.  Britain is dealing with similar issues relating to the Royal Bank of Scotland. ~ E. Manning

August 3, 2008

False Confidence and Tough Times

You’ve probably heard the bad news and are likely to hear more based on underground information that isn’t public yet. Public information isn’t rosy either as otherwise tough line economists are finally admitting a “shallow recession”.

You’ve probably heard that the federal government admitted that 51,000 jobs vanished last month, with just over 1/2 million this year according to statistics. Growth has been reported as slow, but numbers have just been revised for an economic contraction in the last three months of 2007. The popular line is growing that data suggests a recession began late last year. That is really old news. The good news behind the bad news is that once you admit you have a problem, you stop trying to cover up for the problem that you don’t have. In fact, by simply admitting the truth collectively or individually, it is possible to look upward or at least past your situation. That is exactly what the economy really needs, a release from national credit addiction. Business and government need it more than consumers do.

Investment bankers like Goldman Sachs say the entire global economy is slowing, which makes any trade improvement opportunities unsustainable at best for the U.S. economy. Because of that many new opportunities in the U.S. economy are being cut off. Business is also worrying about Christmas sales and is reacting by importing less goods. Looking at the bright side, even if many Americans don’t have a traditional Christmas, we still have each other. The world isn’t over because of a disappointing holiday season except for unwise speculators.

For those businesses that must have an increase in sales, new ways to entice consumers must be discovered to garner what business there is. Otherwise, many businesses will be cutting back and closing stores. This move is expected before Christmas as business continues to contract, but many retailers will try to weather the storm. Panic may ensue, but rest assured that many businesses have simply reaped what they have sown. Let’s face the facts that Americans cannot continue to live on credits cards to finance cheap imported goods to make the business world ever larger profit margins. Inflation also continues to cut into margins on both sides for business. The beast of inflation is no longer reigned in.

Many Americans have decided to get down to brass tacks and quit fooling themselves. Even so, at the end of the year, the likes of Old Navy will still have tons of practically worthless stuff to sell at bargain basement prices in the new year that they paid pennies on the dollar for to manufacture overseas.

Tens of millions of Americans have for years borrowed aggressively against the value of their homes to finance trips to the mall, dinners out, vacations, medical bills and new cars. As housing values continue to fall and artificial financing possibilities wither, the cold reality of real life will finally begin to settle in. Expectations will have to be lowered, at least for now. Wages will have to increase to sustain the economy or prices will have to fall. Since most wages come from the halls of big business, you know that prices will fall.

Confidence is down and for good reason. But confidence is a short-term animal that economists and analysts put too much stock into. Business owners that have some common sense are not stockpiling goods like in days of old. Less stock and less sales mean less tax revenue, which will further hurt the cash that government craves. Confidence will continue to erode for a time and deficit will reign. In six months or more, we may actually know if the stimulus checks were effective in any way or not. Until then, speculation rules. Still, tough times don’t last forever, although getting through is no less difficult. Tough times is also what makes humans grow.

Aside from all the heavy spending, why is America in trouble? Never forget that our friends, the bankers and financiers have dumped the economic cart. Fraud and speculation has worn down the system where a little restraint and sense would have carried the economy a long way. Of course, government guarantees on virtually every financial measure and market don’t work and ultimately create more harm than good by further burdening the economy. We have nationalized banking, mortgage, finance and in some cases, business in general. You can’t take the risk out of business. Human nature mandates abusive practices where there is no risk or reason for accountability.

Happily, we have something to gain from the situation if we are collectively willing to learn from our mistakes and forbid the same behavior in the future. That would be incredible progress that has been slow in coming. Yes, this is a dismal science when times are tough. To some, times are never good enough as we race onward at breakneck speed to meet the rush of bills that are always coming due. That is the life of plenty that America has been sold.

If we are smart, we have other things that we can manage to do during the recovery besides continue to hurt others and the already ailing economy. Sitting still and taking stock may be the wisest move imaginable. We can trim back spending and expectations while looking for a new approach to life in America. Remembering who you really are is more important than false confidence.

While all of this is happening, the digital economy is really ready to take off in a big way with the next upturn. The powers behind the scenes, including the central bankers aren’t hurting. They continue to make it big during good times and bad. ~ E. Manning

February 21, 2008

Wild West Banking

Filed under: banking, government, investment, money — Tags: , , , , , , , , , , — digitaleconomy @ 11:20 am

The “sub-prime” and “Alt-A” mortgage crisis has its roots in an escalating real estate market along with wild speculation and the intense desire for profits at any cost. If you are not clear on the speculative bonanza that brought about the mortgage and banking crisis, I invite you to review this short video which covers Countrywide, the Northern Rock Banking Debacle and some of the speculations in banking. The failures rank from the bankers to the bond rating agencies to the money-lust of the investors. The bonds were seen as a “low risk” deal. Nobody scrutinized the bond rating agencies or how the banking packages were assembled. As seen over and over lately, the conflict of interest has been huge. In general, bank regulators have been clueless regarding the reality of the new internal banking instruments designed by the bankers to make a fast buck.

Observations and Commentary by Elvis Manning

The Credit Crunch and World Banking

Make Bankers Pay?

The Fed and the Subprime Mortgage Debacle

The Great American Mortgage Scam

 

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