How Goldman Sachs gambled on starving the world’s poor – and won

Posted: February 9, 2011 in Uncategorized


…And it was the world’s poor who lost.

Goldman Sachs was famously described in a recent Rolling Stone article as “a vampire squid wrapped around the face of humanity, inserting its blood funnel wherever it can smell money” and if you are inclined to think of that description as a bit of hyperbole, read this article.  It will change your mind.

In fact, it will likely have you howling that the Gold Sacks executives be rounded up and prosecuted for several million counts of manslaughter.

This article explains why the recent run-up in commodity food prices isn’t due to market fundamentals at all, was totally preventable, and totally unnecessary.  It isn’t due to markets making “the most rational decisions” as Milton Friedman would famously have it.  It is being driven up instead by Wall Street rentiers who literally don’t give a damn that their speculation is condemning millions to starvation and a slow, agonizing death – just so they can make billions more than they already have.



How Goldman Sachs gambled on starving the world’s poor – and won

…For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer and the global price is high, he’ll lose some cash, but if there’s a lousy summer or the price collapses, he’ll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked well.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into ‘derivatives’ that could be bought and sold among traders who had nothing to do with agriculture. A market in “food speculation” was born…

…In 2006, financial speculators like Goldman’s pulled out of the collapsing US real estate market, and they were looking for somewhere else to make their stash of cash swell. They started to buy massive amounts of derivatives based on food: they reckoned that food prices would stay steady or rise while the rest of the economy tanked. Suddenly, the world’s frightened investors stampeded onto this ground and decided to buy, buy, buy.

So while the supply and demand of food stayed pretty much the same, the supply and demand for contracts based on food massively rose – which meant the all-rolled-into-one price for food on people’s plates massively rose. The starvation began…

…So it has come to this. The world’s wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. This is what happens when you follow the claim that unregulated markets know best to the end of the line. The finance sector’s Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict such misery, and barely even notice?


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