As Egypt and the Middle East rise, Wall Street and congressional Republicans continue to ignore the financial reforms the world is demanding.
The dramatic rise in food prices is fueling a great deal of discontent in Tunisia, Egypt and elsewhere. It's a deep undercurrent propelling many of the poor, who face prospects of starvation to resort to the streets and to violence. According to the United Nation's Food Agency (Food and Agriculture Organization -- FAO) world food prices are up for the 7th month in a row and are likely to surpass the record high reached in December 2010.
No end is in sight for this destabilizing battle with food price inflation in places like Egypt, where more than half of an average income goes for food. According to the State Department, more than 60 food riots occurred worldwide over the past two years.
In March 2008, a dramatic spike in food prices led thousands of people on the brink of starvation in Egypt to violently riot -- sending a seismic shock wave through the Mubarak regime. After the Egyptian military was able to distribute enough wheat to dispel the rioting, efforts to stockpile wheat by the Mubarak government have failed, as food prices continue to hover at record highs.
The media is reporting many reasons for this problem ranging from soaring demand, cuts in food subsidies, droughts, and government mandates to use more grain-based biofuel. But, another significant factor is at play: unfettered speculation by investment banks. As noted in USA Today, in 2008, "the bulls may not be running on Wall Street, but they're charging in the commodities pits."
At issue are the still deregulated commodity markets ushered in by the Clinton administration and the U.S. Congress with the passage of the Commodity Futures Modernization Act of 2000. Before this law, the Commodity Futures Trading Commission (CFTC) served as a cop on the beat, enforcing rules that prevent the distortion or manipulation of prices beyond normal supply and demand. But Wall Street banks and companies such as ENRON and British Petroleum were determined to make a lot more money from speculation by exempting energy-derivative contracts and related swaps from government oversight.
For this reason, the 2000 law allows entities that have no stake in whether adequate amounts of food and fuel are available for ordinary people and commodity-dependent businesses to make huge sums of money by gambling with other people's money.
Soon after passage of the 2000 law, "dark" unregulated futures trading markets emerged, most notably the Intercontinental Exchange (ICE) in London -- created by Wall Street and European investment banks and several oil companies. A key practice involves "over the counter index trading" in which hundreds of billions of dollars of pension, sovereign wealth, and other institutional funds are used to flood "dark" commodity markets to buy and hold futures contracts without an expiration date or oversight. When it's time to make money on a losing bet, these funds are withdrawn, causing commodity price crashes and economic instability.
These transactions don't involve customary "bona fide" commodity traders, such as an airline company hedging on the price of jet fuel by purchasing futures contracts. As prominent hedge fund manager Michael McMasters noted before a U.S. Senate panel in 2008, this amounts to "a form of electronic hoarding and greatly increases the inflationary effect of the market. It literally means starvation for millions of the world's poor."
Some world leaders are willing to speak out against the pernicious role of "dark" commodity markets. Recently, French President Sarkozy warned of further unrest and even war at the Davos forum, unless commodity speculation is reined in -- something that Wall Street and Republican lawmakers are bitterly fighting. The Dodd/Frank Financial Reform Law places some restrictions on this practice by the CFTC. In particular, the CFTC is beginning the process of weeding out "non bona fide" investment bank speculators.
True to form, House Republicans are demanding that the CFTC slam on the brakes. They're planning hearings and legislation to hamstring these efforts.
The spontaneous mass uprising of ordinary people in Egypt and the Middle East against their authoritarian regimes has many root causes. One that deserves much greater attention is unfettered speculation by powerful private financial institutions that don't care about world-wide starvation and its impacts. It's distorting global food supplies.
We are being fleeced robotically and sytematically by this system that includes the Fed and central banks with hedge funds and investment bankers which can contribute to political campaigns to further deregulate capital flows while labor is strangled with more debt to survive.
Meanwhile, currencies are being debased and real wages not rising in the face of massive food price increases. Derivates are virtual money created by dark pools in the shadow lending system.
This system will collapse soon if something isn't done to reform it.
700 experts were heard by the Commission but Obama and Gibbs said that "the economy is recovering and in no real danger of imploding and collapsing since we have Frank-Dodd and the Volker Rule."
What a joke! Obama is talking out of both sides of his mouth. The Global Class war is on but those at the bottom hardly understand what is happening because they believe that neoliberals such as Clinton and Obama are on their side.
The Goldman Sachs and J.P. Morgan Chase types are supported by Clinton Team and Obama Team, not workers or inhabitants ot the third world. Their real estate derivatives will crash so they want to use food as a commodity to prevent their insolvency. Unfortunately, the Democrats who are the one' who should be preventing this speculation - which only profits these banks and hedge funds - and, instead are thge ones , along wioth the Republicans, who are supporting these commodity manipulations as cynically as real estate markets being manipulated into a bubble and crash.
One hand washes the other.
Control the food on a continent and you control the people. The same interests also control credit and even currency creation. Along with credit default swaps, they can creat wealth for themselves without contributing to the real economy using other people's money.
One-in-four people are involved in protecting private property as security guards, police, military, intellectual property, etc.
The entire system is correctly viewed as a self-perpetuating machine that enriches the select few at the expense of everyone else. This system was intentionally created to ensure that wealth accumulates for the political and investor classes and that this sytem of monetarism is spread the world over. Fractional reserve banking with credit default swaps gives them the tools to starve people out half-way across the world.