Anti-poverty campaigners launched a new campaign against food speculation today. The campaign “Bankers Anonymous” by the World Development Movement asks people to take five steps to help win new rules to prevent banks driving food prices up through financial speculation. Here is more info from WDM:
Betting on food prices is a lucrative business for many in the city. The World Development Movement estimates that Goldman Sachs has made £250 million from food speculation in the last year, while Barclays has made up to an estimated three-quarters of a billion pounds from speculating on food prices between 2010 and 2012.
However, this gambling is having global repercussions. It is clear that commodity speculation is bringing in what the World Bank has called “a new norm of volatile food prices” and these price spikes are having devastating impacts the world’s poor. Indeed food price rises forced 44 million people into extreme poverty in the last months of 2010 alone.
Mali, a country whose open markets make it very vulnerable to price fluctuations, is particularly suffering. World Bank research reports that some markets in southern Malawi experienced a 100 per cent increases in the price of maize between 2011 and 2012.
J.B. Jana, Electrician from Zomba said:
“Buying food is very difficult because here in Malawi money is a problem. It is difficult- when I buy food there is not much money left over. To buy maize, even a small amount is expensive. I support 10 people including my daughters and their children. When you are sick and go to hospital it’s a problem as there is no medicine. If you have money you can buy medicine in a private hospital but it’s expensive so it’s hard to buy after getting food. Sometimes we go to sleep without eating”
It is for this reason that regulation is needed. Only structural reforms can stop the gambling culture in the city. This is why the World Development Movement has launched Bankers Anonymous. This is calling on people to join a simple five-step programme to help bankers quit their gambling addiction. Each step goes to pressure UK finance ministers to support regulations in Europe that would bring in the transparency and limits to commodity trading that are drastically needed.
We need systemic reforms to create an environment where speculators will be discouraged by the design of the system rather than regulations, but in the meantime we encourage everyone to support the campaign.
In the current monetary system banks create new money, in the form of the numbers that appear in your account, through the accounting process they use when they make loans. Bonuses, commission and other incentive schemes encourage junior bankers to lend as much as possible so the amount of money in the economy soars, fuelling an artificial boom. The incentives for the boards of large banks lead them to favour using this newly-created money for speculation.
Positive Money reform proposals will re-align risk and reward, so that those who stand to gain from the upside of risky investments also stand to take the downside. Whenever there is a misalignment between the risk and the reward, there will be moral hazard and excessive risk taking by whoever stands to gain from the upside. This problem is rampant in the banking sector and was another major contributor to the crisis. Our proposals seek to remove this misalignment of risk and reward. They aim to create an economy where entrepreneurs, innovators and the real economy can thrive by – as much as possible – ensuring that investment goes to businesses, science and technology, rather than into asset price bubbles or financial market speculation.