Has a "food bubble" replaced the housing bubble?

What caused the Egyptian rebellion? Danny Schechter has offered an analysis which should trouble us all, because what happened to Hosni could happen here.

In Egypt and elsewhere, people are hungry because food prices have risen dramatically.

Prices in Egypt are up 17% because of a worldwide surge in commodity prices that has many factors but speculation on Wall Street and big banks is a key one.

As IPS reported, "Wall Street investment firms and banks, along with their kin in London and Europe, were responsible for the technology dot-com bubble, the stock market bubble, and the recent U.S. and UK housing bubbles. They extracted enormous profits and their bonuses before the inevitable collapse of each.

Now they've turned to basic commodities. The result? At a time when there has been no significant change in the global food supply or in food demand, the average cost of buying food shot up 32 percent from June to December 2010, according to the U.N. Food and Agriculture Organisation (FAO). Nothing but price speculation can explain wheat prices jumping 70 percent from June to December last year when global wheat stocks were stable, experts say."

In olden times, even the most heartless dictators understood the need to make sure that the common people had bread. But the dictatorship of libertarianism has a different logic. As this paper explains:

Thus, the inflow of “investment” money into commodities markets automatically lead into price increases. There is no other way, this is just simple math.

You may also want to read this paper, "Commodities Market Speculation: The Risk to Food Security and Agriculture." This was published in 2008, when the problem had already made itself known but before the real trouble had set in. From the intro:

Today, developing countries are consuming less food. About 43 percent of more than 27,000 people polled in a recent 26-nation survey said that they had cut back food consumption as a result of higher prices.2 The number of those undernourished and food insecure in the world has increased along with prices. Over the last year, riots broke out over food prices, lack of available and affordable food, and insufficient food aid.

Amidst the food price crisis, speculation is a major contributor to extreme price volatility, which is skewing agriculture commodity markets to such a degree that both farmers and consumers are losing out. This paper reviews the role of speculation in the global food crisis. It explains the particular role of U.S. regulation of commodities markets within the global regime. Finally, it offers policy recommendations for how governments can better regulate markets in support of food security and employment goals.

That was 2008. Now we have the ascent of the Tea Party libertarians, who ain't gonna regulate nothin' -- no matter how many people die.

See here:

In fact, America (and Europe, by implication) is at the very heart of this story, with Goldman Sachs and City bankers threatening to push the global economy over the precipice once again with their next bout of reckless speculation.

The Wall Streeters got huge bailouts and are now making huge profits. The money has to go somewhere. Right now, the commodities market is considered the safest place to put it.

Just a few months back, the Food and Agricultural Organization of the United Nations in Rome warned of another impending food crisis in 2011, the two principal causes of which will be climate change and food speculation.

This crisis is now beginning to materialize, as climate shocks in Russia, Pakistan, Australia and Argentina have conspired with rampant food speculation to cause food prices to rise to their highest levels in recorded history.

You thought housing speculation was bad? You ain't seen nothing yet.

One measure of our basic economic weakness is that we lurch from one bubble to another instead of shoring up our fundamentals. We don't have any fundamentals any more. All we have are Wall Street vampires.

In an analysis of the food price crisis of 2007-08, De Schutter documents how the U.S. government passed legislation in 2000 deregulating the food commodity markets and for the first time permitted speculation on speculation.

Here's how it used to work. In January, Farmer Brown would sign a contract to sell his 2011 future crop to a grain trader like industry giant Cargill for 100 dollars a tonne. In the fall, Cargill would then sell Farmer Brown's grain at whatever price they could get to a bakery or feedlot company for cattle. These "futures" contracts insulated both the farmer and the grain trader from wild price fluctuations.

Now, after the passage of the U.S. Commodity Futures Modernisation Act in 2000, Cargill could sell Farmer's Brown "futures" contract to an investment bank on Wall Street for 120 dollars a tonne, who could in turn sell it to a European investment company for 150 dollars a tonne and then sell it to a U.S. public pension fund for 175 dollars a tonne and so on. Add in some complex financial instruments like 'derivatives', 'index funds', 'hedges', and 'swaps', and food become part of yet another highly-profitable speculative bubble.

Now there is a new and bigger food price bubble that began midway through 2010. It's no surprise since nothing was done to change the conditions, Ghosh wrote. Regulations that could prevent or at least limit such speculative financial activity are not in place. The 2010-11 food price bubble is blamed on last summer's Russian drought and increased consumption by India and China. However, FAO figures clearly show grain consumption by those latter two countries has actually fallen, mainly because many simply can't afford to buy as much grain, Ghosh told IPS in an email interview.

Yes, we're going to be hit too

U.S. grain prices should stay unrelentingly high this year, according to a Reuters poll, the latest sign that the era of cheap food has come to an end.

Masters says the markets are now heavily distorted by investment banks: "Let's say news comes about bad crops and rain somewhere. Normally the price would rise about $1 [a bushel]. [But] when you have a 70-80% speculative market it goes up $2-3 to account for the extra costs. It adds to the volatility. It will end badly as all Wall Street fads do. It's going to blow up."

You can be sure that the fucking teabaggers are going to want to put out the fire by spraying it with gasoline. Only idiots think that the problem is "socialism" -- an imaginary bogeyman. The problem is unregulated capitalism. In a word: Libertarianism.