Hedge funds accused of gambling with lives of the poorest as food prices soar

• Commodity speculators push cocoa to 33-year high
• Bets 'risk the most vulnerable in the world starving'

The WDM's Great Hunger Lottery report says "risky and secretive" financial bets on food prices have exacerbated the effect of poor harvests in recent years. It argues that volatility in food prices has made it harder for producers to plan what to grow, pushed up prices for British consumers and in poorer countries risks sparking civil unrest, like the food riots seen in Mexico and Haiti in 2008.

Deborah Doane, WDM director, said: "Investment banks, like Goldman Sachs, are making huge profits by gambling on the price of everyday foods. But this is leaving people in the UK out of pocket, and risks the poorest people in the world starving.

"Nobody benefits from this kind of reckless gambling except a few City wheeler-dealers. British consumers suffer because it pushes up inflation, because of unpredictable oil and raw material prices, and the world's poorest people suffer because basic foods become unaffordable."

Guardian  19 July 2010

Food Speculation

Executive Summary

Take the highest stakes, riskiest economic behaviour ever devised, and marry it to the most fundamental basic need of humankind, and you have the subject of this report.

Over the past decade, the world’s most powerful financial institutions have developed ever more elaborate ways to package, re-package and trade a range of financial contracts known as derivatives.

A derivative is not based on an exchange of tangible assets such as goods or money, but rather is a financial contract with a value linked to the expected future price movements of the underlying asset.

Derivative contracts are traded on a growing number of underlying assets, from share prices, to mortgages, bonds, commodity prices, foreign exchange rates, and even index of prices.

Derivatives trading has been one of the most lucrative parts of the financial industry, but it is the increasingly complex, opaque and disconnected nature of these and similar products that ultimately triggered the collapse of the banks and the worst financial crisis in human history.

Of course, the financial crisis has been an economic disaster of seismic proportions for millions around the world, plunging many countries into recession causing millions to be thrown out of work, soaring public debts and cuts in vital public services.

But while betting on the value of sub-prime mortgages or foreign currency values undoubtedly leads to disastrous consequences, there is another area where the speculative behaviour of the world’s largest banks and hedge funds represents a threat to the very survival of people: food commodities.

In The great hunger lottery, World Development Movement has compiled extensive evidence establishing the role of food commodity derivatives in destabilising and driving up food prices around the world.

This in turn, has led to food prices becoming unaffordable for low-income families around the world, particularly in developing countries highly reliant on food imports.

Nowhere was this more clearly seen than during the astonishing surge in staple food prices over the course of 2007-2008, when millions went hungry and food riots swept major cities around the world.

The great hunger lottery shows how this alarming episode was fueled by the behaviour of financial speculators, and describes the terrible immediate impacts on vulnerable families around the world, as well as the long term damage to the fight against global poverty.

In the report we describe how the current situation came to pass, the risks of another speculation induced food crisis, and what specifically can be done by policymakers here in the UK as well as in the US and EU to tackle the problem.

But at its heart, The great hunger lottery carries a very straightforward message: allowing gambling on hunger in financial markets is dangerous, immoral and indefensible.

And it needs to be stopped before any more people suffer to satisfy the greed of the banks.

WDM: Full Report .pdf  July 2010

Corporate Sociopathy    Fractional Reserve Banking    'Golden Sacks'    Wealth Log

WDM

Goldman Sachs

Goldman Sachs: Annual Report .pdf

Jarvis staff set to lose £28m in back pay

More than 1,000 employees of the collapsed engineering company Jarvis stand to lose the £28m they are owed in back wages, holiday pay and other benefits, its administrator has warned. Deloitte said the "unhappy" fact was that unsecured creditors, such as former staff, were unlikely to receive any of the money they were entitled to ...

Observer  11 July 2010

2,000 jobs at risk as Jarvis collapses into administration

Productivity does not explain wage differentials

The co-option of “fairness” by the UK's new government has unnerved many on the left. Yet in reality, all sides have always drawn on the language of fairness. What is at stake is really the interpretation of the causes of inequality; a matter of economics. This article suggests how we should interpret the inequalities of modern society from a post-Keynesian perspective ...

openDemocracy  07 July 2010

Living 'costs at least £14,400' for a single person

Minimum weekly budget:

• Single working age: £175.34
• Pensioner couple: £222.22
• Couple with two children: £402.83
• Lone parent with one child: £233.73

BBC NEWS  06 July 2010

A minimum income standard for the UK in 2010

FTSE 100: how London's leading share index lost touch with the rest of Britain

The disasters befalling BP, BA, Cadbury and the Pru might give the impression that British business had lost its way.

In reality, they, like so many in the FTSE 100, are now detached multinationals playing by their own rules ...

The FTSE 100 and many of the companies listed on it have evolved in line with a belief in the benefits of globalisation, a mania for ultra-liberal markets and an infatuation with mergers and acquisitions – a philosophy that has come in for sustained questioning in the financial crisis.

There can be no harking back to a mythical past: as a small island with an empire-building spirit and a powerful navy, the UK has always had what might politely be termed an international trading outlook. Only an extremist would argue for a John Bull index, if such a thing could be compiled.

Nonetheless, some commentators argue it is undesirable that our collective prosperity depends so heavily on investments that are so imperfectly understood.

Tony Manwaring, chief executive of thinktank Tomorrow's Company, says:

"There is a huge disconnect between business and society in the UK. British politics has failed to recognise the changing nature of business in the context of globalisation. We need to be asking on what basis pension funds invest our money in companies such as the Prudential and BP, and what are they doing to advance a stewardship agenda to deliver long-term value. We cannot go back to some mythical British past, but there is a huge deficit of understanding and discussion." ...

Britain's best-known share index now reflects the fact that this country acts as an offshore financial centre for brass-plate corporations. Whether that is desirable is open to debate. But when the Footsie flounders, it is pension fund members who thought their money was prudently placed who pay the price ...

Observer  06 June 2010    Branch Office Britain

George Osborne set to cut headline corporation tax

Zygmunt Bauman called it "Standortkonkurrenz" - competing with other countries, in a race
to the bottom, to lure footless corporate capital to invest in your country rather than someone else's.

Corporation tax was expected to raise £42bn in 2010-11, according to the Budget Red Book produced during Labour's last Budget.

The proposed tax cut would lower the figure to around £37.5bn leaving a £4.5bn shortfall that the Chancellor would seek to make up elsewhere.

The manifesto said the tax cut would be funded by "reducing complex reliefs and allowances" but the Tories have offered no further details. Experts say areas that could be targeted could be R&D tax credits and some capital allowances.

Vince Cable, the Business Secretary, is reported to be pressurizing Mr Osborne to consider the possible negative impact of severe cuts to investment allowances.

The British Chambers of Commerce has also urged the Chancellor to make sure the corporation tax reforms does not come with adverse side effects. David Frost, director general of the BCC, has suggested lowering the rate in phases so that the reliefs can also be changed gradually.

Separately, the CBI on Tuesday said that establishing competitive business taxes is essential for delivering economic growth. The influential trade body published a list of priorities for the Government to cut costs, including the freezing the public wage bill for two years which it said could save £18bn over two years.

The CBI also called for a "re-engineering" of public services to make them more efficient.

Telegraph  19 May 2010

OFT launches stock-take into UK economic assets

The Office of Fair Trading is mounting a massive stock-take of the country's economic infrastructure, from energy and water companies to transport and communications assets, in order to investigate whether consumers are being ripped off as many of these businesses have changed hands in the past decade ...

Over the past decade a slew of British infrastructure assets have changed hands as buyout firms have looked to capitalise on the dependable revenues of many utility companies and many of the country's crucial services are now owned by foreign companies. For instance, only two of the UK's household energy suppliers – Centrica and Scottish and Southern Energy – remain in British ownership, just over a decade after the market was opened up to full competition.

Thames Water is owned by the Australian bank Macquarie, having previously belonged to RWE which owns npower; Powergen is owned by German energy group E.ON; the nuclear power company British Energy is part of the French group EDF; the airports operator BAA is owned by the Spanish infrastructure group Ferrovial; and Scottish Power is part of Spain's Iberdrola ...

Guardian  14 May 2010    Branch Office Britain

Who owns Britain

Bankers' earnings surge towards pre-crash levels

Pay and bonuses totalled £20.5bn in four months to April, compared with £24bn at height of boom in 2007 ...

The steep rise in earnings is likely to put pressure on the coalition government to impose a clampdown on City pay practices, which the Liberal Democrats in particular attacked while in opposition.

Guardian analysis of data from the Office for National Statistics shows that bankers were paid £8.5bn in bonuses in the four months to April, compared with £7bn during the same period last year.

There was also a jump in pay across the industry of £1bn to £12bn as bankers shifted some of their earnings away from bonuses to avoid the former Labour government's bonus tax ...

Guardian  13 May 2010    Corporate Sociopathy    Wealth Log

EU leaders announce €70bn plan to protect euro

Messrs Merkel and Sarkozy might do well to reflect on the time Britain took on the international speculators and lost.

The day George Soros made a killing shorting the pound; the day the Treasury spent £27 bn trying to prop up an overvalued currency.

Is this the, er, 'thinking' behind the empty sub-Churchillian rhetoric from the corporate lackey in charge in Brussels.

They should be taking their cue from John Palmer and Joseph Stiglitz, and go back to the drawing board: the anti-IMF/WTO drawing board.

The one that puts people before the likes of Goldman Sachs.    Black Wednesday

EU leaders have agreed a financial defence plan in an attempt to protect the eurozone countries from speculative attacks in the wake of the Greek debt crisis.

The German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said today that an "intervention unit" designed to preserve financial stability in the 16 eurozone countries would be in place by Monday when the markets reopen.

The creation of the unit, which will have up to €70bn at its disposal to shield the euro against further market speculation ...

The European commission president, José Manuel Barroso, said: "We will defend the euro whatever it takes. We have several instruments at our disposal and we will use them."

Jean-Claude Juncker, who heads the Eurogroup of eurozone finance ministers, said: "We are talking about a global attack against the euro, and the eurozone must react as one."

Guardian  08 May 2010

It's time the EU had a new economic philosophy

The current system for running the euro structure is ... toothless ... that ... the Greeks are now paying a heavy price in social injustice for so-called Greek national sovereignty.

National governments are not obliged to work within a coordinated euro-area wide economic strategy. They pay no penalty for breaking the rules ...

There are other glaring deficiencies.

There is no adequate system for transfers of resources to compensate the less competitive EU regions and countries for the inevitable effects of economic integration such as exists in all other economic and monetary unions (such as the United States).

There is not even a symmetrical obligation on those euro-area countries that are strongest to stimulate consumption and growth and thus to balance measures by weaker economies obliged to curb consumption and employment because of excessive budget deficits and state debt ...

The EU leaders ... should unambiguously signal their intent to make European economic union a reality by give euro-area decision-making bodies real decision-making powers over fiscal policy, discipline and balanced economic growth ... the EU as a whole must accelerate plans for tough European wide regulation of financial markets, banks and speculators something which whoever forms the next British government would do well to support ...

In truth, the very foundations of the global neo-liberal system ... is now discredited.

The EU as a whole also needs a new economic philosophy based on green and sustainable growth and which encourages social cohesion ... and which actively promotes greater social equality.

Guardian  07 May 2010    Blog    Economic Democracy    IMF    The Euro: A Question of Sovereignty

Eurozone crisis is 'postponed'

EU ministers offer 500bn-euro plan

Darling rules out British support for euro

Control the jackals

Greek Debt Woes Ripple Outward

Reform the euro or bin it

Dow Jones insanity shows the need to regulate the murky world of dark pools

We don't know all the causes yet of Thursday's bout of insanity on the Dow Jones Industrial Average, but this much is clear: regulators have lost control of the equity market ... big buyers can go hunting for sellers (and vice versa) without having to reveal their hand.

It makes a mockery of the claim that published stock prices reflect the balance of supply and demand at any given moment.

It is because of the sheer lack of transparency that these off-exchange trading platforms are called "dark pools". There are more than three dozen alternative trading pools in the US now ...

The traders themselves long ago stopped being actual humans. More than half of all share trades in the US are now done by computer programmes, and the proportion is rising exponentially.

These black-box programmes are designed to trade at very high frequency, using impenetrable mathematical models to spot supposed trading patterns and eke out tiny profits, multiple times a second ...

The SEC recently – belatedly – began (the) review of high-frequency trading and dark pools.

It is difficult to be optimistic that it will get its head round all these issues.

This is the same SEC that couldn't catch Bernard Madoff when he was using an archaic computer to fabricate thousands of trades ...

Independent  08 May 2010        Corp Sociopathy Log    Fractional Reserve Banking

Origin of Wall Street’s Plunge Continues to Elude Officials

Goldman Sachs boss faces an ambush at the AGM

In the absence of economic democracy, CEO's like Lloyd "I'm doing God's work" Blankfein can put two fingers up to "shareholder proposals" safe in the knowledge that fellow corporate investors will remain on side, on the understanding that the new "business standards committee" is empty corporate spin. This, after all, is the firm that worked both for the Greek government, and against it. All in the interests of corporate profit.

He once joked that Goldman Sachs was “doing God’s work”, but yesterday Lloyd Blankfein came face-to-face with the Lord’s representatives on Earth.

A stream of Christian shareholders held him to account at the bank’s annual meeting in Manhattan, exhorting him to work “for the many, not just the few” ...

In hopes of deflecting further criticism from shareholders and the wider world, which he knew would be watching the meeting closely, Mr Blankfein said that Goldman would create a new business standards’ committee to conduct a comprehensive review of business practices at the firm and come up with recommendations to the board ...

Mr Blankfein looked remarkably more relaxed throughout than he did during his recent grilling by the US Senate.

He responded politely but rejected all shareholder proposals.

By the end, he looked unbowed, but relieved all the same that he had successfully got through another day in the spotlight at the Goldman Sachs circus.

Times  08 May 2010    Goldman Sachs

The mutual way to put Britain back on its feet

By any account the UK economy is in a dire position. According to a McKinsey report in January total British debt (that's corporate, personal and public debt) was 469pc of GDP.

Our situation is second only to that of Japan, whose economy has atrophied for nearly 20 years.

Heavily indebted, we must do what any household or business would do: cut costs and increase income. For a country this means getting more out of what we spend on public services and growing our private sector ...

Unable to make the most of our people and denied access to finance and long-term funding, both the public and the private sector need a new model to drive intensive long-term investment in research and development, business capacity and skill appreciation.

That new model could and should include an updated version of an old one: co-ops. A new, modernised mutualism is one of the ways we can escape the present economic crisis.

Right now we still operate under a shareholder value regime, where companies have increasingly focused on short-term gain using debt leverage to increase stock value.

A new mutualism, where every employee owns something, offers stakeholding instead of shareholding as a method to raise performance, productivity and investment.

And this is no fantasy. Employee-owned firms have outperformed the FTSE-All Share Index over the last 18 years by an average of 10pc ...

Daily Mail  04 May 2010    Philip Blond 'Red Tory'

UK unemployment surges to 15-year high

Unemployment rose unexpectedly in the three months to February to hit 2.5 million - the highest level in more than 15 years.

The number of people out of work increased by 43,000 between December and February, according to the Office for National Statistics.

The number of “inactive” people in the economy, classed as those who are not working because they are ill, studying or looking after children, also rose again, by 110,000 in the quarter, to reach a record high of 8.16 million ...

Overall employment also dropped in the three months to February by 89,000, to a 14-year low of 28.8 million.

There was also additional signs that increasing numbers of people are taking up part-time work because they can not find a full-time job.

The number of part-time workers who could not find a full-time job soared to 1,046 million in the three months to February ...

Times  21 Apr 2010

Town halls ‘to bear brunt of 600,000 public sector job cuts’

Job prospects bleak in Black Country

The West Midlands has been hit harder than anywhere by the recession that leeched jobs from the economy.

The number of jobseeker’s allowance claimants, a key measure of unemployment, doubled in some constituencies during the downturn.

Although the numbers have levelled off in recent months, and today’s unemployment figures are not expected to buck the trend, the most recent figures suggest that this will remain a blackspot.

The number of claimants fell in February to 176,100 or 7.3 per cent of the working population but were still well above the national average of 5.8 per cent.

In Birmingham 12.7 per cent of the adult population is unemployed.

The figure is higher among school-leavers. Youth unemployment in the city is running at 24.4 per cent, almost double the national rate of 12.9 per cent.

A Birmingham City Council report last week suggested that soaring unemployment could cause another outbreak of gang violence as the young turn to drugs and crime for money and status ...

In the Black Country 138,000 manufacturing jobs have been lost since 1998.

Dan Sloan, 19, from Cannock, said: “I have been looking for a job since I was 16. I would take anything really, building, gardening. It is tough. When I go for a job, somebody always seems to get there first. I feel like giving up now. I might as well resign myself to the dole and living on benefits. It may not be much of a life but at least it is better than no money at all.”

Times  21 April 2010    Youth Unemployment

Labour has failed to reduce 'Neets', say MPs

You can't blame young people for turning to drugs.

Short-changed by schooling, moving on to 'precarious citizenship' and the dreary prospect of life on the Miniscule Wage as a drone for corporate profit.

Keir Hardie's old party was founded to offer a better quality of life to everyone, until it was hi-jacked by Blair, Brown, and Mandelson.

Around one-in-10 teenagers is still classed as “Neet” – not in education, employment or training – far short of official targets set by the government, it was disclosed ...

Barry Sheerman, the committee’s Labour chairman, said number of Neets had failed to fall “despite one policy strategy after another” ...

“It is time to take a more radical approach and to look at the example of the Netherlands, where rates of youth unemployment are consistently low and where young people up to the age of 27 have a more unified support structure,” he said ...

The report said that the proportion of 16- to 18-year-olds classed as Neet had “changed very little since 1995”.

About 261,000 young people – or 10.3 per cent of the age group – had no job or training place at the end of 2008, according to the latest figures ...

The figure rose to 1,082,000 among 16- to 24 year-olds ...

The report also suggested that more "compulsion" should be incorporated into the benefits system.

It added: “We were struck by the approach taken in the Netherlands, in which relatively generous levels of benefits and other support are offered to young people in exchange for greater compulsion to take up education, training or work ... " ...

Telegraph  08 Apr 2010

Alternatives to Welfare    'NEETS'    A Return to "Primordial Loyalties"

Young people must attend college to receive benefits

Welfare

AA patrol staff vote for strike on pensions

National secretary Alistair Maclean said it was clear there was "widespread anger" over plans to cap employee pensions ...

Mr Maclean said AA staff were set to lose thousands of pounds under changes to pension pay-outs, which they found "completely unacceptable".

He said the private equity groups which own the AA are "highly profitable", adding:

"Staff have gone through a major reorganisation. They have taken all the pain and don't accept that private equity can come in and buy and sell them like a tin of beans ... "

Independent  07 April 2010

Barclays defends decision not to write down £2.4bn debt from AA/Saga deal

Private equity - a new capitalist mutation

It was turf war at the AA

Saga to merge with AA in £6.15bn deal

Private Equity

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