Book and film reviews

Deadly business

In the Museum for Bread Culture in Ulm, Salzstadelgasse 10, an interesting and current exhibition on "Speculating with Food" is running from September 12 to November 11, 2012

Long forgotten is the old saying that I heard from my grandmother: “You don't play with food”. On the poster for the exhibition "Deadly Businesses" a grain speculator who hanged himself in 1817 after a failed investment is shown as a warning.

Usury with food

After the real estate bubble burst in 2008, stock market speculators were looking for another field of activity. Banks soon started offering funds that speculated on grain prices.

As expected, prices rose afterwards and in 2008 there was the first bread riot. B. in Mexico, where the prices for corn had risen sharply - not least because of the production of biofuel from corn.

In 2011 - after deducting the inflation rate - wheat, maize and rice were on average 150 % more expensive than in 2000. The speculators who made good profits on the commodity exchanges are considered to be one of the contributors to these price increases.

Even if these price increases have not yet hit us very noticeably in Europe, one should know that in developing countries the poor have to spend up to 80% of their income on food!

Precaution or speculation?

As far back as our historical knowledge goes back, there have been good and bad harvests, and all peasant people were well advised to store the surpluses of the good years for times of bad harvests.

Here are a few examples:

The breadwinner of Egypt

The oldest well-known example is provided by the Bible. In Genesis, it is reported that Joseph recommended that the excess grain of the proverbial “seven fat years” be stored in order not to go hungry during the “seven lean years”. At that time, according to the Bible, it was not about speculation but about the well-being of the people!

Grain trade in the Middle Ages

In the Middle Ages there were repeated regional famines that could not be compensated for by surpluses in other areas due to inadequate transport options. Cities and sovereigns determined the grain policy. Strict market regulations, the fight against middlemen and stocks were supposed to ensure sufficient supplies, which did not always succeed. There were even death sentences for violations.

The French revolution

The French Revolution was probably triggered by a hunger crisis. Capricious weather conditions resulted in bad harvests for several years in a row. No precautions had been taken and the poor roads made the situation worse. In the "Age of Reason" the government was blamed for mismanagement that exacerbated the food crisis. (Cf. “In a nutshell, curiously” on page 110 “How the climate makes history”).

The Wheat Exchange of Chicago

When steamships plowed the oceans in the middle of the 19th century and railways shrank distances on the mainland, grain became a globally traded commodity. The Chicago Grain Exchange has been the world's trading hub since it was founded in 1848. It should ensure price stability; for when there were poor harvests in one country, the shortage could be made up by surpluses obtained in another country. The contracts for later deliveries were also originally intended to help the farmers. If they were guaranteed fixed prices before the harvest, they could plan better, perhaps forego keeping their own stocks to compensate for price fluctuations. But already at the turn of the 19th to the 20th century there was dramatic price speculation, artificial shortages, enormous speculative profits and losses on the Chicago stock exchange.

Economy and stock exchanges without ethics

Today one has to fear that speculators endowed with unheard-of capital are trying to manipulate the markets in a way that was unthinkable a few decades ago without the Internet and global trade.

That concerns us all: because whoever pays into a pension fund or into a life insurance, or puts his money in the bank, has no guarantee that there will be no speculation on rising food prices.

It is high time that the governments intervene, which hopefully have not - as it seems - been manipulated by the financial sharks in such a way that one can get scared and banged![i]

(1) (with illustrations)

Final grade:
[i] In an Arte report ("Goldman Sachs - A Bank Runs the World", broadcast on September 4, 2004 at 8:15 pm) it is pointed out that leading figures of the American government are former Goldman Sachs employees. It's no different in Europe: Mario Draghi, (today President of EURO-Bank) was Vice President at Goldman (2) and Mario Monti (Italian Prime Minister) was an international advisor at Goldman Sachs (3).