THis post can be found here.
I know what your next blog should be about”, David said, twisting his pint of stout between two hands like it was a delicate piece of Lalique crystal. “I don’t do requests, dear” I replied in my best Bette Davis voice. But the truth is that, sitting there outside The Windmill pub next to the Young Vic, shivering but determined to enjoy my fag, I perked up. My last big post on Cameron’s Big Society had been read by over 12,000 people and I was feeling the pressure – desperate not to do a Grisham and follow it with shite, but also convinced that one post was not enough to do a JD Salinger and never write again.
Add the fact that some of the dozens of comments the post attracted were scathing and personal and I had a full-blown crisis of confidence: blinded by ideology; not offering any alternatives; inhumane for not having given change to the homeless person in that story; biased and partisan.
I may be all these things. But this is my blog, my voice, my opinion. You don’t have to read it. You certainly don’t have to agree with it. It does not claim to be impartial. I wear my ideology on my lapel like a red carnation.
David went on to suggest a piece on the recent Cameron speech during his trip to Egypt which was followed by official visits to several oppressive Middle-Eastern regimes accompanied by an assortment of weapons manufacturers. The implicit – no, explicit – hypocrisy in the PR stunt had outraged David so much that he tore to pieces his newspaper (if the Evening Standard can be considered such these days).
“I think you should do something on the dismantling of the NHS”, chimed in my niece, as she passed me the wedge of lime from her Mexican beer to put in my vodka – austerity measures apparently extended to citrus fruit… Light bulb! “Thank you so much”, I chirped. She looked pleased; convinced that her suggestion had won the day. It had not. But that simple action of sharing a piece of lime had kindled something. If I could take another esoteric subject and make it accessible or even funny, maybe I could retire. So, here goes.
AN IDIOT’S* GUIDE TO FOOD SPECULATING
*the IDIOT in question, is me
Ever since the collapse of the finance sector a couple of years ago, pressure has been mounting on the institutions at the centre of it to be more prudent in the way they gamble, loan money, take unreasonable risks, sell those debts on, insure against non-payment, bet on non-payment and make an excessive amount of money if things go well and even more if things go badly. The loans market became too hot; too many beady eyes on it; too many investors got jittery. So, the hunt was on for the next big money-spinner. Because it seems that, like fictional dinosaurs in a blockbuster picture, greed will find a way.
The next fashionable market in which to dabble is food. That’s right: wheat, rice, olive oil, soya, coffee beans, anything you can think of. Floods in China? Let’s speculate on the price of grain. Drought in Africa? Let’s make a hefty bet on maize going up. Let’s cause the price to spike even more by doing so.
Let’s go further than that! Eighteen months ago, in a luxury apartment on Curzon Street in Mayfair, a private hedge-fund managed on behalf of millionaire investors bought 240,000 tons of cocoa beans – 7% of the world’s supply. They then stored it, depriving the market, speculated on the price, then sold. The result was the highest prices of chocolate in more than three decades. It is a de-regulated free-for-all. Food is the next crude oil or precious metal. This is how it works:
I get up early one morning and go to my local betting shop. I make a hefty bet that the price of limes will go up. What an idiot, you’re thinking. I then go to my local market. Let us say that people need limes. Let us say there is nowhere else to buy limes – the next town is not within a reasonable distance. I buy ALL the limes. I pop them in my garage. I do the same the next day and the day after that. I then set up a stall and sell my limes to the now desperate buyers at a much inflated price. In the next town’s market, the price also goes up. I collect on my bet too! More money. I fix myself a vodka & tonic with the last of my limes and ponder which food to deprive my local market of next. And the real beauty of all this? I am doing it all with other people’s money at no risk to myself.
This is what is happening right now. It is a significant contributing factor to the global spikes in food prices; a contributing factor to the spike in hunger and poverty in the developing world; the major catalyst for unrest in North Africa and the Middle East. The same unrest that makes crude oil prices go up. Which make food prices climb further. It is a circular barrel, perpetually turning around on itself and printing monopoly money. Good times for Curzon Street. With 4% inflation, bad times for you.
So, why is there no regulation? Dominant economic theory has, after all, evolved to say that properly regulated markets work better than de-regulated or over-regulated ones. The President of the G20 is asking for the issue to be looked at. A paper has been put forward signed by 10 EU finance ministers, including France and Germany asking for regulation. The US and the UK are resisting the move. Why?
Over half of the funding for the Tory party comes from companies and individuals working in financial services. More than a quarter of Tory MPs and peers have held jobs in the banking sector. This includes 70 Tory MPs. That’s 13 more MPs than the Liberal Democrats have. That is the real coalition. They include:
Leader of the House of Lords, Lord Strathclyde – Chair of Trafalgar Capital Management 2001-10;
Pay-master General Francis Maude – Solomon Bros and Morgan Stanley;
Cabinet Office minister Oliver Letwin – NM Rothschild & Son 1986-2009;
International Development Secretary Andrew Mitchell – Lazard Bros from 1979-2009
Commons Leader Sir George Young – Samuel Hill Merchant Bank
The original committee the government set up to look at the Finance sector contains almost exclusively corporate executives, including representatives of Santander, Standard Chartered, Citigroup, Schroders, RBS, Vodafone, Tesco, British American Tobacco, BP, HSBC, Sony and Barclays.
Eleven Conservative MPs have held senior positions at Barclays at one time or another; eight at Rothchild & Son; four at Lehman Bros, including Steve Baker MP who was “Chief Architect, Global Financing and Asset Servicing Platforms” at Lehman Bros from 2006-2008 – the year of the company’s collapse which sparked the financial crisis.
Mr Baker explains his job at Lehman Bros on his personal website: “Instrumental in forming the strategy and design for the global financing programme, supporting the multi-million dollar securities lending business. Also central to determining the strategy for the critical function of maintaining, and controlling the risk associated with, many billions of dollars of assets under management. My work at Lehman Brothers particularly
informs my present work on reforming the financial system.” And in a recent article, he warns: “The greatest danger to civilization is not climate change, but bad economics”, pinpointing the problem with economic science as “the inability of its practitioners to foresee events such as a massive credit-fuelled boom which caused a bank collapse and recession”. That would be the bank for which Mr Baker was working just before it collapsed.
And these are the men in charge of our financial regulation. It is like hiring Dr Shipman as a cook or Gary Glitter as a nanny.
To the rallying cries of: “enough of bashing the banks”, my response is: “you have missed the point”. The structural fall-out of the crisis is that, through a series of acquisitions and insolvencies, there are less financial institutions, but they are bigger, more concentrated, more powerful. All that we have witnessed is a round of musical chairs. The people that influence policy and legislation have just moved sideways and when the music stopped only very few – artless enough not to cover their own arse – have been left standing. The seats of power are still occupied by the very same people that made a total mess of things before. Only now, having drained the housing and loans market, they have moved to a playing field where the human cost is even more direct and devastating: food.
There are those who say that this is a very complicated issue, which must not be over-simplified by a leftie simpleton. It is true that my background in competition law and economics and many years investigating competition issues for the OFT have not brought me into direct contact with this particular sector. But it is also true that whenever I have sat across a table from a hired consultant economist that has said “this is a very complicated issue, which must not be over-simplified”, I knew I was on to something. For every commentator they can point to that says this isn’t happening, I can point to a number that say it is.
The detestable truth is that on the very same day that you and I read reports of hundreds, possibly thousands, dying in Libya others are reading an article entitled 9 Agriculture Stocks to Consider Before the Middle East Dust Settles. “Amongst the many lessons we can pull from the events unfolding on the streets of the Middle East, from Tunis to Manama, is that commodity prices are rising and the world is going to need more food over the next century” it explains.
So, when I see David Cameron’s smug, tanned face telling me “it is time to move away from Retribution and into Recovery” I have violent impulses. Violent. Because, recovery cannot occur when we have failed to learn the most basic lesson from the last nightmare: A system which rewards, even incentivises, greed at no personal risk unfailingly brings the very worst out in people and will cause catastrophes of increasing magnitude.
And that is my biased, partisan, ideology-blinded opinion on that. I have had enough of this government’s limes.