Reply #27: What you say is true. But the nature and extent of the speculation

[Ghost Dog]

appears to have changed beyond all proportion in recent years. The following article by Ellen Hodgson Brown paints a very dark picture:

http://www.webofdebt.com/articles/egyptian_tinderbox.php

... "Goldman . . . came up with this idea of the commodity index fund, which really was a way for them to accumulate huge piles of cash for themselves... Instead of a buy-and-sell order, like everybody does in these markets, they just started buying. It’s called "going long." They started going long on wheat futures... And every time one of these contracts came due, they would do something called "rolling it over" into the next contract... And they kept on buying and buying and buying and buying and accumulating this historically unprecedented pile of long-only wheat futures. And this accumulation created a very odd phenomenon in the market. It’s called a "demand shock." Usually prices go up because supply is low... In this case, Goldman and the other banks had introduced this completely unnatural and artificial demand to buy wheat, and that then sent the price up... (H)ard red wheat generally trades between $3 and $6 per sixty-pound bushel. It went up to $12, then $15, then $18. Then it broke $20. And on February 25th, 2008, hard red spring futures settled at $25 per bushel...(T)he irony here is that in 2008, it was the greatest wheat-producing year in world history.

". . . (T)he other outrage... is that at the time that Goldman and these other banks are completely messing up the structure of this market, they’ve protected themselves outside the market, through this really almost diabolical idea called "replication"... Let’s say,.. you want me to invest for you in the wheat market. You give me a hundred bucks... hat I should be doing is putting a hundred bucks in the wheat markets. But I don’t have to do that. All I have to do is put $5 in... And with that $5, I can hold your hundred-dollar position. Well, now I’ve got ninety-five of your dollars... (W)hat Goldman did with hundreds of billions of dollars, and what all these banks did with hundreds of billions of dollars, is they put them in the most conservative investments conceivable. They put it in T-bills.... (N)ow that you have hundreds of billions of dollars in T-bills, you can leverage that into trillions of dollars... And then they take that trillion dollars, they give it to their day traders, and they say, "Go at it, guys. Do whatever is most lucrative today." And so, as billions of people starve, they use that money to make billions of dollars for themselves."

/... http://www.webofdebt.com/articles/egyptian_tinderbox.php