Lambert Stether blogs at Corrente.
Yet another market where the rule of law doesn’t apply. Check out the video from RNN:
From the transcript:
MICHAEL GREENBERGER, UNIVERSITY OF MARYLAND SCHOOL OF LAW: But there’s another problem here, and that is some of these participants—and I’m not saying who they are, but I’m sure there are enough there doing this that they are adversely affecting the price—are actually not just swamping the markets with investments, but they’re working with each other to drive the price up. That is a criminal problem. That is called criminal manipulation of the price. And that is why the president of the United States has now twice asked the Justice Department, once in April 2011 and once in March 2012, to please, please investigate these markets to see if there is criminal wrongdoing.
We had one remedial process fail by Wall Street lobbying, and that is limiting speculation to a reasonable part of the market. And the second part is failing because of prosecutorial laxity, which is going after people who are criminally working with each other to drive the price up. And the quickest way—within a matter of weeks, if there were a serious investigation undertaken, if the FBI was called in, if records were subpoenaed, if market participants were interviewed and the Justice Department at least gave an indication, as they did when they went after the Enron conspirators in the early 2000s, that they were serious about this, just the appearance of a serious investigation would cause the criminal speculators to scatter like cockroaches scatter when lights are turned on.
Hahahaha. Like a “serious investigation would ever happen.” This is Obama we’re talking about.
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See also “The Food Bubble” back in 2010:
[Goldman et al.] kept on buying and buying and buying and buying and accumulating this unprecedented, 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, right? That’s the idea. There’s not a lot of supply, so the price goes up. In this case, Goldman and the other banks had introduced this completely unnatural and artificial demand to buy wheat, and that then set the price up. … Let me tell you, hard 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. This is completely beyond the pale, particularly at a —-
JUAN GONZALEZ: Almost ten times its historic price.
FREDERICK KAUFMAN: Yeah. It was just completely out of control. And, of course, the irony here is that in 2008, it was the greatest wheat-producing year in world history. The world produced more wheat in 2008 than ever before. … [Eliding material about “replication.”]
JUAN GONZALEZ: And the result was, as the price went up, that there were food riots around the world.
FREDERICK KAUFMAN: Yeah.
JUAN GONZALEZ: And what about the human dislocation that occurred?
FREDERICK KAUFMAN: Yeah, in 2008, there were food riots in more than thirty countries. The global price of food rose over 80 percent. This had an effect not only on wheat, but on corn, on soy, on cooking oil, on rice. You know, people talk about globalization. “We don’t need to set prices or have tariffs, because we’re globalized. You know, people can buy their wheat, anyway.” Well, gee, guess what happened. … You had hunger. You had a disaster. You had a global disaster, because, remember, in America, we’re spending maybe 15 percent of our weekly paycheck on food, right? I mean, maybe you remember, a couple years ago, why was that dozen eggs so expensive? Why was that milk so expensive? Why was that meat so expensive? That’s 15 percent. For most people on the earth, they’re spending more than 50 percent of their daily income on their daily bread. And when their daily bread moves up 80 percent, they’ve just moved right into the ranks of the food insecure. And it was not only in Burkina Faso. This was in America. You had 49 million hungry families in America. You had one out of five children in America at soup kitchens. You had a million hungry people in Los Angeles.
So, I mean, it is unconscionable that Wall Street has completely lost touch with the reality. They’ve forgotten that there is their mathematical formula, there’s virtuality, on the one hand — “Gee, I can make a lot of money by making a formula” — and on the other hand, there’s reality. There are real things that they are affecting, and they’ve completely forgotten about it, to devastating effect.
Forgotten? Did they ever know?