Underlying the uprising in Egypt and Tunisia is a growing global
crisis due to soaring food prices and unemployment. Roughly 40% of
Egyptians struggle at poverty levels of under $2 per day. Food
price inflation in Egypt is currently at 17% yearly. In poor
countries, 60-80% of people's incomes go to food, compared to
10-20% in industrial countries. An increase of a dollar in the cost
of food can mean starvation for people in Egypt and other poor
countries.
Once, food was considered a poor speculative investment but that
changed with the development of ETFs (exchange-traded funds) and
other financial innovations.
Frederick Kaufman wrote:
''The history of food took an ominous turn in 1991,
when Goldman Sachs came up with the commodity index fund, a way for
them to accumulate huge piles of cash for themselves. . . .
Instead of a buy-and-sell order, like in all markets,
they just started going long on wheat futures. . . . And every time
one of these contracts came due, they would "roll it over" into the
next contract. . . .
And they kept on buying and accumulating this
unprecedented pile of long-only wheat futures. Usually prices go up
because supply is low . . . . In this case, Goldman and other banks
created this completely artificial demand to buy wheat, and that
set the price up. . . .
wheat generally trades between $3-6 per 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
And so, as billions of people starve, they use that
money to make billions of dollars for themselves.''
