Federal Reserve Chairman Ben Bernanke is on the way out the door, but the consequences of the bond bubble that he has helped to create will stay with us for a very, very long time. During Bernanke’s tenure, interest rates on U.S. Treasuries have fallen to record lows. This has enabled the U.S. government to pile up an extraordinary amount of debt. During his tenure we have also seen mortgage rates fall to record lows. All of this has helped to spur economic activity in the short-term, but what happens when interest rates start going back to normal? If the average rate of interest on U.S. government debt rises to just 6 percent, the U.S. government will suddenly be paying out a trillion dollars a year just in interest on the national debt. And remember, there have been times in the past when the average rate of interest on U.S. government debt has been much higher than that. In addition, when the U.S. government starts having to pay more to borrow money so will everyone else. What will that do to home sales and car sales? And of course we all remember what happened to adjustable rate mortgages when interest rates started to rise just prior to the last recession. We have gotten ourselves into a position where the U.S. economy simply cannot afford for interest rates to go up. We have become addicted to the cheap money made available by a grossly distorted financial system, and we have Ben Bernanke to thank for that. The Federal Reserve is at the very heart of the economic problems that we are facing in America, and this time is certainly no exception.
This week Barack Obama publicly praised Ben Bernanke and stated that Bernanke has “already stayed a lot longer than he wanted” as Chairman of the Federal Reserve. Bernanke’s term ends on January 31st, but many observers believe that he could leave even sooner than that. Bernanke appears to be tired of the job and eager to move on.
So who would replace him? Well, the mainstream media is making it sound like the appointment of Janet Yellen is already a forgone conclusion. She would be the first woman ever to chair the Federal Reserve, and her philosophy is that a little bit of inflation is good for an economy. It seems likely that she would continue to take us down the path that Bernanke has taken us.
But is it a fundamentally sound path? Keeping interest rates pressed to the floor and wildly printing money may be producing some positive results in the short-term, but the crazy bubble that this is creating will burst at some point. In fact, the director of financial stability for the Bank of England, Andy Haldane, recently admitted that the central bankers have “intentionally blown the biggest government bond bubble in history” and he warned about what might happen once it ends…
“If I were to single out what for me would be biggest risk to global financial stability right now it would be a disorderly reversion in the yields of government bonds globally.” he said. There had been “shades of that” in recent weeks as government bond yields have edged higher amid talk that central banks, particularly the US Federal Reserve, will start to reduce its stimulus.
“Let’s be clear. We’ve intentionally blown the biggest government bond bubble in history,” Haldane said. “We need to be vigilant to the consequences of that bubble deflating more quickly than [we] might otherwise have wanted.”
Posted below is a chart that demonstrates how interest rates on 10-year U.S. Treasury bonds have fallen over the last several decades. This has helped to fuel the false prosperity that we have been enjoying, but there is no way that the U.S. government should have been able to borrow money so cheaply. This bubble that we are living in now is setting the stage for a very, very painful adjustment…
So what will that “adjustment” look like?
The following analysis is from a recent article by Wolf Richter…
Ten-year Treasury notes have been kicked down from their historic pedestal last July when some poor souls, blinded by the Fed’s halo of omnipotence and benevolence, bought them at a minuscule yield of 1.3%. For them, it’s been an ice-cold shower ever since. As Treasuries dropped, yields meandered upward in fits and starts. After a five-week jump from 1.88% in early May, they hit 2.29% on Tuesday last week – they’ve retreated to 2.19% since then. Now investors are wondering out loud what would happen if ten-year Treasury yields were to return to more normal levels of 4% or even 5%, dragging other long-term interest rates with them. They know what would happen: carnage!
And according to Richter, there are already signs that the bond bubble is beginning to burst…
Wholesale dumping of Treasuries by exasperated foreigners has already commenced. Private foreigners dumped $30.8 billion in Treasuries in April, an all-time record. Official holders got rid of $23.7 billion in long-term Treasury debt, the highest since November 2008, and $30.1 billion in short-term debt. Sell, sell, sell!
Bond fund redemptions spoke of fear and loathing: in the week ended June 12, investors yanked $14.5 billion out of Treasury bond funds, the second highest ever, beating the prior second-highest-ever outflow of $12.5 billion of the week before. They were inferior only to the October 2008 massacre as chaos descended upon financial markets. $27 billion in two weeks!
In lockstep, average 30-year fixed-rate mortgage rates jumped from 3.59% in early May to 4.15% last week. The mortgage refinancing bubble, by which banks have creamed off billions in fees, is imploding – the index has plunged 36% since early May.
If interest rates start to climb significantly, that will have a dramatic affect on economic activity in the United States.
And we have seen this pattern before.
As Robert Wenzel noted in a recent article on the Economic Policy Journal, we saw interest rates rise suddenly just prior to the October 1987 stock market crash, and we also saw them rise substantially prior to the financial crisis of 2008…
As Federal Reserve chairman Paul Volcker left the Fed chairmanship in August 1987, the interest rate on the 10 year note climbed from 8.2% to 9.2% between June 1987 and September 1987. This was followed, of course by the October 1987 stock market crash.
As Federal Reserve chairman Alan Greenspan left the Fed chairmanship at the end of January 2006, the interest rate on the 10 year note climbed from 4.35% to 4.65%. It then climbed above 5%.
So keep a close eye on interest rates in the months ahead. If they start to rise significantly, that will be a red flag.
And it makes perfect sense why Bernanke is looking to hand over the reins of the Fed at this point. He can probably sense the carnage that is coming and he wants to get out of Dodge while he still can.
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KING WORLD NEWS INTERVIEW WITH DR. PHILIPPA MALMGREN
Statistics: Posted by DIGGER DAN — Sat Jun 08, 2013 1:52 am
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Bilderberg Group? No conspiracy, just the most influential group in the world
Conspiracy theorists claim it is a shadow world government. Former leading members tell the Telegraph it was the most useful meeting they ever went to and it was crucial in forming the European Union. Today, the Bilderberg Group meets in Britain.
By Matthew Holehouse9:56AM BST 06 Jun 2013
“The abuse is terrible,” said Peter Mandelson, leading the walking party through the throng of protesters and carrying the group’s uniform orange ski jacket under his arm.
Amid the din, Peer Steinbruck, the former German Finance Minister, pointedly refused to break off his conversation with Thomas Enders, the head of defence giant EADS. Behind him, Eric Schmidt, the Google founder, picked up the pace along the narrow road and kept his eyes fixed on the Suvretta hotel ahead. Franco Bernabe, the vice chairman of Rothschild Europe, grinned through the chorus of booing and chanting in German down megaphones, before ducking under the police tape and into the safety of the hotel’s grounds.
It was June 2011. Demonstrations were sweeping through the stricken eurozone, China and North Africa. And in tranquil St Moritz, high in the Swiss alps, half a dozen of the most powerful men in the West had taken a break from a weekend of intensive and strictly confidential debate to walk in the woods, when their paths crossed with the protesters who had come from around the world to keep an eye on them.
The gathering was entirely innocent, the walking party would insist. But what were they doing there?
No such encounters will take place in Watford this week, as the Bilderberg, the annual conference for 140 of the world’s most powerful, meet for four days at The Grove, a £300-a-night golf hotel close to the M25. The entire hotel has been booked out, and a high fence erected around the exclusion zone. Armed checkpoints have been set up on local roads, and locals must show their passports to enter their own driveways. The Home Office may foot the bill. A US news site dedicated to uncovering conspiracies had booked a room for last week but were told by phone not to turn up.
The Bilderberg was founded in 1954 to bring the leaders of Western Europe and the United States closer as the Soviet Union cemented its control of the Eastern bloc. They met first at the Bilderberg Hotel, near Arnhem, at the instigation of Joseph Retinger, a Polish polio victim who had fought the Nazis during the war. Prince Bernhard of the Netherlands was the chair. In that first meeting, the participants – including bankers, economists, and the future Labour leader Hugh Gaitskell – debated the Communist threat and the prospect of European integration.
Publicly, the group says it is still merely a debating society – a forum for leaders to "listen, reflect and gather insights" unbound by official policy positions.
But while they rankle at the conspiracy theorists, former leaders of the Bilderberg confences says they were the most important events they ever went to, and the freedom of speaking away from the ears of Whitehall officials meant the discussions that took place decisively shaped modern Europe.
It is above all a club for life’s winners. George Osborne, Ed Balls and Ken Clarke, the Cabinet Minister who also serves on the group’s steering committee, will arrive this afternoon, as will Mr Mandelson. They will be joined by Jose Manuel Barroso, the President of the European Commission; Christine Lagarde, the head of the IMF; Francois Fillon, the former French Prime Minister; Robert Rubin and Timothy Geithner, the former secretaries to the US Treasury; and serving prime ministers, foreign ministers and finance ministers from across north west Europe.
The chairmen and chief executives of some of the world’s biggest businesses will attend, with a combined wealth running into hundreds of millions of pounds – from Deutsche Bank, Barclays, Amazon, Google, Shell, HSBC, Lazard, Prudential and Alcoa. Henri de Castries, the chairman of the Bilderberg, is the head of AXA, the insurance giant. Peter Thiel, the billionaire founder of PayPal, is also on the guest list. Goldman Sachs and BP have in recent years been donors to the British committee organising this week’s gathering.
Then there are the defence officials: Olivier de Bavinchove, the commander of Eurocorps, the EU’s standing army; Sherard Cowper-Cowles, the former British diplomat who now works for BAE Systems; Robert Kaplan, the chief analyst at intelligence firm Stratfor; Henry Kissinger, the former US secretary of state; and David Petraeus, the former US commander in Afghanistan who briefly ran the CIA. Those are the publicly issued names. A source involved in this year’s planning admits sometimes others may turn up, “just for the day”.
On the agenda is economic growth, big data, Africa, medical research and the rise of cyber warfare. The future of the welfare state is likely to be discussed, as one topic is titled "jobs, entitlement and debt". Another session is called simply "current affairs".
The debates take place with the delegates seated together in one large room. Some prepare written papers. It is bad form not to join in the discussion; they are not there to listen, a source says. On Saturday afternoon there will be time for golf, followed by dinner at which guests are seated alphabetically. Discussions are minuted and a report of what each guest said circulated, former guests say, but there are no formal resolutions voted on or policies adopted.
Few want to talk about it. I’m out of the office when Baroness Williams of Crosby returns my call, but when her secretary learns it is about the Bilderberg she says she cannot speak. The Treasury’s press office do not answer emails asking whether the Chancellor has arranged any meetings with delegates in advance, and if he is attending in an official capacity, or what he might say. Ed Balls’s staff are similarly shy.
Emanuele Ottolenghi, an expert in Iran at the Washington think thank Foundation for the Defense of Democracies who will sit next to Osborne at dinner, politely emails: “The conference is off the record. I will, therefore, be unable to comment on it, before or after.”
I asked if he will make a case for the defence of off-the-record meetings. They are far from unique to the Bilderberg. He replies with a link to an old Daniel Pipes essay on the rise of conspiracy theories, which argues they have flourished in the States amongst the politically disaffected, the hard Right and, controversially, the black community. “I sympathise with your point of view, and can recommend this as a frame of reference,” he says.
And the conspiracy theoretician-in-chief is Daniel Estulin, a 46-year-old Lithuanian and the author of the best-selling The True Story of the Bilderberg Group. Fidel Castro, the former Cuban leader, is a fan. It argues the group’s founders were former Nazis, and it now gathers to choose presidents and control the media.
“Bilderberg is not a conspiracy theory. It’s a conspiracy reality,” he writes from Moscow, where he is filming his weekly show for Russia Today, the Kremlin-backed broadcaster. “It was a vehicle through which private financier oligarchical interests were able to impose their policies on nominally sovereign governments. The idea is the creation of a global network of cartels, more powerful than any nation on Earth, destined to control the necessities of life of the rest of humanity.”
A major victory, he tells me, was engineering the 1973 oil price shock to prop up the dollar and make Wall Street rich. He sends me long lens photographs he took of de Castries and Richard Holbrooke, the US diplomat, relaxing in chinos and linen jackets at a gathering in Italy. He’s unsure what they were up to.
But high on the agenda in Watford will be Eric Schmidt and Google, his sources say. “It is an integral part of the United States security apparatus. Your information is processed, analysed and stored for later use,” he adds. He adds: “Limitless anything spells c-o-n-t-r-o-l.”
He asks for a copy of the guest list. I direct him to a newspaper story, taken from a press release on the Bilderberg’s official website.
“Lots of the stuff written about it is a load of crap,” says Lord Healey of Riddleden, who served as Chancellor to Harold Wilson and James Callaghan. He would know. He attended the first Bilderberg meeting in 1954 and sat on the steering committee for forty years.
“Those who weren’t invited were very jealous. Some people described it as a secret Communist organisation. Others said it was a secret American organisation. But it was balls.”
For much of the post-War era Healey helped set the agenda and chose the delegates. He is proud of their record in spotting future leaders. Bill Clinton and Tony Blair were invited early in their careers. “The steering committee, because of their wide range of backgrounds, made some very good choices,” he says.
Lord Carrington is also frustrated at the theories. “I remember there was this American who thinks it’s a great conspiracy and the Queen is involved, and probably Satan,” he said.
Carrington, now 93, was Margaret Thatcher’s foreign secretary during the Falklands War, and after leading Nato he served as chairman of the Bilderberg in the 1990s. He has never spoken publicly about the role before.
“The reason people talk about conspiracy is if you want people to speak freely on matters of importance, either financial or political, they don’t want every word they say reported in the press. It’s been secret in that sense,” he says.
Healey is sure of the influence of the group. At 95, his memory for dates and speeches has dimmed, but he recalls discussing at length the Vietnam war with Henry Kissinger.
Most vividly, he recalls its role in bringing the architects of the European integration – Schmidt, Pompidou, Giscard d’Estaing, Leone – together for open-ended discussions with bankers and economists about how the European monetary system might work.
“The great advantage of the Bilderberg thing was they did not have to reach agreement. You had time to discuss things with people who influence events who normally you would not meet at all.”
He adds: “People could talk very freely, much more freely than they would at home.”
Would the European Union and single currency have taken the shape they have now without those early Bilderberg meetings, I ask him.
“I think it was a very important element in it. Whether it would have happened without it is difficult to say,” he says.
Other accounts suggest the annual meeting can be decisive.
Alexandre Lamfalussy, the banker who went on to run the European Monetary Institute, the forerunner to the ECB, recalls sitting next to Helmut Kohl, the West German chancellor, at the Bilderberg in the mid-1980s. He was asked whether Germany would ever be unified. It was inflammatory, and publicly unutterable, with Soviet troops still occupying the East. “It’s going to happen,” Kohl said. “Forget about your reticence, you will have to understand that German division will not endure.” Americans at the table thought, at first, he was joking.
Similarly, according to the author Jon Ronson, during the Falklands War David Owen managed to turn the weight of world opinion with a single speech demanding sanctions on Argentina before an audience of foreign ministers at Bilderberg. The sanctions were later imposed.
And for business leaders, it is a perfect opportunity to lay the groundwork for deals. According to Tom Bergin’s Spills and Spin, the account of the Gulf of Mexico oil disaster, Lord Browne, the head of BP, used a walk by Lake Como at the 2004 gathering in Italy to suggest a vast merger with Shell to create the world’s biggest oil company. Lord Browne left under the impression it would happen.
Such cosiness, critics say, is a threat to democracy.
“If our politicians want to be wined and dined in luxury for three days with Goldman Sachs, that seems to me a little bit like lobbying,” says Hannah Borno, a journalist and transparency campaigner, who will be outside The Grove today. She wants the minutes of the discussions to be published. She is puzzled as to how the Bilderberg Association is granted tax exemption as a charity, when groups such as private schools usually need to pass a public benefit test.
She adds: “Conspiracy theories have served the group quite well, because any serious scrutiny could be dismissed as hysterical and shrill. But look at the participant list. These people have cleared days from their extremely busy schedules."
Such scrutiny would kill the Bilderberg, delegates insist, and as a consequence international relations would suffer.
“I found it the most useful of all the meetings I attended regularly. The Bilderberg was the best because the level of the people attending regularly was so much higher,” says Healey. “There was the Atlantic Institute which discussed the Americans’ and Canadians’ issues, and there was the purely European one, which used to meet in Germany. But Bilderberg was the most useful of the lot.”
Healey, who like Carrington served in the war, writes of the meetings in his memoirs: “Experience has taught me that lack of understanding is the main cause of all evil in public affairs. Nothing is more likely to produce understanding than the sort of personal contact which involves people not just officials or representatives, but human beings.”
Carrington also enjoyed the equality shared amongst the leaders when away from the office.
“The fact they were whatever they were made no difference, because everybody was pretty distinguished,” he says. “They behaved like ordinary people, if you can believe that.”
Statistics: Posted by yoda — Thu Jun 06, 2013 10:56 am
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Lanworth cautious over world wheat prospects
Lanworth re-opened doubts over the Black Sea grains harvest, and stoked concerns over Australia too, as it cautioned that the world wheat harvest would narrowly fail to cover demand in 2013-14.
The analysis group, which uses satellite imagery to a large extent in its forecast, pegged the world wheat crop at 694.3m tonnes, a sharp rise on last year’s harvest, but nearly 7m tonnes below the US Department of Agriculture’s initial estimate, revealed last week.
It would also fall marginally below demand, fostering a small drop in world stocks over 2012-13 rather than the rise to 186.4m tonnes that Washington foresees.
Lanworth was more upbeat than the USDA on the harvest in the former Soviet Union state of Kazakhstan, upgrading its estimate by 700,000 tonnes to 17.4m tonnes thanks to "recent above-average precipitation and cool temperatures" which have boosted hopes in major producing regions.
However, on most other major producers it was more downbeat, including on Kazakh’s regional peers, Russia and Ukraine, which investors have increasingly focused on thanks to dry weather in some important grain-growing areas.
‘Much lower soil moisture’
Recent rains had been seen by many observers as improving crop prospects, with consultancy Ikar earlier this week raising its forecast for Russia’s wheat crop by 1.3m tonnes to 53.8m tonnes, while the Russian Grains Union lifting its range estimate for the overall grains harvest to 90m-100m tonnes, from 90m-95m tonnes.
But Lanworth kept its forecast for the Russian crop at 50.8m tonnes, flagging soil moisture levels which are "much lower than last year" in the Southern district, a key source of the country’s wheat exports.
For Ukraine, Lanworth cut its wheat harvest forecast by 1.6m tonnes to 20.3m tonnes, "based on expected warm conditions" and flagging "dry conditions that occurred from April through the first half of May".
The downgraded forecast is in line with an estimate from UkrAgroConsult of 20.2m tonnes, but below the USDA figure of 22.0m tonnes.
‘Approaching crunch time’
Separately, at broker RJ O’Brien, Richard Feltes said: "We are approaching crunch time on former Soviet Union rains, so keep your eye on rains across Ukraine and Russia," flagging talk that Russia has dropped wheat offers for October onwards in what would be seen as a sign of declining confidence in the crop.
Agritel, the Paris-based consultancy, which has a Ukraine office, said that in Russia’s South, "the water deficit should have an impact on the yields of the spring crops.
"If the situation does not improve in the coming days, winter crops could be impacted too."
FCStone said it "would like to see additional rains in dry impacted areas of the Russian wheat belt" before backing the ideas of upgraded crops.
Lanworth also reduced its forecast for Australia’s wheat harvest by 200,000 tonnes to 24.1m tonnes, even amid rains which some commentators believe have improved prospects for the sowing season.
"Though recently updated weather outlooks indicate a return to normal precipitation during the second half of May, Lanworth notes a 15% probability of extreme low production due to dry conditions during wheat planting and yield formation," the group said.
"Since 2000, wheat harvested area has declined from Abares’ initial projections as precipitation during and after May has fallen below average."
Abares, the official Australian commodities bureau, has pegged domestic wheat area at 13.83m hectares, a rise of 4.5%year on year.
Lanworth estimated the Canadian crop at 28.1m tonnes, below Washington and Toronto forecasts.
Statistics: Posted by yoda — Wed May 22, 2013 1:41 pm
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Wheat prices dip after US foresees huge world crop
Wheat prices extended losses after US farm officials lifted the bar on estimates for this year’s world harvest of the grain, and cautioned over heightened competition among exporters to secure orders.
The US Department of Agriculture, in its first forecasts for 2013-14 season, pegged the world wheat harvest at a record 701.10m tonnes, lifted by a sharp recovery in former Soviet Union harvest, and increases in Australia, Canada and the European Union too.
"Production is projected higher in all of the world’s major exporting countries," the USDA said in its benchmark Wasde report on world crop supply and demand.
Indeed, the Russian harvest was seen rebounding 49% from last year’s drought-affected levels to 56.0m tonnes, narrowly overtaking US production.
The world figure was above forecasts from other commentators, including a 695m-tonne forecast from the United Nations Food & Agriculture Organization on Thursday, and a 680m-tonne estimate from the International Grains Council.
With all major world wheat exporting enjoying strong harvests, the US itself faced a drop of nearly 10% in its own shipments, to 25.2m tonnes (925m bushels).
Wasde wheat estimates, change on last and (on market forecast)
2012-13 US carryout stocks: 731m bushels, unchanged, (-2m bushels)
2012-13 world carryout stocks: 180.17m tonnes, -2.089m tonnes, (-1.36m tonnes)
2013-14 US carryout stocks: 670m bushels, N/A, (+12,000 bushels)
2013-14 world carryout stocks: 186.38m tonnes, N/A, (+2.01m tonnes)
Sources: USDA, ThomsonReuters
"Large crops for major export competitors limit opportunities for US wheat," the USDA said.
The impact was exacerbated by strong crops in many importing nations, with Middle Eastern purchases, for instance, expected to drop more than 20%.
"Also affecting global trade prospects are year-to-year production increases for major importers, the Middle East and North Africa, where weather has been favourable for winter crops since seeding last fall," the USDA said.
Statistics: Posted by yoda — Sun May 12, 2013 12:37 pm
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KING WORLD NEWS INTERVIEW WITH "WHISTLEBLOWER" ANDREW MAGUIRE
Statistics: Posted by DIGGER DAN — Sat May 11, 2013 2:22 am
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Louise C. Bennetts
I don’t often commend regulators, but for those interested in preserving national sovereignty, new SEC chairwomen, Mary Jo White, is off to a good start if yesterday’s New York Times’ editorial is anything to go by. The Times criticized White for approving new SEC derivatives regulations that defer oversight of foreign security-based swap transactions, including those relating to the foreign subsidiaries of U.S. banks, to foreign regulators. The Times also derided White for approving rules that were “weaker” than the similar rules released by the Commodity Futures Trading Association.
Like the CFTC, the Times’ editorial board has clearly not heard of the concept of international comity, which it seems to confuse with “weakness”. In particular, it is not clear why the Times believes that unelected U.S. regulators should have the right to be self-appointed derivatives tsars to the rest of the world. The Times also appears to have overlooked the recent letter, signed by the finance ministers of nine of the United States’ largest trading partners and addressed to their U.S. counterpart Jack Lew. The letter was a thinly-veiled attack on the CFTC’s so called “extra-territorial” application of its cross-border swap rules and noted that an approach “in which jurisdictions require that their own domestic regulatory rules be applied to their firms’ derivatives transactions taking place in broadly equivalent regulatory regimes abroad is not sustainable.”
Of course, the Times does raise one important point: that it is undesirable to have two agencies releasing different rules on what amounts to the same topic. But the arbitrary distinction in the oversight of security-based swaps (regulated by the SEC) and OTC derivatives (regulated by the CFTC) is just one of Dodd-Frank’s many design flaws. Moreover, the SEC is under no obligation, pursuant to Dodd-Frank or otherwise, to follow the CFTC’s approach just because the CFTC released its regulations first. Especially as those regulations have proven to be so contentious (and not just with U.S. banks who legitimately fear being shut of international derivatives markets, but, more importantly, the foreign regulators on whom the U.S. may have to rely in a crisis).
It has become an unwelcome trend for U.S. regulatory agencies to overreach their jurisdictional and geographical boundaries. This began with the IRS’ FATCA implementation and has continued in the financial regulatory space. That White does not wish to follow her CFTC counterpart, Gary Gensler, down the rabbit hole and alienate the U.S.’s trading partners and allies is commendable, even if the Times is disappointed.
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Starving The World For Power And Profit: The Global Agribusiness Model
SUNDAY, MAY 5, 2013
Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.
A daily ration of bread is now beyond the reach of roughly a billion people on planet Earth. What’s more, hunger is spreading like a pandemic, making incursions from its traditional strongholds in the global south to towns and cities across depression-hit Southern Europe. In Greece reports are growing of young children having to scrounge for food from classmates, while in Spain city dwellers have become all but inured to the daily spectacle of people of all ages, genders and walks of life rummaging in rubbish bins for a bite to eat.
Some people point to this 21st century hunger pandemic as evidence of the unsustainability of current population growth — and to an extent they’re probably right. After all, there’s only so many people that the world’s rapidly declining resources can sustain. However, as Esther Vivas of the Pompeu Fabra University’s Centre of Studies on Social Movements points out (video), the crude reality is that many of us continue to live in a world of food abundance.
The problem of world hunger, she says, is the result of the acute inefficiencies of a global agribusiness model geared purely at generating ever larger profits for the handful of businesses that now control the global food chain. Tragically, all too often the human cost is measured in the lives of those who don’t have enough money to pay the rapidly escalating prices of basic foodstuffs. And it’s a heavy cost indeed: according to some estimates, one person dies of hunger every 8-12 seconds.
Vivas offers sharp insights on a global industry that prioritizes, at pretty much every turn, profits and power over human welfare. Unfortunately, the video is only available in Spanish and without English subtitles, so for those of you whose linguistic talents don’t quite extend to the Spanish tongue, here’s a brief summary of the highlights:
Like most countries, the distribution, wholesale and retail of food is dominated by a handful of supermarket chains which, through their oligopolistic structures, are able to more or less dictate what people eat, how much they pay for their food and how much farmers receive for their produce. Needless to say, it is a model that is wiping out small local farmers throughout Europe and the U.S., as well as leaving a terrible toll on the environment due to the vast distances much of our food has to travel before reaching our plates.
The same people who kindly brought us the subprime crisis and the resultant Great Recession are now speculating vast quantities of money on the price of basic foods on the international commodity exchanges. As a result, the prices on these exchanges are no longer determined by real-world conditions of supply and demand but rather by the financial interests and whims of a small but extremely powerful group of big banks and hedge funds, many of whom have been gorging at the trough of taxpayer largesse for the last five years (for more information on the financialisation revolution, read this).
The Fatal Cost of Price Shocks
In countries like Ethiopia and Somalia, the price of essential foodstuffs more than doubled in the space of just a couple of months in the summer of 2011. In these countries many families spend as much as 80 percent of their disposable income on food, so when the price doubles, they go without.
The Famine Myth
Whenever famines take place, the media tends to pin the blame on meteorological problems, droughts or war, often ignoring the elephant in the room: the wholly inefficient and inhumane global agribusiness. Indeed, what we’re rarely told is that many countries in the global south were largely self-sufficient in food production until the late 1970s.
In the 80s and 90s, however, the rise of the global “free trade” movement meant that many local farmers suddenly faced fierce competition from some of the world’s biggest food producers — companies which received vast subsidies from the U.S. government or E.U. and were thus able to produce huge food surpluses, which they them dumped on some of the world’s poorest countries at below-cost price.
The result was all too predictable: peasant farmers and small holders were priced out of the market and countries which had for centuries been self-sufficient in food production became wholly dependent on food imports — hence their stark vulnerability today to food price shocks.
The Privatization of Virtually Everything
The breakneck pace of privatisation of land and seeds in the last 30 years has massively enriched the political and economic elites of both the Northern and Southern hemispheres, at the expense of the general population. As much as 70 percent of the world’s seeds now belong to a handful of huge multinational conglomerates, granting them virtual control over the global food chain. Seeds, which for millenia have been a common good to be shared out and improved among small communities of farmers, are now almost the sole preserve of companies like Monsanto and Syngenta, which brings us to:
The GM Revolution
As global hunger rises, ever-greater pressure is being brought to bear on countries to embrace GM technologies — despite clear evidence of the risks they pose. [According to an international study from 2008, the industrialisation of agriculture, of which GM is a part, has led to the heavy use of artificial fertilisers and other chemicals. These have in turn harmed the soil structure and polluted water ways. What's more, the leaching of the soil of essential minerals means food is less healthy than 60 years ago].
Perhaps most importantly, legitimate concerns remain about the impact on GM foods on human health. For this reason, countries across Europe including Germany, France, Switzerland and Greece continue to prohibit sales of GM food. But not so in Spain, where GM crops are routinely tested, grown and sold to unsuspecting consumers. [Indeed, Spain has more large-scale plantations of genetically modified seeds than any other country in the European Union (EU), accounting for 42 percent of all field trials of genetically modified crops in the EU, according to figures from the European Commission Joint Research Centre].
We Are What We Eat
Clearly, if we regularly consume GM products or food with high levels of pesticides, flavorings and chemical fertilizers, the long-term toll on our health will be heavy indeed. But despite what we are often told by Agribusiness representatives, there are alternatives out there. We can choose to buy healthier options such as local organic food, and in turn help to support local farmers. We can even develop our own urban allotments, as more and more city dwellers are choosing to do. The most important thing is not to descend into apathy and resignation, for that is precisely what the world’s major food corporations want.
Statistics: Posted by yoda — Mon May 06, 2013 6:11 am
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