....as if we needed another one. This time it is food....
WHAT HAS the food crisis got to do with Northern Rock? Quite a lot, actually. The rocketing price of wheat, soya beans, sugar, coffee etc is all part of the credit crisis which has caused panic in financial markets and encouraged investors to take their money out of risky mortgage bonds and shaky equities and put it into commodities as "stores of value". Put another way, the Western banks are exporting their debts to the third world.
The phenomenal increases in food prices are only in part a consequence of climate change and population. Most of the recent rises have been the result of speculation and the collapse in the value of the dollar. This is being tacitly encouraged by the central banks, such as the US Federal Reserve, who are trying to ignite another asset bubble to replace the real estate and dotcom bubbles which have burst in spectacular fashion. It's the third bubble and it's hitting the third world hard.
Desperate for quick returns, trillions of dollars are being taken out of private equity and financial derivatives and ploughed into food and raw materials. The financial websites call it the "commodities super-cycle". It ranges from precious metals at one end, to corn, cocoa and cattle at the other - speculators are even placing their bets on water prices.
The collapse in the price of the dollar means that most international commodities are more expensive for poor people. The dollar's decline is a result of the low interest rate policy of the Federal Reserve. When rates are set below the rate of inflation, investors have to keep moving their massive funds from sector to sector in search of higher returns
Here is a much-underpublicised story. Radi al-Radhi, head of the Iraqi anti-corruption committee said, “The estimated value of the wasted sum because of administrative and financial corruption is eight billion dollars,"
Radhi blamed the constitution for some of the funds lost; saying one of the clauses in the Iraqi law blocked the launching of legal action against government employees. "Article 136 B stipulates that no civil servant should be sent for trial before the consent of his minister," the statement quoted Radhi as saying. The article was obstructing investigations into the "lost money". So the wonderful Iraqi constitution has a clause to protect rotton and corrupt government officials.
Radhi also said that his panel was investigating around 180 employees of the oil ministry in the southern port city of Basra following reports of corruption.
If only that $8 billion were available to bail out the sub-prime lenders.
Hey! You've won a ride back to the top
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