Monday, January 21, 2013

Food prices, hunger and retirement accounts

There's a lot of money that's looking for a better return on investment right now, that is making life difficult for people, particularly poor people. 

What I mean is this:  Everyone, and I mean anyone, with dollars in a bank account is unhappy with the interest rate that banks pay on your savings.  They're paying tenths of a cent per year.  It's really tempting to anyone to get  higher return, and a financial concern that can return 10 to 30% returns annually is considered to be attractive. 

The bankers have figured out that they can now make large profits on food

Look folks, I'm all for making a profit.  In fact, making a profit is how a farm survives.  But we do that by actually producing something and selling to people who want it, not by a shell game where traders buy and sell food, or options on food, and just the entry of the money into the market drives prices up. 

Commodities markets were designed to allow a farmer, in this case, to sell their crop before they harvested it - futures.  It allowed someone who used that crop, like a cereal manufacturer, to lock in a price that they considered fair, and allowed both the farmer and the manufacturer, more certainty in their supplies and prices and profits. 

When an investment bank, like goldman sachs, invests BILLIONS of dollars into this sort of market, just the money coming in will drive up prices -- it creates an artificial demand for something that is limited in supply.  There's only so much corn sold on the open market each year.  Or pork bellies.  Or beans, or any other food.  

So how many people should starve so that a retirement account can go from a 6% return to a 7% return?   Because in a wealthy nation like the USA, a dollar more for your corn flakes really doesn't matter much...  unless you're poor.  Like 30% of the population in the USA.  And then that extra $1 means a great deal. 

Take care with your investments, and make sure that you're not sponsoring this sort of behavior.  Goldman Sachs is the worst of the bunch, but most investment banks aren't much better, in my opinion.   Invest in companies and individuals that you know and trust. 

Disclosure:  I believe that stocks, and the financial markets in general, are rigged for the benefit of the banks and brokers.  I think that individual investors will never know what is going on with their bank, or broker, or any publicly traded company.  I own no, as in zero, stock, preferring to invest my money in farmland and in companies that I own directly and make a profit by making products that people want to buy.  I produce goods and services. 

When you have a large bank, like HSBC, who laundered billions of dollars in drug money for the Mexican cartel, and admitted intentionally doing so, and NO ONE goes to jail for that crime -- can you really say that there's any meaningful penalty for any financial crime?

Since there's no penalty, and therefore, little to no risk, there is nothing to curb this outrageous behavior but individuals like you. 


1 comment:

Lee Johnson said...

Goldman Sachs always leads the pack into whatever new banking scheme will most harm the country (i.e. maximize profit for their shareholders). Their proud history of ethical banking must be why multiple presidents have always put a Goldman Sachs exec in charge of our country's economy.