Inflation & Interest Rate Conspiracy

[anywebsite]

Inflation is not rising prices. Rising prices are a secondary effect. It's a common mistake so don't feel too bad about it.

 

When we speak of inflation, just what is being inflated? It's the money supply. This causes currency debasement. Your money becomes worth less, so it buys less.

 

It's all explained here.

 

 

 

To put it simply,

 

Printy, printy

 

No, you're totally misunderstanding one particular theory of economics.

 

The inflation figures are actually based on rising prices, you're wrong. http://www.statistics.gov.uk/cci/nugget.asp?id=19

 

mj.scuba, I don't think you're far off the money with your conspiracy theory.

 

Rupert, speculation & hoarding can affect prices too.

[Cyclone]

Inflation is measured by looking at increases in prices, that doesn't mean that that is what inflation is though.

[Cyclone]

Inflation: Too much money chasing too few goods.

Food price rises: Too little food offered for sale to fill too many bellies.

 

That's just supply and demand pushing up the price.

[Sausage Dog]

I'm not usually one for conspiracy theories but here's one that entered my head yesterday with the announcement of inflation at 4%, and interest rates likely to go up as well.

 

So 'the banks' screwed up by lending to people who were not good for it. Then they take public funds to bail them out, but they still need to substantially re-capitalise their balance sheets.

 

So here's what they do. Instead of lending to businesses like we keep being told they're meant to be doing, they give their remaining monies to their mates on the commodity markets; to speculate on things like wheat and oil. This drives up the price of fuel and food, which in turn drives up inflation. The central banks then raise interest rates, which means the banks can then charge a higher rate to their existing lenders.

 

It's a win win situation for them, any commodities they hold can be dumped back on the market at the highest price so they make a huge profit on that too.

 

Is this plausable or have I just been thinking too much?

 

Steady on there, you're sounding like a socialist. Keep on with this thinking, and you'll be condeming the Coalition, if you pardon the pun.

[Loubbe]

How Goldman Sach gambled on starvation

 

This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.

 

It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn't afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it "a silent mass murder", entirely due to "man-made actions."

 

Most of the explanations we were given at the time have turned out to be false. It didn't happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn't because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren't enough on their own to explain such a violent shift.

 

To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world's stomachs ache.

 

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

 

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.

 

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.

 

So what has this got to do with the bread on Abiba's plate? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was already deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in food contracts based on theoretical future crops – and the speculators drove the price through the roof.

 

Here's how it happened. In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world's frightened investors stampeded on to this ground.

 

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

 

When I asked Merrill Lynch's spokesman to comment on the charge of causing mass hunger, he said: "Huh. I didn't know about that." He later emailed to say: "I am going to decline comment." Deutsche Bank also refused to comment. Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that "serious analyses ... have concluded index funds did not cause a bubble in commodity futures prices", offering as evidence a statement by the OECD.

 

How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period – but only a fraction as much as the ones affected by speculation. Her research shows that speculation was "the main cause" of the rise.

 

So it has come to this. The world's wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. Their Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict so much pain?

 

If we don't re-regulate, it is only a matter of time before this all happens again. How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish. In the US, the House has passed some regulation, but there are fears that the Senate – drenched in speculator-donations – may dilute it into meaninglessness. The EU is lagging far behind even this, while in Britain, where most of this "trade" takes place, advocacy groups are worried that David Cameron's government will block reform entirely to please his own friends and donors in the City.

 

Wow. Not suprising the bankers don't shout about this.

[Grandad.Malky]

 

 

 

And the award for the longest most tenuous copy and paste jobs goes to …………….. Vague_Boy

[MAC33]

the PPT,that is the Plunge Protection Team [Central Bank] manipulate the stock market up or down

 

 

http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm