ABOUT

On 21st December, 2001, US President Bill Clinton signed the Commodity Futures Modernization Act of 2000, following the advice of his Secretary of the Treasury Robert Ruby, a former top manager at Goldman Sachs.
This threw the doors wide open for financial investors to speculate with commodities at will.
This offset the regulations introduced by President Roosevelt in 1936, which included limitations on the position size of an individual trader that put a stop to pure speculation.In an interview, Bill Clinton later referred to this decision as one of his biggest mistakes during his term.

The FAO (Food and Agriculture Organization of the United Nations) concluded in an extensive study that there were 75 million more hungry people as a result of the first sharp rise in prices of corn, wheat, soya and rice in 2007-2008.
This included about 41 million people in the Pacific and Asian region and another 24 million in Sub-Sahara Africa. A second, even greater wave of price increases took place between 2010-2012.

Staple foods were no longer affordable anymore for the families affected, as a result of the increase in prices. The resulting budget relocation affected expenditure on education, accommodation, mobility and so on.
Taking a closer look, it is no coincidence that the Arab Spring in 2010-2011 came at the same time as this speculation on the international commodity markets.

It must be said that food speculation is undoubtedly the single biggest cause of inflation, even though other causes are also responsible for increases in prices, such as growth in the world population, changing diets in some emerging countries, and excessive production of organic fuel etc.

The investment in commodity securities reached about 10 billion dollars by the end of the 1990s. In 2011, the total had already reached 450 billion dollars. Thus, the volume of derivatives traded on the stock exchange was 20 to 30 times higher than actual physical production levels. As a result, the leverage effect applied by speculation with commodities has risen dramatically.

A global survey carried out among 180 professional stock brokers in spring 2014 found that 75% of those surveyed saw a direct connection between futures speculation with agricultural commodities and the actual street prices of these resources.
Curiously enough, economists have led a wide-ranging theoretical debate on the repercussions of such speculation on the pricing of these goods. However, they all know that introducing a financial transaction tax would reduce the attractiveness of market transactions for foods drastically.

What would be even more important is to completely ban financial speculation with agricultural products using global regulations.