U.S. Drought Could Cause Global Unrest

[zerozero]

U.S. Drought Could Cause Global Unrest - Climate Desk - The Atlantic

Twice in the last five years, rising food prices triggered global waves of social unrest. With drought baking U.S. crops, another round of soaring, society-straining price spikes may happen in coming months.

According to researchers from the New England Complex Systems Institute, commodity speculation -- investors betting on food prices -- will amplify the drought's market signals, creating a new food bubble and the crises that follow.

"The drought is clearly going to kick prices up. It already has. What happens when you have speculators is that it goes through the roof," said NECSI president Yaneer Bar-Yam. "We've created an unstable system. Globally, we are very vulnerable."

The ongoing drought, the United States' worst since the Dust Bowl, is expected to last until October and will decimate U.S. harvests. America is the world's largest exporter of corn, wheat and soy beans; global prices for those commodities have already surged to record levels.

Since 2004, global food prices have slowly but steadily increased, with drastic and socially destabilizing spikes in 2007 and again in 2010. Economists argued over the causes, with blame cast on poor regional harvests, supply shortages caused by converting food crops to biofuels, and -- most controversially -- speculation.

 

[88m3]

shrug


Ironic the worst since the dust bowl and we're in the worst depression since the "Great Depression".

 

[Type Username Here]

I got my weapons, MREs, soup cans and squirrel traps just sitting in the shed ready in case my family and I need it.

I doubt I ever will but the world works in mysterious ways.

 

[zerozero]

these dudes gotta create a financial market in everything.. wtf? these dudes just sit around and be like I got some extra cash.. let me bet that the crops are gonna fail and the prices are gonna rise.. next thing you know there's a lot of money following the few crops that don't fail, and not by people who're interested in eating these crops insane

 

[Type Username Here]

these dudes gotta create a financial market in everything.. wtf? these dudes just sit around and be like I got some extra cash.. let me bet that the crops are gonna fail and the prices are gonna rise.. next thing you know there's a lot of money being staked on the few crops that don't, and they're not going to the people eating those crops

It's the neo-capitalism breh. All it is is legal gambling by millionaires and billionaires with no regard to the rest of the world.

 

[zerozero]

It's the neo-capitalism breh. All it is is legal gambling by millionaires and billionaires with no regard to the rest of the world.

yeah man. I don't know anything about finance but it prompts one to wonder why exactly is there so much money sloshing around the world with nothing to do? isn't there anything left to do? I guess there's a lot of things you can do (put down railroads in africa, etc.) but you can't see the clear return on it until the consumers can pay for it. So there's a catch 22 in which producers have a lot of money and consumers have no money so there's nothing for producers to create that can make good returns for them

 

[Type Username Here]

yeah man. I don't know anything about finance but it prompts one to wonder why exactly is there so much money sloshing around the world with nothing to do? isn't there anything left to do? I guess there's a lot of things you can do (put down railroads in africa, etc.) but you can't see the clear return on it until the consumers can pay for it. So there's a catch 22 in which producers have a lot of money and consumers have no money so there's nothing for producers to create that can make good returns for them

All they have left now is betting money on money with money that only exists digitally as pixels on the screen. They're playing with house money and they know it.

 

[TheBigBopper]

these dudes gotta create a financial market in everything.. wtf? these dudes just sit around and be like I got some extra cash.. let me bet that the crops are gonna fail and the prices are gonna rise.. next thing you know there's a lot of money following the few crops that don't fail, and not by people who're interested in eating these crops insane

It's a protective hedge against securities negatively effected by rising crop prices. It isn't nefarious.

 

[zerozero]

It's a protective hedge against securities negatively effected by rising crop prices. It isn't nefarious.

it vastly distorts the crop's prices for the people who need to actually eat them. and even if you look at it from an amoral standpoint, the very notion of a bubble being created means the price is being completely distorted by the speculation.. the people participating in the bubble no longer are going by the real value of the eventuality they're hedging against but just trying to get into the action

 

[TheBigBopper]

it vastly distorts the crop's prices for the people who need to actually eat them. and even if you look at it from an amoral standpoint, the very notion of a bubble being created means the price is being completely distorted by the speculation

Eventually, price corrections always come into effect giving securities their true value. Speculators can bid up prices, but bubbles will always pop, with markets in the end reflecting the actual value of whatever is being traded.

 

[zerozero]

Eventually, price corrections always come into effect giving securities their true value. Speculators can bid up prices, but bubbles will always pop, with markets in the end reflecting the actual value of whatever is being traded.

My concern with this is that everything in life is not an abstraction. While these financial games are going on, they're affecting the economic reality of the things that are undergoing securitization. With some things like food and energy this is especially problematic because it hits the end prices on things common people buy on an ongoing, inelastic basis.

Found an interesting report about this, will read later:

Food Commodities Speculation and Food Price Crises

In this briefing note, the UN Special Rapporteur examines the impact of speculation on the volatility of the prices of basic food commodities, and the possible solutions forward.

The study shows that a significant portion of the increases in price and volatility of essential food commodities can only be explained by the emergence of a speculative bubble. In particular, there is a reason to believe that a significant role is played by the entry into markets for derivatives based on food commodities of large, powerful institutional investors such as hedge funds, pension funds and investment banks, all of which are generally unconcerned with agricultural market fundamentals.

 

[ogc163]

My concern with this is that everything in life is not an abstraction. While these financial games are going on, they're affecting the economic reality of the things that are undergoing securitization. With some things like food and energy this is especially problematic because it hits the end prices on things common people buy on an ongoing, inelastic basis.

Found an interesting report about this, will read later:

Food Commodities Speculation and Food Price Crises

I wouldn't call it "financial games" seeing as how speculators have been around for years and there is a tendency for people to overstate/overestimate their power as it relates to price fluctuations. Speculators as a whole can't make profits by manipulating the prices of commodities by way of vigorous buying and selling; they can only profit by taking advantage of spatial and temporal discrepancies in prices caused by exogenous factors - events external to the actions of the speculators - that affect the demand for and supply of goods. Speculators who attempt pump and dump short term gimmicks run the risk of being undercut by speculators who have made previous purchases and seek to exploit price differentials themselves by pre-selling other speculators.

 

[The Real]

I posted a slightly different take on this as a diff. thread, but didn't realize good drought convo was happening here already. My fault.

 

[ogc163]

Good article on futures contracts as it relates to agriculture

Finance Overhaul Casts Shadow on Plains - WSJ.com

 

[zerozero]

Good article on futures contracts as it relates to agriculture

Finance Overhaul Casts Shadow on Plains - WSJ.com

good background of how they're used

but about this bill, lol @ the WSJ. "nobody knows what's going to happen, but we're worried"

edit: oh damn, this article is from 2 years ago. no agricultural armageddon resulted from the passage of that legislation