Foreign Policy came out with a spectacular article last spring and with wheat dropping and the arab spring entering into the winter I feel its more relevant than ever. This article not only highlights the dangers present in a financial industry that is too powerful, but also the role modern multinational corporations play in the world at large.
As some of you may or may not know, the revolts in Egypt this past spring were largely caused by the skyrocketing price of bread. In the Middle East bread is considered a sign of status and wealth; to feed your family and guests bread is a sign that you are a powerful person in the community. People in the region also tend to buy bags of wheat, unlike Americans who tend to buy bread. This makes the cooks of the Middle East countries particularly sensitive to price fluctuations. So, when the price of bread went up and lot of people no longer could afford to feed their families, they revolted.
Now the reason this is important to Americans, aside from the foreign policy implications, is that Goldman Sachs (GS) also uses the same process the do with wheat with something that is very important to America: oil. The very cyclical nature of crude oil prices is due to large mega banks, such as GS and Morgan Stanley, continually betting the price will go up, and since they are so powerful in the market they can then influence the price and push it higher.
I think what Gs is doing is brilliant. Evil but brilliant. Companies should not be able to say they are immune from the rules surrounding commodity trading just because they are the biggest and the most powerful. On the contrary, we should treat them with suspicion because of it.
No comments:
Post a Comment