Here's a link to Goldman's self-serving response to "The Food Bubble," a simmering serving of swill concocted by Steve Strongin, Goldman's Head of Global Investment Research.
And here's part of the response Harper's will run . . .
No one denies there was a shortage in global wheat markets from 2005-2008. Unfortunately, Steve Strongin brings us no closer to understanding why hunger ruled the planet in 2008, as his defense of Goldman's Commodity Index Fund mixes misrepresentation with outright mendacity. While the goal of the GSCI was to transform the nature of commodity markets while allowing bankers to amass huge pools of capital, the CRB index has been from its inception in 1934 a market indicator that not only included the prices of tradable commodities, but of butter and lard. To equate the two indices because they are "investable" is to deliberately twist the historical contexts and goals of each. Similarly, Strongin quotes the CFTS, the USDA, the DOE, the US Treasury, the SEC Commission and the Board of Governors of the Federal Reserve System that "current oil prices and the increase in oil prices between January 2003 and June 2008 " are largely due to "fundamental supply and demand factors." If such a group had commented about the wheat markets—much smaller and more vulnerable than the behemoth world energy markets—perhaps we might consider such a perspective germane, and remind Strongin that it was George Soros who called the oil price rise in the summer of 2008 for what it was: A bubble. And when it comes to quoting the recent OECD report, Strongin musters an elision that would never pass the fact-check department. What the report actually asserted was that a "significant increase in investments in agricultural derivative markets from non-traditional sources, whether for portfolio diversification or speculation . . . has contributed to the rise in short-term futures prices and is an additional factor in the current spike in spot market prices." Then, by reverting to the true cliché that speculation adds liquidity to markets, Strongin once again deflects attention from the fact the the GSCI was not acting in any normative speculative fashion (a buy for every sell and vice versa), but adding an unprecedented demand pressure to the wheat market by buying as futures prices rose, and continuing to buy, no matter how high the price of a wheat future might go—classic behavior of a market cornerer, not a speculator. Finally, Strongin's assertion that there was no connection between commodity index investing and the price of hard red spring wheat on the Minneapolis Exchange underscores the disconnect and blindness of so many in the financial industry, who cite global connectivity and global markets when it suits them, and deny interdependence when the rest of us catch on. Strongin calls for a "vital debate" and a "serious public discussion" of global food shortages, but offers no solutions whatsoever as he restates the dogma that has fostered the abuses of commodity index funds in the first place, while adorning his assertions with extra helpings of received wisdom—such as the unsustainability of biofuel production and the Chinese desire for chicken. There will be no vital debate until Goldman, et al, face the facts.
That quote you do from the OECD report is no where in the report:
http://www.oecd.org/dataoecd/16/59/45534528.pdf
Posted by: Chris | November 05, 2010 at 05:42 PM
The quote can be found here on page 4:
http://www.oecd.org/dataoecd/54/42/40847088.pdf
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