The Ecologist - Barclays Making Up To £340 Million Encouraging Speculation On Commodities

[hatrack]

EDIT

From a position of relative obscurity, Barclays Capital, the investment arm of the high-street bank, has rapidly increased its involvement in commodity trading and become not only the market leader in the UK but the third biggest trader globally, behind Goldman Sachs and Morgan Stanley.

It boasts on its website to having had a ‘rapid’ expansion in its commodities division in recent years and says, ‘if you are seeking exposure to commodities as an asset class, we can offer you an extensive and innovative suite of products’. According to the WDM report these products include the risky proprietary trading or ‘prop trading’ where traders aim to make money by betting on particular outcomes in the prices of an asset. Barclays is also known to have developed products that allow pension funds and other financial players to bet on food prices, opening up the market to even more speculation.


‘Barclays are proud to be the UK’s number one food gambler,’ says WDM food campaigner Heidi Chow. ‘They are not only making large amounts of profit from pushing up food prices but they are also actively finding new ways for other financial institutions such as pension funds to further flood the food markets with speculative cash, making a serious situation even worse.’



In a previous report, WDM highlighted how the price of coffee jumped by 20 per cent in three days in 2010, after a trader called the bluff of hedge funds that had made millions by selling coffee contracts and betting on the price to fall. This left hedge funds scrambling to buy actual coffee beans, and the price shot up from the extra demand.

EDIT

http://www.theecologist.org/News/news_analysis/833156/barclays_making_up_to_340_million_profit_on_food_price_speculation.html

[elleng]

1. Sick.

If only governments would get their acts together, decide that such behavior is against the public interest, and outlaw it.

[DJ13]

2. On the same page theres also an article about Goldman Sachs making $1b

doing the same thing.

[subterranean]

3. This doesn't get nearly the attention it should.

Commodity future were originally created to reduce price volatility and lower risk for real buyers and sellers. Speculators were limited to just a small position in these markets to provide liquidity.

Because those limits were gradually removed, without any debate, in the 1990s, speculators now play a much larger role, and have turned the original function of the markets upside down. They INCREASE risk and volatility. From the standpoint of the investment banks, the more volatility there is, the more money they can make.