It is arguably the world’s most powerful lobby firm. The Institute of International Finance is an umbrella organisation representing the biggest investment banks on the planet.
Enjoying huge financial resources to fund research and the ear of every significant politician and regulator, the IIF’s views generally hold sway in most international financial debates.
The IIF’s board is a who’s who of money men. Its chair is Josef Ackerman – chairman also of Deutsche Bank and arguably Europe’s most powerful banker. UBS, JP Morgan, HSBC and of course, Goldman Sachs are among the 35 big beast members.
Yesterday, the IIF sent a report to the G20 group, which consists of the world’s leading economies including China, India, Brazil and the US.
The G20 have singled out commodity speculation as an area of concern because huge increases in the amount traders bet on the price of oil, metals and food have produced two price spikes in three years adding hundreds of pounds to annual food and fuel bills sending inflation through the roof.
The IIF yesterday told the G20: ‘There is little convincing evidence linking financial investment with trends in commodity prices and volatility.’
And yet recent evidence strongly suggests the reverse.
Six weeks ago, the Bureau revealed how the UK’s biggest grain company bought up, and took delivery of, all the available British feed wheat in a move that traders described as an unprecedented series of purchases.
Last month, Vermont Senator Bernie Sanders posted two ‘confidential’ US Commodity Futures Trading Commission documents on his website. These showed Schroders among 18 financial groups who exceeded position limits in key commodities during the price spike of 2008. According to the documents, Schroders exceeded limits in wheat, cotton, soybeans, lean hogs, oats, sugar and coffee in late 2007 and 2008.
And today comes another strong riposte to the IIF’s arguments in the shape of a new report by World Development Movement.
This shows
- financial speculators now hold over 60% of some commodity markets compared to just 12% 15 years ago
- the total assets of financial speculators in these markets have nearly doubled from $65bn in 2006 to $126bn in 2011 – 20 times more than the total amount of aid money given globally for agriculture.
- the changing nature of traders with the introduction of commodity index funds, high frequency and algorithmic trading and an enormous growth in opaque, deregulated ‘over-the-counter’ trading.
The effect the ‘financialisation’ of food commodities is having on the poor is profound. If we think our weekly shop is pricey, try living in Kenya where in just three months at the end of 2010 and early 2011 the price of maize rose by 27% and 20% in the Democratic Republic of Congo.
‘These markets are now barely fit for purpose both for those who rely on these markets directly and in terms of their devastating impact on food prices around the world,’ suggests the WDM report.
It is hard to disagree. This year we will see to what extent the G20 is in the pocket of the bankers. To leave commodity markets unchanged feels like a dereliction of responsibility.
There is now, a real hunger for change. And that means greater transparency when it comes to identifying who is trading as well as the introduction of stricter enforcements of position limits.
September 13th, 2011 at 6:45 pm (#)
is your headline backwards?
(Ed’s note: “Bank Lobby must ignore G20 over food speculation” – that would be a controversial call to arms!)