[sustran] If and when visiting London and trying out Barclays Cycle Hire, consider this:

Todd Edelman edelman at greenidea.eu
Tue Apr 26 21:44:09 JST 2011


http://www.guardian.co.uk/business/2011/apr/25/barclays-faces-commodity-protests

Barclays faces protests over role in global food crisis

Barclays Capital, the investment banking arm, blamed for driving price 
rises through commodity trading
by Felicity Lawrence
guardian.co.uk, Monday 25 April 2011 19.00 BST


Barclays will be targeted during its annual meeting on Wednesday by 
anti-poverty campaigners accusing it of playing a leading role in 
driving up food prices on global commodities markets.

Barclays Capital, the investment banking arm of the high street bank, is 
the UK's biggest player in food commodity trading, and one of the top 
three banking players globally, according to a new analysis for the 
World Development Movement.

Along with Goldman Sachs and Morgan Stanley, BarCap has pioneered new 
kinds of financial products that have enabled pension funds and other 
investors traditionally barred from commodities exchanges to bet on food 
prices.

Deborah Doane, director of the World Development Movement (WDM), accused 
Barclays of making excessive profits at the expense of millions in poor 
countries. "First, it was sub-prime mortgages, now it's food 
commodities," she said. "The lack of transparency in these markets bears 
worrying resemblance to the behaviour that led to the 2008 financial 
crash. Like any irrational asset bubble, the investors pile their money 
in for short-term profits, in spite of the consequences."

The WDM report estimates that BarCap may have made as much as £340m in 
2010 from its activities in food speculation. Precise figures are not 
known because much of the speculation takes the form of over-the-counter 
derivatives – trades entered privately between banks and clients. Banks 
do not publish a breakdown of revenues within divisions, so the WDM 
figure for Barclays is extrapolated from other measures published by the 
company, such as money at risk.

Barclays declined to comment in detail on the WDM report but said in a 
statement: "Barclays Capital conducts a variety of investment banking 
activities to help our clients across asset classes and geographies." It 
added that it acted as "an intermediary for our clients globally" rather 
than trading on its own behalf.

Barclays has already found its business ethics questioned this year, 
with UK Uncut, the campaign group, targeting branches over its tax 
avoidance activities. Soaring food prices have further highlighted the 
role of investment banks and hedge funds in commodity price spikes. The 
UN Food and Agriculture Organisation's (FAO's) food price index has 
reached record levels in recent months, and steep rises in the price of 
staples helped trigger the revolutions in Tunisia and Egypt.

While a range of factors, from climate change to demand for biofuels, 
have contributed to food price rises, financial speculation in 
agricultural commodity derivatives is believed by many, including the 
FAO, to have magnified volatility. Others, including the banks and the 
OECD, argue speculation is not a significant factor.

Financial activity in the commodities markets has seen explosive growth 
in the last few years. According to data from the UN special rapporteur 
on the right to food, Olivier De Schutter, investment in commodity index 
funds rose from $13bn (£7.9bn) in 2003 to $317bn by 2008. While there 
are no definitive figures on how those index funds break down, it is 
estimated that their holdings in agricultural commodity markets rose 
from about $3bn to over $55bn over that period.

Producers and processors of physical goods have long used commodities 
exchanges to hedge against risks such as bad harvests. But much of the 
recent growth has been through new "structured" products invented by 
banks and sold to investors.

After intense lobbying, banks won deregulation of commodities markets in 
the US in 2000, allowing them to develop these new products. Goldman 
Sachs pioneered commodity index funds which offer investors a chance to 
track changes in a spread of commodity prices. Barclays, meanwhile, 
invented "collateralised commodity obligations" in 2004, which resemble 
the synthetic collateralised debt obligations (CDOs) of credit crisis 
notoriety, except that they are backed by commodity trigger swaps 
instead o f credit default swaps. BarCap also has a leading position in 
commodity index investments.

There has been concern that the commodities boom represents a new risk 
to financial stability. The global financial watchdog, the Financial 
Stability Board, has warned that it has all the hallmarks of a bubble 
waiting to burst.

Michael Masters, the hedge fund manager who gave testimony to the US 
Senate on speculation and food prices in 2008, agrees that the growth is 
potentially dangerous. "Financial speculation now accounts for more than 
two thirds of the market, and only about 30% is physical hedgers," he 
said. "The percentages have flipped in that period. When billions of 
dollars of capital is being put to work in small markets like this, it 
amplifies price rises and if financial flows amplify prices of food 
stuffs and energy, it's not like real estate and stocks – when food 
prices double, people starve."

guardian.co.uk © Guardian News and Media Limited 2011

-- 

Todd Edelman

Mobile: ++49(0)162 814 4081

edelman at greenidea.eu
www.greenidea.eu

Skype: toddedelman

Urbanstr. 45
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