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The Food Bubble (2010)

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Re: The Food Bubble (2010)

#101

Post by ArchD »

justincormack wrote: post #65
ArchD wrote: post #58

Earlier quoted context omitted.

Maybe what I was suggesting wasn't clear enough. If you need food in 100 days, you can pay for the futures for that day, or in 100 days the actual spot price, whatever it turns out to be in 100 days. You generate demand for the futures or the actual commodity, not both. By acting early, well in advance, you could get a better price if the price is going to go up. Even if you have zero idea where the price is heading,…

That is clearer. But right now that would increase demand for futures even more, over the current situation, and if the futures prices are higher purely for speculative reasons, you would reduce volatility but pay a lot for that. Whereas if you sell future production into the market now, you realise gains from historically high prices, and hopefully make a profit.

Well, I'm not necessarily suggesting it for right now, but as a general strategy.

But, if the governments were to short the futures right now, who's to say the price will not increase? It's a risk. If they can be sure, other entities can also be sure and make money doing the same.

Re: The Food Bubble (2010)

#103

Post by ArchD »

mhb wrote: post #81
ArchD wrote: post #36

I'm wondering if there's something preventing the government of vulnerable countries from buying futures themselves to shield their own people from violent price fluctuations like these, i.e. hedge against price increase for food commodities that need to be imported. Trading commodity futures may be inaccessible to ordinary people, but I don't see why the government of a country, even a developing one, cannot do it,…

The governments don't need to do it. This is exactly why futures contracts exist. So that bakers who know they need wheat in six months can know today what the wheat will cost them and can price the bread with that assurance. But maybe your point is that by doing this they would avoid the transient price spike due to the indexes rolling over in the near months. Which might make sense, but that phenomenon was noticed…

Sure, bakers who know they need wheat in six months can buy some futures for six months from now. Then, what is the problem that TFA is talking about? I thought it was about poor countries being impacted by the price spike resulting from the long speculation. If the people in these countries had bought the futures they needed well in advance, why were they getting impacted? I inferred that the problem was because people there were not sophisticated enough to buy the necessary futures.

Re: The Food Bubble (2010)

#104

Post by westicle »

sammathews wrote: post #64
forensic wrote: post #31

Earlier quoted context omitted.

This community is exactly the type of testosterone-driven money-obsessed community that would create a Goldman Sachs Commodity Index that will cause starvation, and then absolve themselves of responsibility due to some free market arms-length ideology. It's not a coincidence that you're disturbed by the comments. Wall Street entrepreneurs and Silicon Valley entrepreneurs are fundamentally very similar in mindset and…

I could not disagree with you more. SV Entrepreneur types, as a generalisation, are more like the farmers in this article selling there wares than the WS Bankers. Sure people are money obsessed but they do it either by being profitable or by selling equity in value creating businesses. I think the Google slogan of "Don't be evil" is the best summation of the average tech entrepreneur these days, generally because the…

Something which has always disturbed me about the community is the macabre fascination with funding and exits.

Obviously these are healthy steps in the progression of some businesses, but at times it seems HN focuses on them to the exclusion of whether a startup actually contributes something worthwhile. It is probably arguable that those things represent a reasonable proxy for the value created (or expected to be created) by the business. Then again, there are plenty of funded (and acquired) business models which are based on cynical exploitation of the less-educated for the benefit of the business owner, at a net cost to society as a whole.

If an SV entrepreneur-type is more focused on getting funded or making an exit than creating net value to society, I think it is fair to draw ethical comparisons with the WS banker-type.

Re: The Food Bubble (2010)

#105

Post by ramchip »

JonnieCache wrote: post #48
indrax wrote: post #38

Earlier quoted context omitted.

One of the things markets are supposed to do in theory is to route resources to where they are needed, and financially punish people who move resources in stupid ways. The technical analysis I've seen here seems to hover around the question of why the investors were not automatically screwed. In a more efficient market the price collapse would have been obvious, the bubble would not have happened, and no one would ha…

>One of the things markets are supposed to do in theory is to route resources to where they are needed, and financially punish people who move resources in stupid ways. How many more people have to die needlessly before this theory is reexamined by those who practice it?

Planned economy has been attempted in several countries. Their death record isn't exactly shining.

Re: The Food Bubble (2010)

#106

Post by ramchip »

westicle wrote: post #104
sammathews wrote: post #64

Earlier quoted context omitted.

I could not disagree with you more. SV Entrepreneur types, as a generalisation, are more like the farmers in this article selling there wares than the WS Bankers. Sure people are money obsessed but they do it either by being profitable or by selling equity in value creating businesses. I think the Google slogan of "Don't be evil" is the best summation of the average tech entrepreneur these days, generally because the…

Something which has always disturbed me about the community is the macabre fascination with funding and exits. Obviously these are healthy steps in the progression of some businesses, but at times it seems HN focuses on them to the exclusion of whether a startup actually contributes something worthwhile. It is probably arguable that those things represent a reasonable proxy for the value created (or expected to be cr…

I'm not sure I can agree. Sometimes there is an emphasis on acquisition, but companies that sound overvalued or negative to society tend to be disliked on HN as well. Groupon, for instance, gets flak in about every thread that mentions it.

Re: The Food Bubble (2010)

#107

Post by robfig »

Obligatory http://xkcd.com/552/

I read an article in The Economist some time ago about speculative trading in oil markets. People were raising a ruckus about how it raised the costs of heating for the poor. Turned out that the evidence showing causation was extremely flimsy, and many other global trends were much better explanations.

I think burden of proof is on the article to make the case for causation, and I didn't see it (although I skimmed the second half).

Re: The Food Bubble (2010)

#108

Post by keithg »

dantheman wrote: post #93
Cushman wrote: post #68

Earlier quoted context omitted.

I don't see any reason to distinguish them. A free market means a free market. When one monolithic organization with access to controlling capital makes its goal not to preserve the freedom of the market, but to extract value from the rest of the market for itself and its shareholders, that's not a market. That's a centrally planned economy. The bankers have turned Communist oligarchs in all but name.

Actually you are incorrect, a free market is one in which people voluntarily interact for mutual gain, i.e. it is not coercive. If their is government interference then it is not a free market, cornering a market does not make it any less free if done solely through voluntary trade.

A free market also implies some transparency does it not? If it's crystal clear what is being bought & sold, then everyone can make informed decisions and take their gains/losses honestly. When things like derivatives are created specifically to obscure the product and mislead potential buyers, then is it truly a free market? Shouldn't the government's roll be oversight (aka interference) if deception is creating a clear advantage for one party in the transaction? Your premise of mutual gain falls short in these cases.

Re: The Food Bubble (2010)

#109

Post by viandante »

megablast wrote: post #98
viandante wrote: post #54

I just don't get the point. You buy something if you expect its price it is going up. If the price is going up, it means there is higher demand. If there is higher demand, it means somebody does actually need more food (think of China and India). I think the whole point of this article sounds a bit ideologic. Also, again, no really good data to prove his point.

You buy something if you think the price will go up, but this also makes the price go up. If a whole bunch of people think a commodity will go up, and start buying up, this will drive the price up a lot. A commodity does not have to change it value, or for there to be an increase in demand for the price to go up, all it needs is some speculation that it will go up, and a whole bunch of people looking to profit.

I still don't get it. If people are buying and the value is not there, they will loose money, right? Speculators can also bid on a lower price (derivatives), right? So, who are all those crazy people bidding only in 1 direction (higher prices)?

Re: The Food Bubble (2010)

#110

Post by anamax »

Cushman wrote: post #94
dantheman wrote: post #93

Earlier quoted context omitted.

Actually you are incorrect, a free market is one in which people voluntarily interact for mutual gain, i.e. it is not coercive. If their is government interference then it is not a free market, cornering a market does not make it any less free if done solely through voluntary trade.

So if I'm born into a world where someone has cornered the market on, let's say, food, and their perfectly rational strategy is to choose not to sell food to anyone who competes with them, I'm not any less free to compete than if one person didn't get to make that decision? Get outta here with that.

> So if I'm born into a world where someone has cornered the market on, let's say, food

Then you can ride away on your unicorn.

The western world doesn't have food monopolies. The 2nd world occasionally does, but they're created by their govts.

Of course, it doesn't help that the US govt decided to raise corn prices by subsidizing corn ethanol.

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