Amber Waves of Pain

How Wall Street (and your 401k) Profit from Hunger

Unidentified man following the developments on the trade board at the Chicago Board of Trade, Stanley Kubrick (Photographer). Retrieved from the Library of Congress, <www.loc.gov/item/2004679048/>

A popular theory floated around Washington in 2011, suggesting Commodity Index Traders, including Wall Street’s biggest banks, hedge funds, and retirement funds were responsible for driving up the global price of food. That price spike would lead to riots the world over, from Libya to Syria, and push millions around the globe to starvation.

Since then the so-called Masters’ theory has been widely debunked as a root cause of rising food prices, but the economists who cleared investors from the guilt of causing starvation did only that. The data shows that though they did not cause rising food prices, they did profit from it.

A Second Look at 2008 Commodity Investment

First, if you’re at all interested in understanding how commodity markets work, and how ag products are bought and sold, get yourself a copy of Endless Appetites: How the Commodities Casino Creates Hunger and Unrest by Alan Bjerga. Though it’s approaching 10 years old, it’s insight into food and ag during the 2008 financial crisis is invaluable.

The Master’s theory was a simple one, that between 2000 and 2010, food prices rose steeply, and so did the amount of speculation in ag commodity markets by major index funds. Index fund trading…