Академический Документы
Профессиональный Документы
Культура Документы
Alan Bjerga
US investment bank Goldman Sachs convinced government officials in the early 1990s to allow it to start gambling on the price of food. Alan Bjerga explains how they did it
In 1991, Goldman Sachs had an idea that changed commodity-trading forever. J. Aron & Co., Goldmans commodities trader, wanted to enter into a swap with a pension fund that wanted to add commodities to its portfolio. Raw goods were looking attractive at the moment. Inflation had risen more than 6 per cent the previous year, and the economy was in the recession that, in 1992, would elect Bill Clinton president. The pension fund wanted to buy into commodities to manage its financial risk, which Congress had said it could do. Goldman was willing to do the deal, but as a speculator that didnt rely on producing or using physical goods for its business, J. Aron could only do so much before it bumped up against Commodity Futures Trading Commission (CFTC) limits on positions - that could be held by a speculator. Position limits, put in place to prevent market corners and manipulation, date to the Commodities Exchange Act of 1936. The pension fund didnt want to invest in a single commodity - corn, or wheat, or natural gas have too many individual quirks, - but it did want to benefit from commodities as an asset class, buying into oil, natural gas, corn, wheat, and other goods. So, Goldman created an index that would track prices of a predetermined selection of commodities, allowing index-fund buyers a way to speculate in physical goods. That let the pension fund manage its risk, often backing that index by buying up the actual futures of the foods, fuels, and metals the index covered. To make sure futures holdings matched the investment, Goldman asked the CFTC for an exemption from speculative limits on crop futures under a loophole Congress had opened in the 1980s. The CFTC granted the request. Investment banks could buy crop contracts, just like a wheat merchant. Food no longer made for just a balanced diet. It balanced portfolios too, opening the doors for millions of investors to have a personal stake in food and energy markets beyond their groceries and gas tanks. Goldmans innovation didnt instantly change trading. Shifts in political winds posed a danger to any bank getting overly involved in commodities. Bushs CFTC could give an exemption, but someone else's could take it away. The stock market was about to begin nine straight years of gains. Corn, thanks to the productivity of U.S. farmers and stable world markets, couldnt compete with that.
moving increasingly in lockstep, indicating that commodities have become financialised as an asset class. Still more papers argue that the introduction of multibillion index funds that are holding onto futures for decades regardless of immediate circumstances the elephants in the kiddie pool - makes futures prices less likely to fall and more likely to rise, since the funds will buy a futures contract expecting it to increase over the longer term, even when shorter-term prospects arent clear. The research debate is of intense interest to CFTC Commissioner Bart Chilton, who emerged during the 2008 food crisis as the panels top critic of the role investors may play in driving up food costs. Early in 2011, he was staying more quiet on regulation - 'Im keeping my powder dry,' he joked - because the price and political situation was different in 2011 than in 2008. The second food shock saw stock markets rising with commodities prices as the global economy grew, a classic story of supply and demand. Real-world explanations for price gains - China, oil, weather- were more up-front the second time around. The CFTC, led by Gary Gensler, an Obama appointee and 18-year Goldman Sachs veteran, was at its most willing to regulate big-bank trading since the Clinton administration. The Dodd-Frank bill, named for its Senate and House sponsors, tightened limits on how many crop futures a speculator could hold even as it continued to exempt buyers of actual physical commodities, called end-users, from limits. It also brought under regulation many trades done outside exchanges, and it expanded the agencys ability to collect information on exactly who was doing what in which commodities markets.