13 Sep '11, 3pm

How Goldman Sachs started the food speculation frenzy

How Goldman Sachs started the food speculation frenzy

had an idea that changed commodity-trading forever. J. Aron & Co., Goldman’s 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 didn’t 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 Commo...

Full article: http://www.theecologist.org/News/news_analysis/1045180/ho...

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