Remember the food crisis of 2008 when prices of staple foods rose inexplicably – rice by a an unbelievable 320 per cent – no like me you’ve probably forgotten – but between 120 and 200 million people around the world couldn’t afford to buy food anymore – those that survived haven’t forgotten.

At the time we were told it was just supply and demand too many mouths and too little food plus we’d started diverting arable land from food production to producing crops to make bio-fuels to burn in our cars – we were all to blame – I bet the oil companies loved that one – guilt of burning fuel in our cars certainly made many of us conclude that maybe it was better to burn oil instead.

However, nothing was further from the truth. Peter Wahl at the German policy Unit WEED argues that food speculation played a decisive role in the price bubble in 2008.

The factors governing the pricing of agricultural commodities are complex. No single factor alone determines the price.

Firstly, one must distinguish between long-term and short-term factors.

The long-term factors include:

A. Increasing demand, predominantly through the economic rise of emerging economies, especially through the adoption of western consumption habits by the middle classes. The Chinese, for example, are increasingly consuming dairy products.

B. Agricultural productivity. The trend in productivity is stagnating in many developing countries. This is due to under-investment and structural adjustment programmes which have imposed a priority of export orientation instead of national food security, as well as the liberalisation pressure due to the WTO and bilateral trade agreements or the decline by half in the ODA (official development aid) for agricultural promotion between the 1980s and the present day.

C. Production of agro fuels. Over the last ten years, the US and the EU, but also Brazil, have started to cultivate renewable agricultural commodities (among others, rape, sugar cane) to produce ethanol and diesels on a large scale in the search for alternatives to mineral oil. The cultivation of agro fuels absorbs agriculturally productive land, and this can lead to a substitution effect and therefore to a reduction in food production.

D. The reduction of food stocks, particularly in the EU.

The short-term factors include

E. The increase in the oil price in 2007/2008 as well as fertilizer prices.

F. Bad harvests in 2006 and 2007 in Australia, one of the world’s biggest grain exporters.

G. The U.S. dollar exchange rate fluctuations, the lead currency in international trade; or changes in the value of national currencies, such as the temporary decrease in the dollar exchange rate as a result of the financial crisis.

H. Export restrictions on food by governments which want to guarantee food self- sufficiency for their own countries due to the explosion in food prices. However, this well-intentioned measure also contributes to the food supply shortage on the world market and consequently increases prices.

I. Finally, speculation.

When the food prices sky-rocketed in 2007, the role of speculation was mentioned as an afterthought or completely ignored by mainstream economists. Instead, mainly long-term factors such as the increase in demand and the production of biogas were made responsible for the drastic price increases. A World Bank study even claimed that agro fuels contributed a proportion of 70% to the food price increase.

In a study on the food crisis, even before the food price reversal, UNCTAD pointed out that this factor could not be so important in prices increasing to more than double in such a short time period. For example, the price of rice increased by 165% between April 2007 and April 2008, and rice cannot be used for biogas, and there is no substitution of acreage in the countries where it is grown, either.

It has become incontestably clear since the decrease in food prices from July 2008 at the latest, that neither increasing demand in the emerging economies nor agro fuel production caused the food price trend. It cannot be that the Chinese suddenly start to eat much more yoghurt only to stop again just a few months later. Neither has agro fuel cultivation risen so sharply only to decrease again just as abruptly. Short term factors, such as poor harvests, did not play a role in the price upswing either.

Moreover, speculation in connection with the financial crisis is the decisive factor. We are dealing with the classic case of a speculative bubble which was built up in the second half of 2007. The crisis in the mortgage sector in the US, which was also the result of a huge speculative bubble, started to spread across the whole financial sector. People in the financial market sought alternatives in the commodity sector and the bubble started to form. It reached its maximum in Summer 2008 and then burst.

Meanwhile, even mainstream economists no longer deny that speculation at least contributed to this bubble. Thus, the BMZ describes speculation as one of the reasons for high food prices in April 2008: “the international capital markets have become aware of the agricultural markets again in their search for lucrative and relatively safe investment areas of the future. This causes more volatility, especially when participants act in a strongly speculative way.” UNCTAD also identifies speculation as a factor for the agricultural commodities price bubble. In the meantime, even the World Bank acknowledges that speculation shares the responsibility for the price increases even if it considers speculation as a subordinate factor. And even the IMF can no longer ignore the facts when writing very vaguely that pure financial factors, including the mood of the markets, can have short term effects on the price of oil and other commodities. Read Peter Wahl’s Full Report.

So what do the speculators have to say for themselves?

The hedge fund manager Michael Masters estimated that even on the regulated exchanges in the US – which take up a small part of the business – 64 percent of all wheat contracts were held by speculators with no interest whatever in real wheat. They owned it solely to inflate the price and sell it on. Even George Soros said this was “just like secretly hoarding food during a hunger crisis in order to make profits from increasing prices.” The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

When asked to comment on the charge of causing mass hunger, Merrill Lynch’s spokesman said: “Huh. I didn’t know about that.” He later emailed to say: “I am going to decline comment.” Deutsche Bank also refused to comment. Goldman Sachs were a little more detailed in their response: they said “serious analyses… have concluded index funds did not cause a bubble in commodity futures prices”, offering as evidence a single statement by the OECD. Johann Hari.

Every last investment banker is nothing but a self-centred cunt and don’t let anyone tell you different they don’t give a shit how they make a profit – who suffers or dies – whatever their protestations to the contrary.

And we need theses bastards? Why? It’s time we stopped this madness otherwise it’s going to happen again. Trouble is the Con-Dems aren’t going to be interested in upsetting their friends and donors in the city. What a lovely world we’ve created!

I suggest we all visit the World Development Movement’s website and take some action.