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Der Spiegel tells all
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Member since May 2011 · 2485 posts · Location: Brisbane
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Subject: Why everything costs so much
Der Spiegel explains something I've wondered about for a long time: The skyrocketing price of everything.

Searching for secure and long-term returns, major investors turned their attention to the commodities indexes, investments that promised substantially higher returns than investing in the stock market. The more the funds invested, the higher the prices went, especially since the market for speculative commodities securities is very small.
Basically, oil costs more because people are betting that it will.  It's a self-fulfilling prophecy.  As more people invest in it, the price goes up.  As the price goes up, more people invest in it.  The price of a barrel has gone from $10 in 1999, to more than $139 today.  Half of that increase happened in the last nine months!

The price increases that have affected oil and cocoa apply to almost all other commodities. A sack of rice now costs almost three times as much as it did in January, wheat, corn and soybeans have already reached record prices this year and gold has been on a wild rollercoaster ride recently.
It's a very real problem, obviously.  It disgusts me that people with disposable income - the already-rich, basically - are fucking us all over while they try to make more money without adding any value to our world.

This is about more than just economics. It is also an ethical and highly moral question. Much depends on the answer, including the credibility of our economic system.

Hundreds of millions of consumers around the world are now wondering what will happen next. For weeks, high food prices (more...) have led to unrest in many countries.
Riots, strikes, and revolution: in Haiti the prime minister was removed from office by, basically, panicking people.

The whole situation revolves around something I don't understand, and that annoys the shit out me.  Now I've got to waste valuable brain cells reading about boring old stock markets, futures trading and other dreadfully dull things.  I'm not predicting easy success, because - as usual - the issue is hardly clear.

"This is not about blame," US Treasury Secretary Hank Paulson recently said. "It's about supply and demand." According to Paulson, "speculators have had very little impact."

But the people who are affected by rising commodity prices see it differently. "The flood of money from Wall Street and hedge funds is driving up prices -- and the effects are potentially destructive," says Tom Buis, president of the US National Farmers Union.

As is typical, the 'bubble' growth of this speculative bullshit means there's a very real risk of a crash.  A crash, says Der Spiegel, would be good news for the little people, as prices return to normal, but it would be very bad news indeed for banks and financial entities.

"The financial industry," says Heinrich Haasis, president of the German Federation of Savings Banks, "has disconnected itself from the real economy."
The problem is this speculative mechanism can be a boon, fuelling the economy in rough times, or a curse, as it appears to be now.  Left uncontrolled and unchecked, well, you get massive price increases.    Some people would have us believe that these rising prices are simply a re-adjustment, correcting prices that have been too low for too long.  I call bullshit on that, and believe you'll probably find the people saying this are connected to the funds causing the damage.  Shall we take bets?  =)

I may post more after reading the Der Spiegel article.
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