Photo: Mats Stafseng Einarsen/Wikimedia Commons
Marshall Auerback claims today that Ben Bernanke and the expectation of more quantitative easing are causing the surge in world food prices.He’s wrong.
His argument centres on the flood of money due to the expectation of QE2 and the “financialisation” of commodities due to the Commodities Futures Modernization Act of 2000. He’s correct that the game changed for commodities the minute the legislation passed — 10 years ago. That doesn’t explain the surge this year but it does explain the increased volatility of the last decade.
The move up is helped by the expectation of more liquidity but supply and demand are much bigger factors.
Despite China's stated goal of grain self-sufficiency, imports are going through the roof.