I read an article named “Money from Hunger” from the site kaani.org – must read. Not sure how many read and how many understood – this talks on futures (a financial derivative product – means not a real product but a product on paper – note money is also paper), debt, etc. used as instruments to extract money from the poor. But there are more, may be the original author did not want to scare people by exposing what is happening -or- people won’t understand the complex financial products and their nature. I’ve just given few hints below (certainly not taking a Financial engineering class to you all but would appear so)
I’ve been a campaigner for closing down the commodities exchange in India (or at-least stop trading of all agricultural commodities from the exchange) since 2008. All most 99.99% of the deals in the commodities exchange are either speculative or for Hedging purpose – these deals are done by mostly hedge funds (private MF like fund with no regulation and of super rich people) for money making. Why I write the word deal is that there is no real cash involved and real commodity involved – all one needs is less than 5% of the the total value of a trade as margin or option writer fee. (option is another derivative like future but more complex). This all effectively means even without any money (but with guarantee from and Investment bank like Goldman Sachs, Morgan Stanley, Merrill, etc. and with drawing
facilities from Trader /dealers you can play in the commodities market). Means for your fancy you can practically do anything. The story doesn’t end there.
Indian commodities markets are one of the least regulated
Most of the deals are originated through Participatory note (another derivative product originated from Mauritius – through this route all illegal money can be laundered and channeled back to India as legitimate)
Most importantly all these illegal monies are now being used to spoil the Agricultural commodities market in India – which results in Artificial demand, price rise, non-availability of essential food commodities, etc.
Monsanto is a big player in this market through their agents, same is with oil companies, Govts, HF managers etc.
More innovative financial products (complex products very difficult to understand like a vapor-ware – I call these strange creatures) like credit derivatives, IR-Derivatives, Currency derivatives, bullion derivatives, and Derivatives over Derivatives and the list goes on like CDS (credit default swap), CDO (Collatralized Debt Obligation), etc. are created by Investment managers for the consumption of Super rich in the Zero-Sum game of Finance in the laissez-faire economic system. [Read what these terms mean]
Even banks with Billions of dollars revenues and so much clout disappear in just few hours due to Rogue traders (like Nick Leason) – who have no regard for public money and also no regard for country’s economy or people’s lives.
We as a country in the name of development. globalization, etc. have opened the gates to these kinds of vampires and now we are paying the price – not yet, the game has just begun…
Govt. is also a party to these legal gambling of people’s life and country’s economy – they participate in this system with their own instrument called Fractional Banking [Read what this term mean]. Also govt. makes huge revenue out of securities transaction tax, thus they
are in no mood to stop any of these things.
Note that Coffee, Tea, Gold, Oil, Electricity, Gas, Coal, Iron, Aluminum, Copper, etc. Prices for these are not determined by Supply and Demand (old economic theory) are determined in London commodities exchange and Chicago Derivatives exchange by speculators like George Soros.
The sad part is that many highly educated people including Banker and Auditors themselves don’t know such things exist (many don’t want to educated – and there is clear danger in that. Unfortunately it is also on the head of people to learn and prevent the dangers and fallouts of
these strange creatures
In every field if you scratch the surface itself you’ll get skeletons after skeletons- be it Agri, Education, Healthcare Finance, Banking, Real-estate, etc. It is our duty understand these first…