Many of you may remember back in 2008 - as our economy was heading into full meltdown - there was also a food crisis hitting the entire globe. The price of wheat skyrocketed - creating panic around the world. 2008 became the first year in human history that the population of those who went hungry increased - an increase of more than 250 million people - in a single year! More than a billion people bordered on starvation. The food crisis was even felt in America where 49 million people struggled to feed themselves and demand for food stamps and soup kitchens increased considerably.
It was chaos.
But there was something strange about the 2008 food crisis and the price of wheat that caused it. Simply - there was no shortage of wheat. In fact - 2008 yielded the largest amount of wheat in the history of the world! 657 million bushels weren't sold at all! There was a record breaking surplus! So - with such an enormous supply of wheat - what caused prices to shoot up?
The answer is on Wall St.
In 1991 - Goldman Sachs was looking for another financial instrument to sell. They were tired of speculating with debt and real estate and realized the new horizon was food. So they created an index of commodities like cattle - corn - and wheat - that they could then sell to investors. As more and more investors bought into the food index - prices began to rise. So despite there being plenty of wheat - prices continued to climb thanks to investors purchasing more and more future food commodities. And in 2008 - "The Economist" noted that food prices had increased to a level not seen since 1845.
A bubble was being created - thanks to Goldman Sachs.
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