How the futures markets work, as understood by The Guardian’s chief economics editorial writer – with the help of Lewis Carroll

Warning: this is depressing.

Aditya Chakrabortty, economics leader writer for The Guardian, the most influential English-language newspaper among lefties in the world, wants to explain how the West caused starvation (somehow it must have done).

Mr. Chakrabotty is not entirely anti-market — he admits “the buying and selling of financial contracts on food and other basics has been going on for centuries, and is a useful way of smoothing out demand and supply. But . . . that was a small market in which specialists traded in pork bellies and other things they knew something about.”

Now, he thinks, because of changes introduced by the CFMA (which of course contained no innovations), everything is different.

What has happened over the past decade is that hundreds of billions of new money have been staked on food prices going one way: up. In other words, this is the bubble mentality as applied not just to internet stocks but to the essentials of nourishment. And the losers are not only day traders in Ohio when Pets.com goes bust, say, but the starving in slums outside Mumbai.

Tim Worstall delicately points out that it isn’t quite correct to say that money could have poured into the futures market betting that food prices would go only “one way: up.”

It isn’t f****** possible to do this in a futures or derivatives market! They are zero sum games, for everyone who goes long there must be an equal and opposite short contract.

In fact, without higher prices, there would have been even less food produced.  Mr. Chakrabotty has the satisfaction of sounding wise and being wrong.  But he is the opposite of useful to the “starving in slums outside Mumbai.”