Chatting with Kansas Farmers Union President Donn Teske this morning, in advance of his appearance with the movie in Lincoln, Nebraska, reminded us recently that the proposed legislation to impose tighter regulation on the banks and Wall Street comes out of the Agriculture Department. Huh? As Slate’s Explainer explains:
Because traders used to gamble with corn. A derivative contract, very briefly, is a bet on what’s going to happen in the future. These instruments are now associated with interest rates, or with a company’s creditworthiness, but in the 19th century they were more often attached to the future prices of agricultural commodities, like rice, wheat, cotton, or corn. Farmers were suspicious: They worried that speculators were depressing the value of their goods and lobbied their representatives to step in.
So, in honor of the financial crisis and everyone’s new found interest in futures trading and its impact, here’s a video clip of Donn giving his view of derivatives and futures markets (this clip is a juicy outtake that never made it into the finished movie.)
From our transcript:
DONN TESKE: I would argue that there’s no such thing as a free market anymore.
You have basically three entities marketing all the grain, all the commodities in the country and basically the world. There isn’t any free market.
Even when I was young and naïve I never really believed there was a free market.
Now I’m a cynical old man, you know. Free market’s bull crap. Yeah, you know, you really want to have a fair market place, abolish the Chicago Board of Trade.
I mean, that’s a joke. That’s a legal gambling, speculation, entity and it just ruins us out there. At least they used to have to actually buy the commodity. Now you don’t even pretend you have to buy that commodity anymore.
Any rumor sends it off the scale and we’re usually the ones to blame. The aggressive marketers claim that’s the magic of having it there is that there is because then you can hedge and you can actually use that to your advantage. There’s very, very few times out there that you can do a pure hedge and lock in a profit. You’ve gotta do some speculating yourself as a producer to make it actually work.
I’ve worked an awful lot of the fallout with the farm entities that have tried to make it work on the futures. That’s when they call for crisis help. I went out to one farm once, clear western Kansas. This guys going on all day long and we’re yapping about stuff and kept eyeing the books and I kept seeing a gap in his financial that just didn’t make sense.
Finally, I looked at him and what’s going on. He says, ‘last month I lost $75,000 in the futures…oh, my wife doesn’t know about it yet.’ ‘Oh, this is our thirty fifth wedding anniversary this week.’ ‘Oh, will you tell her.’ No, I ain’t going to tell her.”
Can’t get enough of Donn Teske? Make sure you’ve seen this.