So what is the Real George Osborne all about?

This morning we launched The Real George Osborne, a 14-part Youtube comedy series and online action calling on George Osborne to ‘do the right thing’ and support regulation of food speculation. It stars Rufus Jones (Holy Flying Circus) as George Osborne and follows George and his long-suffering advisor, Vicki, as he tries to raise his political profile in a bid to become the next Prime Minister. 

Today we’ve only released the first episode. The following 13 will be aired over the coming four weeks. We hope that the campaign will really highlight the issue of food speculation and encourage thousands of people to write to George Osborne. 

But why George Osborne? Well, we’ve campaigned on food speculation over the last 16 months. Last month the European Commission published its proposals for regulation and, while these are a step in the right direction, they need to be much stronger if they’re going to be effective . This proposed legislation will now go through the European policy process, and could be altered, finally ending up in the council of ministers where our chancellor will be representing the UK. 

Voting in the council of ministers is run according to something called ‘qualified majority’, which essentially means that votes are allocated according the population size of each country. As the UK is has the third largest population in the EU, this makes George’s vote really important. Add on the lobbying power of the City of London, and you probably understand why the UK will be crucial.

What about food speculation? It’s a really big problem but to understand how it works, you first need to get your head around ‘futures markets’. This is how it works. Imagine a farmer planting wheat in the spring. Because the wheat will be harvested in the autumn, the farmer has no idea what the price of wheat will be at harvest time, which makes it really difficult to plan for the future. Enter a ‘futures contract’, which enables the farmer to sell the wheat at a pre-agreed price in the future. This is known as hedging. 

If the price of wheat is higher in the autumn the farmer has lost out. But if the price is lower, the farmer has gained. Overall, the benefit of futures markets for farmers is that they can plan for the future, sometimes several years in advance. 

These markets are really important and for many years they worked as they should. But in the 1990s and early 2000s, lobbying by banks like Goldman Sachs and Barclays caused them to be deregulated. And since then we’ve seen an enormous increase in the amount of money going into them, with complex financial products (derivatives) being created and traded in a similar way to the markets in sub-prime mortgages that cause the 2008 financial crash. 

In fact, especially since the financial crash, billions and billions of dollars of investment capital  has been moved from mortgages (now too risky) into commodities. And as a result we’ve seen two massive bubbles form, one in 2007-2008 and one in 2010-2011. 

These bubbles are really bad news, both for farmers, because it makes it more difficult for them to hedge their risk, and particularly for consumers, who’ve seen large increases in the price of food. It’s bad enough in the UK, but devastating for people in poor countries, who spend up to 90% of their income on food. 

Futures markets don’t need a lot of extra regulation to make them work efficiently. Two things are enough:

1. Position limits. These are limits on the proportion of the market that financial speculators can hold. Putting them in place would ensure that a single big investment bank or hedge fund  could no longer control the market, but would still enable legitimate buyers and sellers of futures contracts to operate.

2. Transparency. At the moment futures contracts are traded in secret, making it very difficult to get an idea of what is actually going on. By bringing the trading onto regulated exchanges, similar to stock markets, regulators would get an overview.

So far we have the support of people in the European Commission, along with various governments including the French. The US also recently introduced position limits, although these were set too high to be fully effective. 

We are quietly confident that we’ll be able to win this campaign, but we can’t do it without your help. Please watch the videos, write to George Osborne and share them with your friends. 

Watch the first video here:

http://www.youtube.com/watch?v=EdCgYEHr-Ik