By Terry Messenger
BBC Money Programme
Financial speculators have been blamed for inflicting recession on the rich world and starvation on poorer countries.
They have been accused of buying up contracts for vital commodities - not to use, but to hold in the hope of price rises.
Speculators are blamed for pushing up the price of food
And, by buying up billions of dollars worth of food and oil contracts, it's claimed that they artificially drove up prices, wrecked businesses and put food out of the reach of people in poorer countries.
They've been blamed for helping to push oil up to a record $147 per barrel in July last year and for unprecedented prices of vital foodstuffs.
But the speculators, who prefer to be called investors, claim that the accusations are bogus and that they're the targets of a misinformed witch-hunt.
The allegations were given credence by Barack Obama, who expressed concern about the effect of speculation on fuel prices during his triumphant US presidential election campaign.
In June, he promised: "I will fully close the loophole that allows corporations to engage in unregulated speculation that artificially drives up the price of oil."
He was referring to regulatory loopholes which have allegedly allowed US investors to evade limits on the purchase of commodity contracts.
Much of the impetus for the campaign against commodity speculators comes from Michael Masters, a hedge fund manager based in the US Virgin Islands.
Mr Masters invests in stocks and shares but shuns commodities on principle.
Barack Obama has spoken out against speculation
He reckons investment vehicles known as commodity index funds (CIFs) are to blame for record high commodity prices.
"For years, we just had supply and demand," he told the Money Programme.
"And in the last few years when these large institutional flows of money came in the market, we had supply and demand, and demand. And this new demand was what really pushed up the price.
"The bottom line is that the commodity index funds are to blame. They're the lead character in this story."
He claimed that large inflows of cash into CIFs helped push up their total global value from $13 billion in 2003 to $317 billion in July 2008 coinciding with record commodity prices.
He testified at Senate and Congressional hearings in May and June last year as the oil price was climbing to its $147 peak and concern over fuel prices in the US was reaching fever pitch.
He believes half the climb from $70 to $147 was attributable to speculation.
Barack Obama expressed his concerns shortly after.
Mr Masters argued that the high oil price was the main factor, along with the banking crash which plunged the world into recession in the second half of last year.
He said: "We're talking about lost jobs, we're talking about bankruptcies in the transportation business.
"It happened at a time when economies around the world were already suffering from the effects of the US mortgage crisis."
The United Nations Conference of Trade and Development (Unctad) director, Heiner Flassbeck, based a report he wrote for his organisation partly on Mr Masters' findings.
Mr Flassbeck also pins the blame for much of the increase in commodity prices on speculators.
Mr Flassbeck says: "We have seen people dying, we have seen people starving. That is not acceptable if the reason for that is just betting to gain more money than otherwise you would have gained."
Financial traders buy commodity futures contracts for oil and food for CIFs. That means they buy promises to deliver supplies at some point in the future, eg three months, six months or a year.
But they don't want delivery of the product, because their interest is entirely financial, so they sell the contracts shortly before the delivery date falls due.
And then they buy a new contract in the hope that long-term, the price of the commodity rises.
Trader Sean Corrigan of Diapason Commodity Management claims that Messrs Masters, Obama and Flassbeck fundamentally misunderstood the nature of CIFs and their involvement in futures markets.
He argues that if his firm pushes prices up when it buys contracts, it also depresses the price when it sells before the expiry of the deal.
Traders say oil prices rose because of demand, not speculation
He said: "I have to sell that contract back to somebody in three months' time and that push that I've exerted by buying the futures would very quickly evaporate."
He also argued that half the rise in the value of CIFs resulted from the appreciation of investments rather than new inflow.
And he claimed that the new inflow into CIFs represented a tiny proportion of the overall global oil market, making it impossible to have a significant effect on the price.
He said fundamental demand from users in the real economy drove up prices: "In the last six years, China's oil use has gone up by a half. India's oil use has gone up by a third.
"The Middle East - its own oil use and therefore the detraction from the amount it can give to the rest of the world market - has also gone up by 45%.
"These are significant sums of extra physical demand in the world."
Hunt for 'scapegoats'
World leaders were looking for easy scapegoats, says Mr Corrigan. "Robespierre blamed the speculators, Lenin blamed the speculators and our current leaders are also blaming the so-called speculators."
Pension funds, insurance companies and university endowments are among the main investors in CIFs.
Mr Corrigan says: "When you put a saving into a pension fund, you're hoping that in five, 10 years' time, 20 years' time, whenever it is you draw on those funds, insurance or pension, that you will be able to buy the necessities of life with them. So in a way, we're acting for the ordinary saver and the ordinary pensioner."
The price of oil has now dropped, with food prices recording similar falls.
Mr Corrigan attributes dropping prices to falling demand in the recession. Mr Masters claims CIFs have pulled out of commodities, thus depressing the price in the same way they pushed it up.
But the financial world is changing. Already loopholes allowing US traders to evade curbs on their activities have been closed and before he took up the presidency, Barack Obama promised there is more to come.
And in the UK, as the handling of the banking crisis has shown, there is now an appetite for stricter regulation of the financial markets and that includes commodity trading and speculation.
The Speculators, 1930 on BBC Two, Thursday, 29 January 2009.