“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.”
I know what the butcher, brewer, and baker produce, but what does a non-delivery speculator produce?
Liquidity?
I can’t connect to that like a can to a cold brew and you won’t help me by explain non-delivery speculation = efficiency though liquidity using the Brian Hunter/Amaranth example.
Liquidity?
YES!!!!
efficiency though liquidity using the Brian Hunter/Amaranth example.
Brian was a speculator. His participation in the market made it easier for producers and consumers in those markets to execute their trades at better prices.
I’ve read through all these and I have a theory. Perhaps the best way to understand speculators is with 4x4 trucks on Ebay. There is a market of buyers and sellers which is fairly steady over the long haul. In the fall, prices go up and down in the spring. A speculator will buy in the spring and hold it until the fall to sell it again. The speculator will cause prices to rise in the spring when the prices are low, and cause them to drop in the fall. Overall, the speculator will contribute to equalizing the market and the average will remain about the same. So speculators actually flatten the market for the most part. When it works, speculators contribute to lower prices when market forces are on the high end and higher prices when market forces are on the low end.
The exception to this is when too many speculators get into the market and drive up prices. They can actually cause an opposite reaction and create even higher prices in the fall but there will always be a corresponding dropoff when the market is oversold. Am I close?