Great Article.
Thanks for Posting.
try explaining this simple straightforward point to the lefties or greenieweenies.....
try explaining this simple straightforward point to the lefties or greenieweenies.....
Walter Williams is really good at this.
The speculator is portrayed as 'the ant' buying up food and energy planning for the future when it will be more expensive.
The angry consumer/voter is 'the grasshopper'. He wants low gas prices NOW and doesn't care about the future, if he needs those things in the future then he will just blame who-ever is president at that time. I know many of them. Peggy the Moocher who said Obama would pay for her gasoline is one.
I have heard some more reasonable sounding proposals of limiting speculation that involve how much money a speculator can leverage (borrow) to buy the commodity , not outlawing it all-together.
If the money supply is stable, some prices must drop to compensate for those that are rising -- after all, there's only so much money to spend. But when all prices are rising, you can be sure the central bank is at the root of the problem.
They are merely locking in contracts for oil at a future date, for a predetermined price. Good post!
Excellent post. Thanks.
Speculators have absolutely very little with this current run up in prices.
The entire reason is due to the Treasury Secretary and Fed Chairman's Quantitative Easing. Which has caused the value of the dollar to go below common dirt. There is also a short supply due to World turmoil and high levels of prosperity in Asia and other parts of the World.
All commodities and Food prices have surged up due to QE-1 &2. I would guess then that there should be punitive a tax or penalty for their “greed” and the blame should be given to Farmers, Miners, Grocery Stores and anyone who has been forced to raise prices because of the weak Dollar.
But no, it's just those evil speculators manipulating oil prices?
Later
BUMP for economics lesson at the dinner table...
Oil is traded in US dollars. The reason gas prices are up is because the dollar is down. As Bernanke and company continue to devalue the dollar gas prices will continue to rise. It has nothing to do with speculators or the availability of oil. Have you waited in a line lately to buy gas? OK then there is no gas shortage. If the dollar gets stronger gas prices will go down. But don’t count on that happening anytime soon.
Speculators are a target of great political convenience for the Administration. In one fell swoop they can puncture the bubble and bring down gas prices, allowing Obama to become a hero, AND convince wide swaths of the American people that Unregulated Grrrrreedy Capitalists are the problem and more regulation from Democrats is the solution.
This fool in the WH and his tit sucking advisors don’t have a clue who our system works... Surprised...zero and his minions only understand the marxist view...but of course what do you expect from a muslim stooge...
Other speculators end up buying high and selling low, but cover their losses themselves. The action of speculators will destabilize the market somewhat, but they'll be punished for doing so; the harm they do to themselves will usually exceed the harm they do to the market. Further, the need to avoid severe losses will often discourage investment in apparent bubbles.
Unfortunately, in some markets, some speculators are allowed to buy high and sell low without having to cover all losses themselves. Such speculators are doubly evil--they disrupt what would otherwise be sane markets, and they steal money from whoever ends up having to eat the losses they can't cover themselves. Nonetheless, if speculators have a reasonable expectation of being able to evade responsibility for their losses, it may be in their own selfish interest to invest in bubbles, since the gains by those who guess the timing right may exceed the losses by those who don't (other parties will get stuck absorbing the losses the speculators can't cover, but the speculators have no reason to care).
Markets where people are allowed to speculate without having to cover their own losses are unstable. Unfortunately, the government doesn't seem interested in ensuring fixing the dangers inherent in such markets.