Quote:
Originally Posted by legion
Energy traders are pretty much ignoring the underlying supply/demand numbers when bidding up the price of crude. Demand is weak, supply is more than adequate, yet they seem to ignore this and only react to negative news.
The problem is there are too many speculative dollars in the crude futures markets.
Now, I don't want to ban speculators from trading crude futures. They do serve some valuable purposes: they absorb risk and help keep markets liquid. But right now, we have too much liquidity in that market.
What does the Fed do when there is too much liquidity? They raise interest rates to limit the supply and make money more expensive. There are also fractional reserve requirements on banks to maintain minimal liquidity in cash.
In a similar vein, I propose we limit the number of speculative dollars in the crude market to a certain percentage of market capitalization. That means that after the oil producers and refiners, people who never intend to produce or receive only a given percentage of the dollar amounts of future contracts. I was thinking that limiting speculators to 25% would be a good place to start.
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"Speculation" is
not driving the commodities markets to new highs.
Those who actually
take delivery by buying or
sell commodities are responsible for the prices reflected in the futures for those commodities.
The
trillions of dollars the U.S. government has "counterfeited" over the past
decades (along with the trillions of dollars worth of other fiat currencies created by foreign governments) are now finding their way into hard assets.
When more and more people do not want to hold their stored wealth in fiat currencies, government debt, CDOs, SIVs, or some other paper-backed "piece of crap" created by corrupt governments or the thieving financial industry, but instead want
physical goods, the result is a rise in the price (measured in fiat currencies) of those goods.
Complain to the government about the "speculators" -- the government will love the fact that you've bought into their fiat currency con and are now blaming the "free market" for the rising prices!