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Ain't unregulated, free-market capitalism great?
Let's see if any politician proposes regs to block speculation in oil, food, natural gas.
http://www.independent.co.uk/news/wo...3.html?articleSpeculation by large investment banks is driving up food prices for the world's poorest people, tipping millions into hunger and poverty. Investment in food commodities by banks and hedge funds has risen from $65bn to $126bn (£41bn to £79bn) in the past five years, helping to push prices to 30-year highs and causing sharp price fluctuations that have little to do with the actual supply of food, says the United Nations' leading expert on food.
Hedge funds, pension funds and investment banks such as Goldman Sachs, Morgan Stanley and Barclays Capital now dominate the food commodities markets, dwarfing the amount traded by actual food producers and buyers. Purely financial players, for example, account for 61 per cent of investment on the wheat futures market, according to the World Development Movement report Broken Markets.
Speculative investment in agricultural commodities in 2011 was 20 times the amount spent by all countries on agricultural aid. Goldman Sachs, the largest player in the agricultural commodities market, earned £600m from food speculation in 2009, and Barclays Capital, the world's third-largest player and largest British bank in this market, earned up to £340m in 2010, according to the report. Goldman Sachs and Barclays Capital declined to comment.
Before it was deregulated in the year 2000, the agricultural commodities futures market was used mainly by farmers and food buyers seeking to insure themselves against changes in the prices of products such as wheat, maize and sugar. When George W Bush passed the Commodities Futures Modernization Act 12 years ago, there was an influx, led by Goldman Sachs, of purely financial players who had no interest in ever buying food, but who sought solely to profit from changes in food prices, says Olivier De Schutter, the UN special rapporteur on the right to food.
He added: "What we are seeing now is that these financial markets have developed massively with the arrival of these new financial investors, who are purely interested in the short-term monetary gain and are not really interested in the physical thing – they never actually buy the ton of wheat or maize; they only buy a promise to buy or to sell. The result of this financialisation of the commodities market is that the prices of the products respond increasingly to a purely speculative logic. This explains why in very short periods of time we see prices ing or bubbles exploding, because prices are less and less determined by the real match between supply and demand."
Ain't unregulated, free-market capitalism great?
Let's see if any politician proposes regs to block speculation in oil, food, natural gas.
The new oil
That prices are so far removed from 'the real match between supply and demand' is exactly the problem that derivatives have exacerbated time and time again.
A reasonable person might have imagined after the fiscal debacle of 2007-2008-2009 and the ensuing cries for regulation that derivatives would be banned in certain situations, but nooooooo.
And some folks are genuinely upset that the feeble limitations included in the Dodd-Frank bill even exist. In fact, those regulations are nowhere NEAR enough to prevent this type of thing occurring in any market whatsoever, in any financial ins ution whatsoever.
Supply and Demand are the cornerstones of capitalism, and derivatives undermine that very relationship, so why are 'free-marketers' opposed to regulating them?
because "free marketers" are lying. They want "free markets" which are only to their advantage, no matter who they over. That's the inhuman, economic Darwinism face of unregulated capitalism.
If only Europe had Walmart
i heard some rumbling on regulation on how much futures speculation could be done. The main problem as i understand it is that they will buy it from producers at a low cost and then flip it and they will subseuently flip it each time raising the price. The regulations I read was about limiting the flip. Farm lobby is supporting this so it might have some legs but i have heard nothing in months until this from wine.
Good stuff
Keep in mind, commodity go both ways. You can lose money also. Buying a commodity doesn't mean you can sell it for whatever price you want, unless you own a very large share of it. Even then, you will not sell all you buy then. easy to lose money too. Supply and demand still determines the market price.
I think this is mach to to about nothing. For them, it's an investment. Probably safer than so many others.
Creating bubbles that explode due to over speculation is bad for the overall economy. That is exemplified by amongst other things the banking crisis a few years ago. They lost money too.
Its irresponsible. Again you lack critical thinking skills.
Keep in mind that derivatives are nothing other than trading. It is not commodities as such that are being described here.
"Keep in mind, commodity go both ways."
speculators very probably buy insurance against price drop/losses.
They play to win, and they they always win, "win or lose".
Please link an insurance company that covers such things.
AIG sold/sells insurance on Wall St gambling. When Lehman went down and the markets crashed (aka, Wall St lost its bets), Goldman Sacks got paid off with $15B from taxpayers through AIG.
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