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Friday, October 07, 2011

Speculation and Its Ills

From McClatchy:
WASHINGTON — Having failed earlier this year to impose congressionally mandated limits on excessive speculation in commodities markets, a key regulator on Thursday called on the Obama administration to immediately impose temporary limits on some Wall Street investments.
"We were supposed to have these done earlier this year but have failed to do so," complained Bart Chilton, one of three Democrats on the Commodity Futures Trading Commission.
Chilton is calling for what are known as spot-month limits, which would restrict how much of trading can be done by a single trader or company in contracts for next-month delivery of crude oil, natural gas, wheat or any number of other commodities.
The influx of Wall Street money into commodities markets, some on behalf of large pension funds and other institutional investors, has resulted in financial players far outnumbering the traditional traders in these markets, where producers have sought to protect themselves from large price swings.

Read the speech:

It is not that long and it is necessary for an understanding of what is going on. Earlier this year I sought in vain for some reason that coffee was goin up in price, something like a crop failure or drought, but there was none: it was speculators betting on the price of coffee and seeking to make a profit thereby.

So here's what is boils down to:
We cannot make any interest on our savings that is meaningful anymore.
Speculators may increase their returns by manipulating commodities markets.
So, while they win - or lose - we have to pay out more for basic commodities!

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