Hostility Towards Commodity Speculators

[DarkWaters]

I saw this article on CNN.com this evening. Evidently, Barack Obama is reiterating his clarion call for "21st century regulations" on Wall Street by insisting that he wants focused regulations on oil speculators.

Unfortunately, because the Republican Party is also actively embracing an anti-big business mentality* and there does not seem to be anyone offering a moral defense of commodity speculation beyond serious Objectivists, I dread that there is going to be an ugly politically-driven crackdown against oil speculators during the next administration.

*from Former Senate Majority Leader Bill Frist calling for "windfall profits" taxes on oil while he was in office to John McCain running campaign commercials today that insist that he will "hold CEOs accountable" for unspecified crimes.

[ruveyn ben yosef]

The problem is that speculation looks like gambling to most people. Gamblers do not produce anything, they simply move money from here to there by a series of risky undertakings.

The way for speculators to defend themselves is to show that their activities lead to useful capitalization of productive businesses.

ruveyn

[Steve D'Ippolito]

...to say nothing of enabling producers of the commodities to hedge the risks inherent in operating in a "shit happens" environment.

[KendallJ]

The way for speculators to defend themselves is to show that their activities lead to useful capitalization of productive businesses.

This is a pragmatic defense of capitalism, and it will no work. Especially since I think speculation is a myth. It is the smoke screen that those people who wish to regulate the market use to clamp down. And since your call to arms reaches no one's ears, the defense of it will be: nothing.

Speculation, just like "profit taking" is a myth. People who gamble at what he market is going to do don't drive price anywhere. People who gamble out of ignorance are statistically split. People who "gamble" based upon knowledge of the odds are not speculators.

Long-run speculation is a myth and I smell a rat.

Edited June 23, 2008 by KendallJ

[~Sophia~]

This is a pragmatic defense of capitalism, and it will no work. Especially since I think speculation is a myth. It is the smoke screen that those people who wish to regulate the market use to clamp down. And since your call to arms reaches no one's ears, the defense of it will be: nothing.

Speculation, just like "profit taking" is a myth. People who gamble at what he market is going to do don't drive price anywhere. People who gamble out of ignorance are statistically split. People who "gamble" based upon knowledge of the odds are not speculators.

Long-run speculation is a myth and I smell a rat.

From another thread here:

The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum. Goldman Sachs and Morgan Stanley today are the two leading energy trading firms in the United States. Citigroup and JP Morgan Chase are major players and numerous hedge funds speculate. High rollers speculators like Pan Arab Petroleum under the agressive command of Robertino Medici, trades the Dubai crude in a rather new oil exchange, the Dubai Mercantile Exchange (DME).

link to original post

[KendallJ]

hmm from someone who only has one post, and cited nothing??? Still sounds fishy. His assertion is one of conspiracy theory. I've got he original senate committee report that seems to have fueled this debate and I'm going through it.

Needless to say I think Snerd conceded too early.

I'm still not buying it. The poster does't understand the futures markets. All futures markets are many times greater (by orders of magnitude) than their resulting underlying asset markets, and have been since before this whole issue arose. This is not "new" demand. The poster's claim amounts to "anyone who trades in futures is a speculator". The evidence belies that since futures markets have been around since long before this whole episode.

[DragonMaci]

When you get right down to it regardless of whether or not they drive up the price of crude oil, they are doing nothing morally wrong. They are trading value for value in a voluntary and mutually advantageous trade. That is moral action. I think that is the most important consideration in this issue.

Edit: I clarified the wording.

Clarification: My point is that it doesn't matter whether or not they raise prices. What matters most is that whatever they are doing, it is a moral action that all parties involved benefit from. Well, with the exceptions of those that make bad decisions, in which case they pay the prices for their mistakes. By "they" I merely mean the people trading on the Futures market.

Edited June 24, 2008 by DragonMaci

[KendallJ]

Someone point me to this "they"!!! Who is "they"?

[Zip]

Someone point me to this "they"!!! Who is "they"?

Come on Kendall, you know who they are. They are the ones summoned by the statists to justify constraining your liberty. They are called out by the socialists to exemplify the inherent inequality and excesses of the capitalist. They are the *others* pointed at by the nationalists and they are always, always the cause...

Look no farther, they are the ones to blame.

[DragonMaci]

Here in NZ "they" are the petrol companies. The NZ government, which is heading towards a mixture of Communism and Fascism very fast, is going to do an "inquiry" into why petrol companies (apparently) raise prices quicker than they lower them. But petrol companies get just 8% of the price of petrol in NZ and that covers both costs and profits. The government on the other hand gets 40%. So, in short, the inquiry is a smoke screen. So is all government talk about "they".