It's those sharp edges.
Posted on 06/02/2011 8:40:11 PM PDT by Pelham
The wizards of Wall Street have figured out that it’s a lot easier to make a buck off of basic needs—commodities—than corporate paper, and they are fueling another commodities bubble that is pushing millions of people around the globe into poverty and despair. Not content with destroying America’s housing market, they are now forcing us to pay higher prices for gas and groceries.
It’s a Wall Street tax.
The mainstream business press would have us believe higher prices are being driven by the specter of Parson Malthus, who argued more than 200 years ago that food production could not keep pace with population growth. Wall Street analysts describe a “super cycle” in commodities being driven by growth in emerging market economies like Brazil, India, and China. While true to a certain extent, the facts are that the current upward trend in prices and increased volatility is mainly fueled by speculative investment activity from Wall Street. There’s nothing like a good bubble for Wall Street profits, and there’s nothing like profiting on the things people need. From 2000 to 2008, financial flows into commodities increased from $10 billion to $270 billion—an increase of over 2,500 percent! And these same forces that pushed oil and food prices up in 2008 are driving the current commodity bubble.
Recognizing this hot-button issue at the start his next election cycle, President Barack Obama announced he would appoint a taskforce to investigate possible speculation and fraud in the commodity markets. But they won’t find any devious manipulations. Instead, they will find financial alchemy and relaxed regulations which have financialized the commodity markets. Essentially, new financial instruments have allowed investors to circumvent restrictions and profit directly from the price increases in oil and other basic foodstuffs, and the more money that flows in, the higher prices go...
(Excerpt) Read more at artvoice.com ...
An article worth reading. I don’t know if it’s accurate but it certainly appears possible.
“The current oil price spike is being blamed on turmoil in the Middle East and North Africa (affectionately known as MENA) which is supposedly disrupting the supply of oil, causing gas prices to exceed $4/gallon. However, oil storage facilities in Cushing, Oklahoma, one of the largest in the US, are at capacity—it’s awash in oil. Why? Because contango markets make it profitable to buy and store oil, which is exactly what the big players, including Wall Street banks, are doing. Supply is not the problem. It’s the huge flow of speculative money betting on oil, and other commodities, causing increased prices and greater volatility. And, as I argued in a previous piece (“Paging Dr. Bernanke,” Artvoice v9n44), the Fed’s QE2 bond-buying program has added fuel to the fire by raising inflationary expectations, causing investors to put even more money into ETF commodity investments, thus creating a self-fulfilling prophecy.
Wall Street banks have taken control of the futures markets, and the regulators have let them. They make more money when markets are rigged to function more like casinos rather than providing the true economic function of price hedging. Speculative investment flows are the major influence on commodity prices now, and the more money that flows in, the higher prices go, and the more profits Wall Street makes.”
It's those sharp edges.
Commodities can go down as well as up. It’s a risky game. If it were so easy, then everybody should play commodities by way of ETF’s and strategic stocks. It’s not that easy.
The speculators who gave us 147 dollar oil also gave us 32 dollar oil. Works both ways, not just up.
I hear a lot of talk, but with the possible exception of briefly in Libya, where exactly was the supply of oil disrupted? The oil price spiked when Egypt had their revolt because of fears the Suez canal would close.
As far as i can see, all oil exporting nations are still exporting at full speed.
Goldman Sachs “usual suspects” ping
The CME needs to raise the margin requirements to 50% and leave it there. None of this lowering and raising crap like they have been doing. The speculators need more skin in the game.
“The speculators who gave us 147 dollar oil also gave us 32 dollar oil. Works both ways, not just up.”
That’s certainly in the original article. What is new is the author’s explanation of the role of commodity ETFs and the firms that sell them.
They make money when it goes up, and when it goes down.
It doesn’t matter that much to them, as long as there is momentum.
as long as we are whipsawed up and down. The problem as i see it, is that the people who run the money in the country, are fully in charge of government. They largely create the ups and downs by directly manipulating events and governmental policy. That’s very different than true commodity speculation.
I completely agree with that!
I fact, if you think about it, when the market does crash, it will be because they WANTED to let it crash.
Spooky times, indeed.
“I hear a lot of talk, but with the possible exception of briefly in Libya, where exactly was the supply of oil disrupted?”
According the author it’s not being disrupted at all. He maintains that the price of oil is being driven by market innovations that allow investment houses to make huge bets on commodities. They developed a system that lets them get around the old regulations that limited commodity speculation. And the kicker is that ETF investors are the patsies in this game.
Obama causes these problems and now wants to investigate the markets for what? Relaxed regulations? so the answer is what? more government? Obama has contributed to oil going up by suspending drilling in the Gulf and mucking up Eqypt, Libya and the middle east. His policies have also increased inflation which causes speculation in commodities. That's what traders do - they try to anticipate trends.
This article is a distraction form the real problem - the Obama administration
Thanks.
If I have a problem with Goldman Sachs, or similar companies, it’s their daisy chain relationship with D.C.
My problem with this analysis is that it ignores the fact that anyone can bet against any contrived commodities bubble. And there are many people savvy enough to do so.
An author who does not understand the definition of “literally” is not worth reading.
Oil is a case in point. US Government policy shuts down drilling in the gulf, and starts the “arab spring”, creating turmoil in the middle east. Oil spikes and speculators make a bundle.
But im sure the biggest players don’t ever talk to Obama and tell him what to do next. And they sure don’t talk to all the G-S employees in each administration/
And guess who will help Obama with this scapegoating fraud?
Yes you guessed it: The ever-easily-duped “bankers are evil” crowd: helping socialists push their agenda since Andrew Jackson!
The author says the CFTC is planning to make some changes, unless Goldman and their pals have enough muscle to stop them:
“Obama’s taskforce won’t find any wrongdoing because the rules have been changed to meet the needs of investors, not producers and consumers. In fact, the taskforce isn’t really necessary because the CFTC, having taken testimony for the past few months, is about to pass new rules regarding more stringent regulation of the futures markets—like position limit rules and more transparency in trading. This is where the battle will been won or lost for consumers, and of course Wall Street is fighting against the more stringent regulations.
Here’s what has to happen. We need to turn back the clock and ban the products that have allowed huge investment flows into commodities via futures markets which directly impact the prices of goods. It doesn’t take an economist to explain what would happen to prices if the current $400 billion in bets made via the futures markets were reduced to $50 billion. Besides, there are other less pernicious ways for investors to bet on the things we need for survival—simply buy the stocks of the companies that produce things. Higher stock prices won’t kill us, but higher food prices are starving millions. According to World Bank president Robert Zoellick, since June, higher food prices have pushed another 44 million global citizens into poverty.”
Yes, if you cut off certain capital flows for investment using overly restrictive government regulation, all capital flows around world will cease, because risk-seeking capital will stop flowing to investments to seek higher returns.
And government is great at controlling markets with no unforeseen consequences.
I’m sure it will all go exactly according to government’s plans.
For the first time in human history, a government controlling an economy will work!
not.
Why do you think they’re so scared of Palin? She’s going to have to clean the Augeus stables. She’ll have no choice as they’ll be after her for the whole term. They’ll have to fight or run out of the country. I’m surprised people here don’t realize what she’ll do when she’s elected. The gloves are off.
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