Bless the Speculator ( John Stossel )

townhall.com ^ | June 25, 2008 | John Stossel

[PsyOp]

"The market price of any particular commodity, though it may continue long above, can seldom continue long below its natural price. Whatever part of it was paid below the natural rate, the persons whose interest it affected would immediately feel the loss, and would immediately withdraw either so much land, or so much labour, or so much stock, from being employed about it, that the quantity brought to market would soon be no more than sufficient to supply the effectual demand. Its market price, therefore, would soon rise to the natural price. This at least would be the case where there was perfect liberty." - Adam Smith, The Wealth of Nations, 1776.

Adam Smith - The Invisible Hand Speaks.

[TigersEye]

Finally someone who gets it.

[TigersEye]

This notion that the oil companies should be working diligently to put themselves out of business is just stupid.

It is stupid beyond belief. It is a page straight out of the communist play book. Not to mention that most of the oil companies are foreign owned so invoking their sense of patriotism is idiotic.

[TigersEye]

McCain is a nightmare to Soldiers, Sailors, Airmen and Marines.

The War Secrets Sen. John McCain Hides

[gogogodzilla]

The prices of commodities often change unexpectedly, making business risky. The speculator brings a degree of certainty to otherwise risky ventures. When supplies of a commodity are plentiful and prices low -- but speculators expect the price to rise later -- they buy -- cushioning the collapse of prices. When supplies become scarcer and prices rise, they sell -- easing the shortage and lowering the price. Also, speculators may agree to buy a commodity in the future for a price locked in today. This reduces the risk for an oil producer or farmer who fears investing because he doesn't know what price his product will sell for next year.

---

Whereas in the real world...

When supplies of a commodity are plentiful and prices low -- but speculators expect the price to rise later -- they buy -- TAKING THE COMMODITIES THEY BOUGHT OFF THE MARKET, thus reducing supplies at a time of increasing demand and ensuring a higher rate of price increase.

[Sam Gamgee]

Indeed, McCain has the economic grasp of a 3rd grader. And just because he chaired some government groups means squat. Governments always love to think they know what they are talking about. Is McCain an accountant? A financial planner? What exactly were his qualifications for that job?

[okie01]

What exactly were [McCain's] qualifications for that job?

He spent six years as a POW in Viet Nam.

To be perfectly honest, that's about it.

Just as Obama's primary qualification for the Presidency seems to be the color of his skin, McCain's primary qualification amounts to his experience as a POW.

[Sam Gamgee]

Yeah, and now his campaign want to run the election based on that. What a lack of imagination.

[curiosity]

When supplies of a commodity are plentiful and prices low -- but speculators expect the price to rise later -- they buy -- TAKING THE COMMODITIES THEY BOUGHT OFF THE MARKET,

True, but that's not what happening now. Oil inventories are at about the same level they have been the past few summers.

thus reducing supplies at a time of increasing demand and ensuring a higher rate of price increase.

Not quite. They take supplies off the market when they are cheap, and then bringing it back after the price rises, thereby not only accelerating the price rise, but also mitigating it.

[gogogodzilla]

Not quite. They take supplies off the market when they are cheap, and then bringing it back after the price rises, thereby not only accelerating the price rise, but also mitigating it.

Yes, but by buying the oil... they are, in effect, reducing the amount of oil available for purchase by actual consumers of oil. And by reducing supply, without reducing demand, they are guaranteeing the price increase which they are mitigating.

Not to mention that with the increase in speculation in the oil market, there are now... far more purchasers of oil on the market. That, in effect, is increasing demand.

IE - As an example... Prior to now, there were 5 purchasers for 100 barrels of oil. Now, there are 50 purchasers for the same amount.

You can plainly see how that would affect the markets.

[curiosity]

Yes, but by buying the oil... they are, in effect, reducing the amount of oil available for purchase by actual consumers of oil.

If speculation were driving the price, that is what you'd see happening. It's not, however: oil inventories aren't unusually high right now. They're actually lower than usual for the summer.