DITTO. Market was design for users of oil to lock in prices, not non users to use it as a casino to distort the swings to the point that they cause recessions and booms.
So this is the difference? I knew Oil was always traded but didn’t realize the difference.
So it was only intended for the USERS of oil?
Wasn’t the change that allowed this to happen in the year 1999? I thought I heard Dick Morris talk about this once.
Hardly.
Commodity market was originally designed for users to guestimate future prices, lock them in by buying them to support their business needs. It allows the miners/producers to get cash up front from the users to continue operations so the product will be available down the line. It does serve a legitimate purpose. Now if we add someone who borrows money to buy the commodity futures and uses a computer program to drive buy and sell in minutes. All these investors do not even touch the product but use the system to make a quick buck. They create a feeding frenzy and drives the prices drastically up or down, and the main users of the commodity are caught in the the maelstorm. Imagine running a trucking line for grocery stores and your gas bill can swing 50 percent every quarter. Imagine what it does to the prices of groceries and what it does to the consumer.