“In a completely free (and totally nonexistent) market, speculation might act to stabilize prices. In the real world, the one with the birds and the light and the air and stuff, speculators destabilize such markets, or at least elevate prices and create disequilibria.”
Not to get into economic theory too much (because you’re too much of a realist for it, though apparently are also a master of it), but who ever said prices are supposed to be stable? Heck, I always figured that stuff about equilibrium was a model to contrast with reality, to show people what markets are aiming for, rather than arriving at. I also always figured that the better way to shoot for your dreams and get to equilibrium was not to pursue stability, but rather its opposite: an endless process of trial-and-error.
Of course you’re not going to have stability, but if we’re going to have instability, I say let it be because of real shifts in demand, NOT PERCEIVED SHIFTS. Speculators create artificial shifts in the demand curve (you got me back on theory, hope you’re happy) in an attempt to anticipate a real shift. This is a recipe for a mess - they will either make an error (anticipating a rightward shift when there is a leftward shift) or cause a rightward shift larger than real demand merits, all in the name of lining their pockets. They produce nothing via all this activity, they only flip bits in a bank account’s electronic register. You, I, and everyone else in America pay for this activity, to our detriment. Let the market work by responding to real demand.