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- WordsnCollision, on 06/13/2008, -14/+100If there's any justice, these bubbles will burst - impoverishing the speculators and giving relief to the "common" people. Profiting off misery should be made legally a crime against humanity.
- alapoet, on 06/14/2008, -12/+84Which, as usual, the rich get even richer at the expense of those who are barely getting by.
- mlhams, on 06/14/2008, -7/+57Thank goodness for German publications that actually write for an audience that can concentrate longer than 30 seconds.
- BuzzFriendly, on 06/14/2008, -3/+45This is only an element of the problem. The US could drill for some of its own oil but doesn't, the US could build some refineries but doesn't (last in the built in the 70's). For some reason we would rather buy it from the very countries that hate us. The US doesn't want to build nuclear power plants. The US has these stupid blends of gas that it could stop. The US could stop this idiotic ethanol enrichment but doesn't. The US driving population could throttle its own usage. The US lacks a nationwide mass transit system. The US government and the Federal Reserve needs to stop printing and borrowing money it can't afford to pay back thus de-valuating the dollar. We blame the oil companies at the same time we are pulling up to their pump to give them more money. Buy a motorcycle instead of a SUV. Take a walk, ride a bike, carpool, drive slower. There are many many ways this can be corrected but bitching without action isn't one of them.
- legolas68, on 06/14/2008, -2/+33Dabbling in commodities carries risk. Just as in purchasing a home you intend to "flip".
My fear is that when the bubbles burst (and they will), the common taxpayer will be forced to foot the bill to bail these risky people out. Just as in when the housing bubble burst.
We place shame on speculators but when their speculations bring them to the brink of ruin we bail them out. Where is the inherent risk in that? - chrisbaskind, on 06/13/2008, -19/+47Hello, Capitalism.
- Spektr4, on 06/14/2008, -3/+31They have no where else to put their money. The wealthiest people have, in the last two or three decades, seen their wealth increase at an enormous rate. If you're a guy with hundreds of millions or billions of dollars, it is more money than you can ever spend on yourself. And you don't stuff it under your mattress; you have to put it somewhere.
Conservatives argue that by "putting it somewhere" the rich are performing an essential service to the market. Yes, in theory. But not when this investment money is excessively abundant. It has to find places to go. A few years ago, a lot of it was being funneled into mortgage-backed securities. The investment houses could not keep up with demand, so they pushed for more and more loans to subprime borrowers, eventually creating outright "liar loans" where people where encouraged to be creative in outlining their ability to repay the thing. Wealthy investors didn't even understand what they were buying; they just needed somewhere to park their money.
Of course a huge bubble was created, to the detriment of us all. Now that it's burst, the money needs to find a new place to go. Enter commodities. Now the prices will be driven up. And of course, we all pay.
Why is this happening? Because for decades our policies have enabled the rich to grow their fortunes at a rate unprecedented in history. I'm not trying to be a lefty rich basher here. What I say is the plain truth. They now have, quite literally, more money than they know what to do with--and their investments are no longer helping markets but distorting them and creating bubbles, for which we pay the consequences.
My diagnosis is, we've strayed too far from progressive taxation and regulation. Conservative ideologues don't want to hear that. But this is what their policies have wrought. - inactive, on 06/14/2008, -3/+30so last friday alone demand increased by 7%?
- guyro, on 06/14/2008, -10/+37As I understand, while speculators are behind many rising commodity prices, they can only accelerate existing trends in the short term and cannot be blamed for long-term effects.
The underlying trend is one of "authentic" price rises anyway, due to increasing demand and/or decreasing supply (mostly due to hyper-developing countries). Speculators are riding the wave and thus driving it even stronger, but it's not like prices would go down without them. - dugmartsch, on 06/14/2008, -2/+28This should be terrifying people...
"Signs of unusual behavior abound across the commodities markets. Take cotton, for example. In late February, the price of cotton futures jumped by 50 percent within two weeks. But cotton farmers haven't even been able to sell half of their harvest from the previous year yet. Warehouses in the United States are fuller than they have been since 1966. Indeed, all signs point to a price decline."
If we dont get this under control our economy simply won't make it. It'll be just as bad as having a bunch of bureaucrats sitting in a room trying to figure out what the price of cotton should be...i.e. the worst of what communism has to offer.
I wonder why this hasn't happened sooner. - BRod1, on 06/14/2008, -2/+28It's situations like this that convinced me to stop being a libertarian several years ago. Unregulated markets or even lightly regulated markets simply don't work because some laisse faire capitalists are so morally bankrupt that they basically think, "If what I'm doing makes me money and no one can stop me, there's not wrong with it." Anyway....
Those who make the assertion that supply and demand is at fault feel that demand for oil futures contracts by investors is "legitimate" demand. FYI, I find myself agreeing with OPEC for once: the supply is fine to meet current REAL demand for the foreseeable. It's the supply of oil futures contracts that aren't numerous enough to satisfy the commodity speculators...demand driven by fear and greed.
I wonder what would happen should those who invest in commodity futures be required to show that they can take delivery of the commodity - in terms of not only capability but capacity as well - beging purchased at any moment... - XanderDee, on 06/14/2008, -1/+22Speculation is the result of free money. If I said here is $100,000 go invest it for a year then pay it back to me plus 2% where would you go? You would invest in oil, gold, and other commodities.
This is what the Federal Reserve is doing. Loaning out money via the printing press and it is going into speculation.
If the Fed raised rates to 12% (real inflation) oil prices would drop like a rock as the a safe investment is now bonds and the cost of borrowing to speculate is too hi. - DangerCollie, on 06/14/2008, -5/+26There's capitalism and then there's capitalism run amok. This isn't a supply and demand situation, it's supply and artificial demand. Big difference. The reason commodities are rocketing is that hedge funds and investors had to find somewhere else to go after the sub-prime housing market collapsed.
Speculators jacked the price of housing for millions of people, then went running to Congress for a bail out when the housing market collapsed. And walked away from the mess and left the rest of us to pay for the cleanup.
Now those same people are speculating in commodities. They're like a plague on the financial system. Adding cost without adding any value. It's not a fair market, it's an investment cartel. If you're idea of capitalism is a wealthy cartel adding middleman costs to energy and food without adding any value, then you're seriously out of touch with reality. Instead of earning the cost value they add to products, they're simply out spending you to control the supply of a product, forcing you to pay them a tax on the food you eat. That's not capitalism, actually I don't know what that is. More like fascism. Whatever it is, it's not market driven. And there's no accountability. - Phen0m24, on 06/14/2008, -6/+23Seriously folks, it's called hedging. H-E-D-G-I-N-G. If you want to REALLY look at why cost of living is skyrocketing, go to shadowstats and see how much funny money each government prints, which devalues the dollars in your pocket. THAT is the main driver of why prices go up. Just a little heads up: If you're trading options futures, and the contract settles before you sell it - YOU have to take PHYSICAL delivery of X number of BARRELS OF OIL. You think oil speculators have oil storage tanks in their backyards?? While I agree there is ALWAYS a level of speculation (I call it fluff) in the market - think about how many people were investing in the 90's in tech companies with NO EARNINGS - people are now terrified that either A) the dollar is going to fall off a cliff, so oil is something everyone needs regardless or B) the economy is going to swirl down the crapper but other countries STILL NEED OIL. You make money however you can - you adapt to the current scenarios and you hedge your bets. Be informed - don't just repeat what talking heads fill your brain with every day.
I - SoulDrift404, on 06/14/2008, -0/+17"There are many many ways this can be corrected but bitching without action isn't one of them."
Most people aren't even aware of most of the reasons. So an article like this isn't "bitching without action," it's education, the first step -- making people AWARE of a factor. - saisumimen, on 06/14/2008, -4/+20Capitalism in its purest form creates monopolies. There often needs to be "socialist" checks and balances like the Sherman Antitrust act to keep greed in check.
- inactive, on 06/14/2008, -0/+15 Demand didn't double for oil in the last year. Demand is not skyrocketing for cocoa.
Looks like you don't believe anything you read on the internet. - synarchy, on 06/14/2008, -3/+18The argument for central banks has always been that basing money on precious metals does not provide enough flexibility for expansion of the money supply to fuel "modern" growth patterns in an industrial/post-industrial world economy. (Let's ignore the fact for now that for years there have been alternative options to base money on a basket of commodities [value not debt], which can't be hedged, and which must be able to be delivered on demand, meaning the growing economy itself fuels natural growth in the money supply.)
Well, here we have now reached our first glimpse of the full realization of what central banking (really just a banking cartel, n'est pas?) has brought us:
Central banks now exist for little more purpose than to ensure an endless supply of credit for vast financial organizations that contribute nothing of value to the economy. The loose monetary policy, which now seems unstoppable, fuels speculation, to the point that, as is stated in the article, "The financial industry has disconnected itself from the real economy." But only disconnected in the sense that the obscure financial products being traded are so far removed from the real-world commodity on which they are based, that value is now based more on the prediction of continued growing credit to prop up the financial instrument, and not on the ability to deliver the commodity. This is akin to the bundling of sub-prime mortgages into obscure financial products, which themselves were leveraged to purchase even more obscure paper instruments, fueling enormous speculative bubbles. The problem of course, is that the speculators have forgotten that their enormous house of cards still rests on real-world goods; the notion that the financial instruments themselves is disconnected from the real economy is an illusion, and one that comes crashing down eventually, like when the "little" people default on their mortgages.
When the bubbles burst, the central banks are stuck. They can't escape the political consequences of letting the house of cards tumble, since that -- as we've heard over and over again the last two years -- could bring entire global financial system crashing into chaos. Death! Starvation! The overturn of entire governments! My 401K! Oh my! So, the response is to extend even more credit, and now, with bailouts of investments banks, extending the direct credit of nations to save the speculators, from the consequences of their own avarice.
What a system! The people who actually add value to the economy, who's taxes provide the basis for credit, are slaves to an entrenched financial class that now seems to have manages to maneuver itself into a relationship with the banking cartel such that profits are monetized and make the vampire class richer and richer, while these vampires socialize losses and dump them onto he backs of the taxpaying working classes through inflation and higher taxes.
And those who do this feel quite justified. After all, anyone is free to join their team, right? And, they figure, if you fail to figure that out, then perhaps you just deserve to live as a slave. - brstilson, on 06/14/2008, -2/+15You're just jealous because no one will breed with you.
- ConfirmedCynic, on 06/14/2008, -2/+14In other words, the ultrawealthy, awash in money from first skimming off all the profit from twenty years of productivity gains, and then from creating the credit crisis and running (leaving the government to clean up the mess with John Q. Public's money), are now screwing with us again, at the level of necessities since they've eviscerated higher levels of buying power.
- inactive, on 06/14/2008, -0/+10 Whats happending is part and parcel with inflation. There is so much money floating around between the rich speculators that now that tech and housing have been harvested and they see the economy looking bad they are all pouring thier money into commodities.
Unfortunately the things they see as a safe haven for their capital are what we need to live everyday. This is all just another effect of inflation. The whole mess leads right to the doorstep of the Federal Reserve stock owners, or feudal lords. - gibbwake, on 06/14/2008, -2/+12Its not speculators, its the federal reserve printing out more and more money which is causing the buying power of the dollar to go down, this is the cause of 70% of the rise in gas prices, food and every other commodity to go up. But oil prices in turn causes the price of everything else to go up even more. Buy this book for more info: The Creature From Jekyll Island http://www.bravenewbookstore.com/product_info.php? ...
- govsucks, on 06/14/2008, -11/+21Another excuse for collectivists to force individuals to do something. I swear, every time I hear a collectivist talk about freedom it makes me want to puke. A collectivist wouldn't know what freedom was if it somehow knocked the spit from their mouths.
- Dumbledorito, on 06/14/2008, -0/+9This is something I've seen for a long, long time. Some individuals have mountains of money, more than could even be concieved of by most people... and all they do is blindly invest, which is the equivalent of building a sentient HAL-9000 computer for the purpose of playing video poker with it.
Nobody MAKES anything with their wealth or has a purpose in mind beyond "richer, faster, and screw who I have to step on to get richer, faster." It's like giving a kid a fire hose filled with pixie-stick sugar. It's truly sad that these most successful people have all the foresight and vision of a crack addict looking for his next hit. Build a ***** spaceship, found a university to research dildos made of nanites, SOMETHING. Just find a reason to make money beyond the purpose of making money; there's nothing at the end of that path but misery for the world. - remccain, on 06/14/2008, -2/+11Isn't this exactly what happened about 80 years ago?
- neozeed, on 06/14/2008, -0/+9Wow it's a good thing it has nothing to do with the USD losing 70% of it's value!!
PHEW! - spinchange, on 06/14/2008, -1/+10There are 2 different kinds of speculators- those who always both buy and sell, and the index speculators who pretty much are only buying and holding to keep commodities as an "asset class" and/or to hedge against the US dollar, etc. A lot of new investment capital is being invested in futures that just keep getting rolled forward, creating a kind of "virtual hording" scenario.
This document/testimony from a former hedge fund manger to congress does a good job explaining it:
http://hsgac.senate.gov/public/_files/052008Master ... - inactive, on 06/14/2008, -5/+14 This type of speculating coupled with a fiat money system to provide the inflationary capital has been disastrous to countries in the past. The Jews were kicked out of European countries over a hundred times for this kind of destructive behavior. But how do you kick out speculators? We are in big trouble.
- reeder, on 06/14/2008, -3/+11Neither booms nor busts are accidental. Both are the result of the actions of the Federal Reserve's (and the banking members that run it) constant manipulation of interest rates. When the floor drops on everyone, the banking industry has no problem flooding the economy with new money, as long as it starts out in their hands. And we do indeed end up footing the bill. This is why the rich always get richer, and the richest 1,100 people in the world own twice as much as the bottom 2.5 billion poorest.
Our entire monetary, banking, and financial systems are complete ponzi schemes. It forces the vast majority of the world into poverty. - darkstar949, on 06/14/2008, -3/+11@synarchy - Alright, I'll bite. Capitalism in its purest form is not self-correcting and the reason that it is non-correcting is due to the nature of monopolies. Monopolies work by the entity (e.g. a corporation) getting big enough that it doesn't have to play by the same rules of supply and demand that everyone else has to due to their size - they can dump commodities on the market to lower prices so much that smaller companies cannot survive. Theoretically, under a truly open capitalistic market it is entirely possible for one single entity to corner an entire market and force all of the other competitors until they are all that remains - this is where the concept of "mega-corporations" in science-fiction comes from; namely companies that got so big that they control everything.
- ICSU, on 06/14/2008, -1/+9Talks Hans Rosling: Debunking third-world myths with the best stats you've ever seen
http://www.ted.com/index.php/talks/view/id/92 - funkyloki, on 06/14/2008, -1/+9Do some research. We have half the refineries that we did in the 70's and 80's and we are using more than double the amount of oil. That is UNSUSTAINABLE. It's called market manipulation. Oil companies blame enviromentalists, not being able to drill, and not having enough refinery capability. But keeping the supply artifically low they jack up the price. And then play the blame game in order to shirk responsibility for their actions.
http://rawstory.com/news/2005/Group_Internal_memos ...
http://www.democraticunderground.com/discuss/duboa ...
Does anyone here remember Enron? They manipulated the energies market in California, and were busted for it. They had always blamed the problem of the energy crisis in the 90's on environmentalists, but it turned out that was all *****. - Prosequi, on 06/14/2008, -2/+10That is simply not true - taken as a whole, everyone is better off - some of the wealthy are just better, better off. There is still a great deal of mobility across economic lines, up and down.
- magamiako, on 06/14/2008, -2/+10You do know that this is exactly what they're doing, right? They are buying contracts at a price greater than the market would be willing to pay, the price actually goes up, and then resell it when the price is higher.
It's not really that the "actual price", that is, the TRUE supply/demand price has gone up, it's the TRADING price has gone up. Which is really the core of the issue here. Economies develop and people grow, there is more demand--but there's not enough demand to send the price of oil skyrocketing to 5x the cost of a barrel in a couple of years. - Metasquares, on 06/14/2008, -0/+7"Think about it, how on earth could i make money speculating the price of something to artificially high levels?"
You get out before the price comes crashing back down to what it should have been? - sudhu, on 06/14/2008, -0/+7that is where the gambling comes in. Speculators are gambling that by the time contract delivery comes in, themarket would have frothed up to making a the price of oil actually $130.
- shrewduser, on 06/14/2008, -10/+17non of this makes economic sense, speculation is unsustainable... high food prices are a result of massive increases in demand from newly rich (er) countries like india and china, and the same can be said for oil prices... its really that simple....
Think about it, how on earth could i make money speculating the price of something to artificially high levels? if you can tell me that then maybe this story would make sense, but without actual supply and demand there to back me up i wouldn't be able to change a thing..... - funkyloki, on 06/14/2008, -0/+6Speculators could buy all the inventory at lower costs, drive the price up, and then resell it. And by doing that, they make obscene amounts of money.
It is "speculated" that the cost of a barrel of oil would be about 60-70 dollars. Not good but acceptable. It is double that because of speculation and inflation. - specialK16, on 06/14/2008, -0/+6I am glad you are joking though.
You are, right? - tech42er, on 06/14/2008, -1/+7Absolutely. A completely free market is the best system. If the government bails the losers out, the market doesn't work.
- choochee, on 06/14/2008, -1/+7Oil demand is not the problem. Oil reserves have actually been growing, by 107.8 billion barrels since 2001, and 168.5 billion barrels, or 14%, over the last decade. Global reserves have risen by 36% since 1987. Total global oil demand increased by only 1.1% in both 2006 and 2007, roughly the same rate as the increase in world population, and about half the 2.03% average annual growth in oil demand during the 2002-2005 period. The problem is caused by oil speculators on futures markets. Read this article here...
http://seekingalpha.com/article/81063-1-238-billio ... - inactive, on 06/14/2008, -7/+13It's amazing how many people don't understand how this type of trading works. If someone buys a contract for 1000 barrels of oil for June delivery at $130/barrel, then they either expect to a) sell the contract to someone else for more at some point prior to the delivery date, or b) take delivery for the oil and pay $130/barrel.
Speculators don't take delivery of oil (or other commodities), so the strike price on their contracts are low enough that they can sell them to someone else later who wants to receive the underlying asset at the price outlined in the contract. For speculators to be artificially raising prices, they would have to be buying contracts at a price greater than what the market would otherwise be willing to pay, and they would be getting regular deliveries of oil and would be losing money!
If one wants to see commodity prices to come down, one needs to reduce demand. - inactive, on 06/14/2008, -1/+7 So if the whole economy crashes around you thats all well and good right?
Do the American people just exist to keep the system running so speculators can bang models and jet to mansions around the world? Shouldn't our interests count for anything? Not according to you it seems. - betona, on 06/14/2008, -1/+7Hedging and speculating is critical to the market (somebody needs to make the trades that the hedgers need to make). That said, there are about 35 Billion barrels of oil traded daily by speculators, and the U.S. _uses_ about 20 Million barrels daily. So that gallon of gasoline you put in your car yesterday was bought and sold by traders who had no intention of ever taking delivery about 1,750 times in a matter of hours.
So yeah, I might be inclined to say that right now there is a little Dutch Tulip Bulb mania going on. The trend is your friend and the trend is up. I heard a commodity trader say yesterday that if the news changed--say they suddenly announced the opening of ANWAR for drilling, you'd see a $35-$45/bbl drop overnight purely on emotion. - Spektr4, on 06/14/2008, -4/+10Part of the problem here is that the wealthiest people in the world have more freaking money than they know what to do with. Literally. More money than they can possibly spend, so they need to park it somewhere. It was this need for investment vehicles that drove the subprime mortgage fiasco. The big investment houses could not create mortgage-backed securities fast enough to satisfy investor demand, so they kept lowering and lowering the requirements on mortgage loans.
Now that has crumbled. What is a rich guy to do? He needs a new thing to pump his money into. Enter commodities.
Conservatives argue against taxing the rich too much, saying their investments are necessary for continued growth. Yet we have an over-abundance of investment money with nowhere to go. All it does is create bubbles and drive up costs on all of us. Tax the billionaires! "Government can't spend it as wisely as private investors." *****! At least the government will repair roads and bridges, fund the military, improve healthcare, invest in medical/technological advances with distant profit horizons, etc.
The canard that excess investor money is good for the economy must be revealed for the fiction that it is. - SoulDrift404, on 06/14/2008, -0/+6I'm sure you noticed that perspective is addressed in page one of the article?
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Perhaps this is why there are so many voices seeking to defuse the issue and calm things down, those who admit that speculators are at work in the commodities markets, but who also insist that they have little influence over prices. And if they do have an influence, these people say, it can only be a good thing, because it will force humanity to prepare itself more quickly for the unavoidable: the growing scarcity of resources..."This is not about blame," US Treasury Secretary Hank Paulson recently said. "It's about supply and demand." According to Paulson, "speculators have had very little impact." - korvan504521, on 06/14/2008, -0/+6Actually the jews were ussually kicked out of countries because people didn't want to pay their mortages.
Most countries didn't let jews own land, so they tended to build up liquid assets, and were more likely to be merchants. Agriculture based nobility do not have liquid assets, but need them to manage wars so they'd go to jews to borrow money. Jews were already somewhat disliked for religious reasons, so if a king didn't feel like paying his debts he could simply whip up a mob and chase the jews out.
That's basically what Hitler did as well (except for the taking out a loan bit), and the massive confiscations of assets from jewish families significantly helped fuel his war efforts. - tech42er, on 06/14/2008, -1/+6Still capitalism. Speculation is an integral part of capitalism and there is nothing wrong with it. Government bail outs on the other hand are contrary to the spirit of the market and only destroy the economy,
- Spektr4, on 06/14/2008, -1/+6Speculation can go on for years, feeding upon itself, creating a bubble. How do you think house prices in some areas got so unreasonably high? How do you think tech stocks ran up so much in the 90s?
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