Discussion about this post

User's avatar
Overcoming Bias Commenter's avatar

If you follow the link nick (Nick Szabo) gave, you will read that the biggest of the recent investors in commodities have been pension funds, which hold the savings of ordinary people -- most of which do not belong to the "rich actors" that Phillip Huggan seems to want to pin the blame on.

Also, can Phillip document his implication that if credit were unavailable for the purpose, then investors would not have run up commodity prices in recent months and years? Yes, I know that historically professional commodity traders have made heavy use of credit: it seems though that the recent flight to commodities is the doings of investors other than commodity traders as traditionally conceived.

Expand full comment
Overcoming Bias Commenter's avatar

The main cause of the oil price rise from $8 a barrel ten years ago to $135 now, is that there are credit forces that case oil prices to rise too much and fall too much, and that this whipsawing does not also occur in planning oil refineries. When prices were $8, no one built refineries. No there are no refineries.I know the real concern here is over the last two years. But the Netherlands have $10/gallon oil (they pay the social costs of pollution) yet enjoy a much higher standard-of-living than Americans. So I think the recent ruckus is just politicians trying to gain brownie points; is a non-issue to me.

I agree there is no manipulation, but I don't see why CFTC shouldn't regulate commodity markets. Without controls on how credit can interface with traditional capital, you get hedge funds tanking price signals in the long-term. You give credit to rich actors on the assumtion it will help them create even more wealth using the same processes that assumingly allowed them to get rich in the first place. But these actors are using novel processes to "invest" their credit in ways they clearly don't understand as well as they understood their traditional capital field that got them rich.

Expand full comment
22 more comments...

No posts