If You Buy Something

[Guest มร หล&#3]

Commodities speculators threaten the world with a man-made poverty. They can use basic human needs as gambling chips, bidding up the price of materials without having to take physical delivery of what they are buying.

Considering QE printed money going in all uncontrolled directions, this could be viewed in the future as mass murder as it drives people into starvation.

This is not a statement, but a question.

Should the commodities futures markets be scrapped?

Edited June 1, 2009 by มร หลบเลี่ยง

[Victor_Broom]

Scraped or scrapped good sir?

[Guest มร หล&#3]

Scraped or scrapped good sir?

Thank you, Victor.

[Patfig]

Commodities speculators threaten the world with a man-made poverty. They can use basic human needs as gambling chips, bidding up the price of materials without having to take physical delivery of what they are buying.

Considering QE printed money going in all uncontrolled directions, this could be viewed in the future as mass murder as it drives people into starvation.

This is not a statement, but a question.

Should the commodities futures markets be scrapped?

Indeed it is a bit of smoke and mirrors isn't it.

[jonpo]

commodities markets = currency / physical commodities

now if someone (e.g bernanke krugman brown et al.) greatly increases the supply of money and all this money is used to bid for physical commodities.

then who is the murderer? the (in this case) rational speculators ? or the good fellows who armed then with capital an created the conditions to speculate ??

say what you like about markets but they do focus the minds of producers/consumers

http://bioage.typepad.com/.shared/image.ht...9/dotapril2.png

[Guest มร หล&#3]

Indeed it is a bit of smoke and mirrors isn't it.

I didn't really have an issue with it until it was clear government was totally bent and the politicians were the financiers puppets.

Now I'm worried.

[Guest มร หล&#3]

commodities markets = currency / physical commodities

now if someone (e.g bernanke krugman brown et al.) greatly increases the supply of money and all this money is used to bid for physical commodities.

then who is the murderer? the (in this case) rational speculators ? or the good fellows who armed then with capital an created the conditions to speculate ??

say what you like about markets but they do focus the minds of producers/consumers

http://bioage.typepad.com/.shared/image.ht...9/dotapril2.png

But it's not the market. The market is someone who buys copper to make electrical cable to sell to some else who wants to plug something into the power socket.

[Victor_Broom]

Do you mean just take the 'spot' price on the day then?

If I am a farmer who grows wheat and barley, how would I know if it is a sensible move planting next years crop? Or even selling this years?

I first need to commit to fuel, labour and seed costs to sow a certain amount of acres. How would I arrive at the area I would like to sow? Following that, I have fertilizer and spray costs. Each of which are not fixed. As in, if I know the price will be good, I could maybe add an extra dose of herbicide etc., to maximise yield. The next commitment being harvest. Once all done and I come to sell it, I may only get £80/ton when it cost me £85/ton to produce.

Ok, so I wait. The price might go up. Or it may not. Do I take the hit and then still commit to next year aswell?

I understand what you are saying. How would it operate without a futures market though?

[InternationalRockSuperstar]

http://en.wikipedia.org/wiki/Onion_Futures_Act

Onion Futures Act

The Onion Futures Act (7 U.S.C Chapter 1 § 13-1]) is a United States law banning the trading of futures contracts on onions. It was passed on August 28, 1958, and remains in effect as of 2009[update].

This law is notable as the first and only ban on the trading of futures contracts of a specific commodity in United States history, and as a unique modern case with which to study the effects of the existence of an active futures market on commodity prices. In particular, proponents of futures markets often claim that they serve to stabilize otherwise volatile commodity supplies (and thus, prices) by providing a market-driven consensus mechanism for future price estimation. The conclusions drawn in subsequent studies of the effects of the Act upon price volatility have been mixed.

The law was enacted after national protests from onion farmers who accused the futures traders at the Chicago Mercantile Exchange of cornering the market for onions, a form of market manipulation that they claimed resulted in absurdly low prices for their crops.

The law was proposed by Republican Congressman Gerald Ford, who later became the President of the United States.[1]

Effect on price volatilty

The ban provided academics with a unique opportunity to study the effect of an active futures market on commodity prices. Holbrook Working concluded that onion prices had been less volatile during the years when the contract was active than previously.

Roger Gray, a professor emeritus of economics at Stanford University and an expert in agricultural futures markets, analyzed the effects of the ban in 1963 and concluded that the existence of a standardized futures contract had reduced volatility in onion prices while they existed compared to after the ban went into effect.

A subsequent 1973 study by Aaron C. Johnson contradicted that result and concluded that onion prices were less volatile throughout the 1960s than when the contract had been traded.

[Patfig]

I didn't really have an issue with it until it was clear government was totally bent and the politicians were the financiers puppets.

Now I'm worried.

and rightly so

[Guest มร หล&#3]

Do you mean just take the 'spot' price on the day then?

If I am a farmer who grows wheat and barley, how would I know if it is a sensible move planting next years crop? Or even selling this years?

I first need to commit to fuel, labour and seed costs to sow a certain amount of acres. How would I arrive at the area I would like to sow? Following that, I have fertilizer and spray costs. Each of which are not fixed. As in, if I know the price will be good, I could maybe add an extra dose of herbicide etc., to maximise yield. The next commitment being harvest. Once all done and I come to sell it, I may only get £80/ton when it cost me £85/ton to produce.

Ok, so I wait. The price might go up. Or it may not. Do I take the hit and then still commit to next year aswell?

I understand what you are saying. How would it operate without a futures market though?

That's what it was meant for. Did well too. Kept prices relatively stable.

But . . . . well you understand my fear that this system may be abused to leverage a bubble in human needs to off-set the losses in the burst housing bubble.

[Patfig]

That's what it was meant for. Did well too. Kept prices relatively stable.

But . . . . well you understand my fear that this system may be abused to leverage a bubble in human needs to off-set the losses in the burst housing bubble.

That's very cynical Mr P

[Guest มร หล&#3]

That's very cynical Mr P

I believe when you're cynical, everything becomes clear.

Right off to garden centre now, turf! I'll be back later.

Edited June 1, 2009 by มร หลบเลี่ยง

[Patfig]

I believe when you're cynical, everything becomes clear.

Right off to garden centre now, turf! I'll be back later.

Dont let the grass grow under your feet

[jonpo]

That's what it was meant for. Did well too. Kept prices relatively stable.

But . . . . well you understand my fear that this system may be abused to leverage a bubble in human needs to off-set the losses in the burst housing bubble.

lets say I control the wheat market in london the price is 100quid a ton and I 'speculate' and put the price up to 1000GBP per ton for the Sept09 contract by purchasing 1000000 lots of wheat futures....

well what happens here ?

• investment bankers will purchase vast quantities of wheat on over seas exchanges and charter large 'boats' to deliver it...

• Farmers worldwide reduce the soya and other commodities they are growing to produce and plant wheat which the simultaneously 'sell forward' to me at 1000 per ton.

• grainstore keepers worldwide will also deliver their grain in london to lock in the 'stupidly' high price.

• consumers of grain e.g. beer and bread companies may raise prices thus reducing demand..

the upshot is that by attempting to control the market im likely to just end up loosing 100's of millions. and taking delivery of tones and tones of grain worth far less than i bought it for...

a corner is much more likely when supply is strictly limited e.g. in the case of VW shares...

commodities markets have a pretty good reputation when it comes to price manipulation (of making people bankrupt who have a go)...

there are good reasons commodities markets are more 'clubby' than finance... speculators are often lunch...

Edited June 1, 2009 by jonpo

[ParticleMan]

Mr P, price controls create the same effect as supply failure; you probably don't want that.

What you probably do want, is for producers (ie, sellers of forwards) to price their contracts correctly (ie if "speculators" are making money by trading the contracts - then ipso facto they have been leaving money on the table in that regard).

[Dave Spart]

Thought about this sometime ago.

AFAIK, futures contracts were designed to offer farmers a guarantee on the price of the produce they harvest.

What they have developed into is just another out-of-control genie that can't be put back in the bottle.

[Dave Spart]

Deleted.

Edited June 1, 2009 by Dave Spart

[Dave Spart]

Deleted.

Edited June 1, 2009 by Dave Spart

[Guest มร หล&#3]

Mr P, price controls create the same effect as supply failure; you probably don't want that.

What you probably do want, is for producers (ie, sellers of forwards) to price their contracts correctly (ie if "speculators" are making money by trading the contracts - then ipso facto they have been leaving money on the table in that regard).

Particle's,

Price controls are mentalism as you suggest. I like how futures work so long as the system is not abused using QE money.

[DrGUID]

OK Mr Wiseguy, tell me why onion prices are going up.

[Guest มร หล&#3]

OK Mr Wiseguy, tell me why onion prices are going up.

Onion blight?

You know what I mean though.

[lowrentyieldmakessense(honest!)]

That's what it was meant for. Did well too. Kept prices relatively stable.

But . . . . well you understand my fear that this system may be abused to leverage a bubble in human needs to off-set the losses in the burst housing bubble.

its the money printing that is the problem

[lowrentyieldmakessense(honest!)]

Particle's,

Price controls are mentalism as you suggest. I like how futures work so long as the system is not abused using QE money.

yep price controls are mentalism

who keeps trying to control the price of money

[Guest sillybear2]

Should the commodities futures markets be scrapped?

Yes! Scrap prices are sky high at the moment.

Oh.