naked capitalism

barbadkatte says:

The ban is more to demonstrate that the Government is concerned about inflation, rather than any hope of getting the prices down.

shargash says:

This is a back door attempt at price control, and it will have the same effect as other forms of price control: hoarding, shortages, and extreme volatility on the spot market.

The “observers” mentioned in the article are correct: prices are being driven by fundamentals. Speculators don’t drive commodity prices, they anticipate them. They are, however, convenient scapegoats for governments trying to duck responsibility, the public who wants to blame someone, and analysts who don’t understand the fundamentals.

Anonymous says:

“Chickpeas futures surged 89 percent in the past 12 months on the National Commodities exchange, while rubber rose 41 percent and soybean oil advanced 21 percent in the period.”

That kind of price increase is speculative — especially for chickpeas. To me it does indeed appear that speculators, looking towards inflationary hedges, are creating a self fulfilling prophecy that has no referent to the underlying good being traded.

Note also that the volumes and prices in other less traded futures immediately surged after the ban. That’s immediate evidence of speculative funds and not a sudden increase in demand for these other underlying commodities.

Too much speculative capital has been distorting markets — real estate, lending, etc… — all over the world.

Too much new capital, the $500B that the FED swapped for illiquid securities, the $100B from the BOE, plus the ECB’s contribution (don’t remember the number offhand) have created a huge pool of capital looking for a home.

Anonymous says:

Nobody really knows whether commodity prices are rising because of supply/demand issues or speculation. Let’s see if it works.

Richard Kline says:

Yo Aaron K., we’re thinking alike on this one, yessir. Western Central Bankers have pushed ‘liquidity’ into financial markets—but it’s pooled at the top, not trickeled down into the debt markets. That liquidity is acquired a real neg rates, plus it’s acquirers are paying interest back to the Central Banks to have the use of it at all: doing nothing just loses Big Finance dough in a situation where they _must_ get return in excess of their capital cost. The flow to ‘hard assets’ seems a real, necessary, and all but desperate process, although these latecomers are just following hedgies and private wealth folks who’ve made the same play for awhile and who will get most of the gains. That the speculative buying of demand-driven commodities only builds momentum works well, if you’re a speculator and if you sell your future while the slingshot is accelerating. Oh BTW, inflationary loose money policies of _some_ central banks narrows the asset range that hot spec dough can throw itself at with prospect of making bread.

I have no love for speculators at all, and their acts are not benign, but misapplied central banking to flood equity when we have a solvency issue is the floor of the elevator which keeps rising under spec prices. To me, anyway.