Commodities traders caused starvation and malnutrition for 200 million people

[hammerntongues]

Again, this is the whole point. Hence bubbles.

Your last sentence is not correct - speculators tend to act with a herd mentality. Studies have been conducted on this - one of the biggest influences on the behaviour of commodity traders is the behaviour of his or her immediate neighbour. Hence bubbles and crashes.

Its not just commodity traders tho LBJ its human nature , people buying houses at the top of the market , they are not commodity traders , people do get caught up in the moment but ultimately reason prevails and things revert to a supply / demand equilibrium .
At present there is more demand for grains and sugar and oil and cotton and meat and bauxite and many other commodities but it is not because there are commodity traders it is because there has been a major change in global economies.

 

[littlebabyjesus]

Its not just commodity traders tho LBJ its human nature , people buying houses at the top of the market , they are not commodity traders , people do get caught up in the moment but ultimately reason prevails and things revert to a supply / demand equilibrium .

And in the meantime, people die. That's the whole point!

Reason doesn't prevail, though. The underlying 'real' conditions assert themselves and boom turns to bust as the herd's mood swings from one extreme to another. Nowhere is reason prevailing in any of this - the price just swings from one side to the other of what one might consider a 'rational' price.

 

[Blagsta]

"human nature", lol

 

[A Dashing Blade]

Good article here written by someone who knows a thing or two. Warning, his arguments are back up by actual data!

The Relationship Between Commodity Futures Trading and Physical
Commodity Prices
Lecture given by Dr. Henry G. Jarecki
April 5th, 2011

 

[Blagsta]

You still seem to be under the impression that economics is ideologically neutral.

 

[A Dashing Blade]

Whether they get it 'right' is neither here nor there.

Can blade say incisive without saying anything herself?

I'm a great fan of information asymetry.

 

[ymu]

You really couldn't make this comment up! .

Were you jumping up and down yelling "stop this madness before it destroys us all" for the last 30 years?

Cos if not, at best, you are an incompetent, under-educated naif who is too fucking gullible to be allowed out alone, and whose opinion on anything financial is, by default, extremely suspect.

A case you are proving admirably on this thread.

 

[Yuwipi Woman]

The price of what? The future or the underlying? If the latter then what exactly do you think the mechanism is?

Go back and read the original quote again (or perhpas for the first time). It's right there in the previous sentence.

 

[littlebabyjesus]

I'm a great fan of information asymetry.

Do you have an opinion on the evident, persistent irrational behaviour of investors as they half-blindly follow what their neighbour is doing out of fear of being left out?

What effect does this have on commodity prices? Does it cause volatility in price up and down over time? If so, what effect does a short-term, irrationally based price rise in food have on real people with real bellies to fill? Do you have an opinion about that?

To me what you are saying is nothing more than 'the market knows best', the kind of empirically provably wrong guff that Thatcher used to come out with. Do you accept that this is nonsense?

 

[Fruitloop]

Good article here written by someone who knows a thing or two. Warning, his arguments are back up by actual data!

The Relationship Between Commodity Futures Trading and Physical
Commodity Prices
Lecture given by Dr. Henry G. Jarecki
April 5th, 2011

I'm halfway through but it seems a bit straw-man. No-one claims that trading in futures invariably pushes up commodity prices, or that by limiting speculation major price adjustments in the underlying can be entirely avoided.

 

[ymu]

His opinion is worthless. Hus entire career is built on the sand thrown in his eyes by his now 50% richer bosses who taught him how to create bigger booms so they could gorge on the bigger busts.

He's a useful idiot. Never bothered to think for himself, just believe what he's told. Essential qualities for a well-paid lackey, of course.

It's why he still assumes he has credibility. Clueless to the nth.

 

[Ae589]

You don't do you?

Is this more of you 'teasing out the truth'? You seem to have pigeonholed me. Maybe in the pub we'd have a more cordial conversation.

What do you mean by that?

I mean that the negative effects of this speculation would be accepted by public finances, instead of by the people who caused them, the speculators. It's a sticking plaster, rather than a solution (although obviously better than the current situation).

 

[littlebabyjesus]

I mean that the negative effects of this speculation would be accepted by public finances, instead of by the people who caused them, the speculators. It's a sticking plaster, rather than a solution (although obviously better than the current situation).

Social insurance, paid for by the state, would not be affected at all by speculation.

 

[Ae589]

It's not really about regulating commodity prices as you frame it.

The problem is the investment banks, hedge funds and other speculators that create the volatility that futures are meant to hedge against. Cut off their supply of cheap funding, and much of the problem disappears. Less volatility, less need to buy futures to hedge against it.

That's why we need higher capital reserve requirements and separation of retail and investment banking.

It would be a great start.

 

[Ae589]

Social insurance, paid for by the state, would not be affected at all by speculation.

If you think that speculation leads to people being poorer, and you want the state to financially support them when it does, then an increase in speculation will mean more funds needed from the state.

 

[littlebabyjesus]

If you think that speculation leads to people being poorer, and you want the state to financially support them when it does, then an increase in speculation will mean more funds needed from the state.

No. You provide a system whereby people are given pensions whose value is not dependent on speculation. Butchers can correct me if I'm wrong, but I'm pretty sure this is what he means - not 'bailing out' people whose private pensions have gone wrong, but replacing the need for anyone to have a private pension in the first place. Barbara Castle attempted such a scheme with the SERPS.

 

[A Dashing Blade]

Do you have an opinion on the evident, persistent irrational behaviour of investors as they half-blindly follow what their neighbour is doing out of fear of being left out?

Yes . . . they are muppets.

What effect does this have on commodity prices?

Up if the crowd is buying, down if they are selling.

Does it cause volatility in price up and down over time?

Volatilty decreases in a trending market (think about it!).

If so, what effect does a short-term, irrationally based price rise in food have on real people with real bellies to fill? Do you have an opinion about that?

cf the article I linked to earlier

To me what you are saying is nothing more than 'the market knows best', the kind of empirically provably wrong guff that Thatcher used to come out with. Do you accept that this is nonsense?

Straw man argument, go back to GO, do not collect £200

Scratch that, I see it's not a straw man. My answer . . . depends on the market (eg for state provided healthcare certainly not)

Anything else?

 

[A Dashing Blade]

His opinion is worthless.

He's presenting a theory backed up with data. That is not an opinion.

As an aside, I'm trying to remember where I read a rebuttal argument to his ideas, will post a link when I do (pretty sure it was in Bloomberg magazine from earlier this year, problem is their on-line data base isn't easily searchable).

 

[littlebabyjesus]

Yes . . . they are muppets.

They are human beings. That's all. And this is how markets operate. You can't just deny that and theorise as if it doesn't happen.

 

[hammerntongues]

"human nature", lol

Why the LOL Are you suggesting that it does n`t exist at all or just not in commodity trading ?

 

[littlebabyjesus]

Up if the crowd is buying, down if they are selling.


Volatilty decreases in a trending market (think about it!).

The ups and downs get bigger. In terms of the deaths of people unable to afford to eat, this is the important point.

 

[Ae589]

No. You provide a system whereby people are given pensions whose value is not dependent on speculation. Butchers can correct me if I'm wrong, but I'm pretty sure this is what he means - not 'bailing out' people whose private pensions have gone wrong, but replacing the need for anyone to have a private pension in the first place. Barbara Castle attempted such a scheme with the SERPS.

I'm talking about developing country farmers, directly affected by the price of commodities, needing extra support, which would not be needed if the price had not shot up..

 

[A Dashing Blade]

The ups and downs get bigger.

You ask questions, I answer and then you alter your original question!
Which "ups and downs" are you referring to, the peaks and troughs of a cyclical 10 year cycle or those within an individual up/down trend

 

[Blagsta]

Why the LOL Are you suggesting that it does n`t exist at all or just not in commodity trading ?

I'm making the point that "people buying houses at the top of the market" is a very new phenomenon in human history. To say it's "human nature" is absurd.

 

[littlebabyjesus]

I'm talking about developing country farmers, directly affected by the price of commodities, needing extra support, which would not be needed if the price had not shot up..

If you remove a large chunk of speculating capital from the system, such price hikes won't happen in the first place.

 

[A Dashing Blade]

They are human beings. That's all. And this is how markets operate. You can't just deny that and theorise as if it doesn't happen.

You asked my opinion and I gave it. I'm not denying or theorising anything, just answering your question.

 

[Blagsta]

You asked my opinion and I gave it. I'm not denying or theorising anything, just answering your question.

There's that neutrality again.

 

[littlebabyjesus]

You ask questions, I answer and then you alter your original question!
Which "ups and downs" are you referring to, the peaks and troughs of a cyclical 10 year cycle or those within an individual up/down trend

Fair enough. I shall clarify. I mean the peaks and troughs. The system-wide booms and busts.

 

[littlebabyjesus]

You asked my opinion and I gave it. I'm not denying or theorising anything, just answering your question.

That wasn't the kind of opinion I was seeking. The opinion I was seeking was your opinion as to what effect this very evident source of irrational behaviour has on prices and on real people. How can you talk about this without considering one of the main drivers of the fuck-ups?

btw If you think such people are muppets and that you yourself are immune to such irrationality, you are either a supremely strongly willed person, or a fool who does not realise the forces that act upon him and his decision-making processes.

 

[A Dashing Blade]

I'm making the point that "people buying houses at the top of the market" is a very new phenomenon in human history. To say it's "human nature" is absurd.

South Sea bubble and Tulip-mania are centuries old. But, top of head, I'd say that speculative bubbles can only exist within some sort of capitalist (post-fuedal?) society, therefore your statement is impossible to disprove.