Speculation

More

I'm always skeptical when people who are unhappy about the price of something or other blame "speculators." But the latest issue of Barron's (rarely mistaken for the Daily Worker) has a straightforward explanation of why limits on commodities speculation make sense--basically, because these markets are so small compared to the vast capital available to be invested in them.

The article supports a regulatory distinction between hedgers--those actually engaged in a given business, such as oil or pork bellies, who use commodities markets to insure against risks in the marketplace--and those who merely place bets, an action that provides important liquidity for hedgers and their industries but which, taken to extremes, could severely distort pricing. With respect to agricultural products, the government enforces position limits only on the bettors--the speculators. Barron's suggests it might just as well do the same in oil, where commodity index funds appear to be a major force in driving up prices.

Of course I'm in favor of higher oil prices. I only wish we had the sense to pay them to ourselves in the form of higher energy taxes. That failing, I suppose we'll have to rely on commodities traders and OPEC nations to take our money instead.

Jump to comments
Presented by

Daniel Akst

Dan Akst is a journalist, essayist and novelist who wrote three books. His novel, The Webster Chronicle, is based on the lives of Cotton and Increase Mather. More

Dan Akst is a journalist, novelist and essayist whose work has appeared frequently in The New York Times, The Wall Street Journal, The Boston Globe, Wilson Quarterly, and many other publications.
Get Today's Top Stories in Your Inbox (preview)

The Death of Film: After Hollywood Goes Digital, What Happens to Movies?

You'll never hear the whirring sound of a projector again.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In