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View Diary: Rep. DeFazio GOES OFF! GOP using Bush era ENRON loophole to help Wall St screw you at the Gas Pump (121 comments)

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  •  Check out Matt Taibbi's Griftopia (0+ / 0-)

    There's a whole section on how the Commodities market has been turned into a rigged money making machine for the Big Boys. Forget Enron - Goldman-Sachs is still playing games with the commodities markets.

    Here's some commentary on the book about it.

    Problems with speculation, per Taibbi and the 1936 law that limits commodity speculation, occur when there are too many speculators making too many contracts. Pure investment speculators tend to bet prices will go higher (called "going long") rather than the other way around (called "going short"). When way more people are betting prices go up rather than down, there is no downward pressure on prices at all and demand is falsely skewed upward.

    The problems started under H.W. Bush when the Bush I Administration when Bush appointee and one time managing director at Goldman Sachs helped Goldman Sachs obtain permission to trade in amounts greater than the law allowed. In the next few years, the CFTC issues 16 more letters of permission to various firms. Taibbi claims that by 2008, 80% of the trading activity in the commodity exchanges was speculative, driving prices up.

    emphasis added

    "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

    by xaxnar on Thu Jun 16, 2011 at 03:51:53 AM PDT

    •  Given that the developing world (0+ / 0-)

      is increasing demand for oil, and in the developed world, demand is fairly inelastic, why would anyone bet oil prices would fall?  And if that's so, then shouldn't it follow that speculators are facilitating true price discovery rather than distorting prices?  This isn't to say there shouldn't be regulation or that there aren't abuses, but this discussion rests on a tenuous distinction between the role of speculators and real world supply and demand conditions, implicitly arguing prices should be lower.  

      Given the costs fossil fuel consumption imposes, prices should be higher.  Clearly, they're not yet high enough to wean Americans off of fossil fuel dependence, but it's only a matter of time.  

      "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

      by Loge on Thu Jun 16, 2011 at 11:43:52 AM PDT

      [ Parent ]

      •  Except... (0+ / 0-)

        We're still in a world-wide economic slump. The fact that gas prices have risen and dropped so quickly at the pumps over the last few months is a pretty good indicator speculators are pumping up the market and then cashing in. The time scale is a little too small to reflect global demand trends.

        Like it or not, the commodities market which ideally should smooth gaps between supply and demand has been highjacked by financiers playing games with investors.

        "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

        by xaxnar on Thu Jun 16, 2011 at 05:08:24 PM PDT

        [ Parent ]

        •  Re (0+ / 0-)
          The fact that gas prices have risen and dropped so quickly at the pumps over the last few months is a pretty good indicator speculators are pumping up the market and then cashing in. The time scale is a little too small to reflect global demand trends.

          This is just assumptions on your part, and you have no idea how the market works.

          For every buyer, there is a seller. For everyone hoping gas prices go up, there is a "speculator" on the other side of the table hoping they will go down.

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Thu Jun 16, 2011 at 11:24:25 PM PDT

          [ Parent ]

          •  Perhaps (0+ / 0-)
            This is just assumptions on your part, and you have no idea how the market works

            Or you don't care to believe the market could work any way except your imagined ideal.

            "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

            by xaxnar on Sat Jun 18, 2011 at 05:02:06 PM PDT

            [ Parent ]

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