Well, it turns out the reluctance of Bush's skeleton-crew Commodities Futures Trading Commission to investigate the causes of the oil-price spike, much less to take action, is allowing "hedge funds and big Wall Street banks" to buy up oil contracts at rate that has made their demand for oil contracts comparable to the increase in demand attributable to China(!) over the last five years, with consequences that are likely to be devastating for the rest of us...
The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying, a prerogative traditionally reserved for airlines and trucking companies that need to lock in future fuel costs.
Not only are these firms exempt from limits on speculation, but the Bush CFTC has barely even investigated what they're doing. (Indeed, the CFTC, according to the article, has dropped to its lowest levels of staffing in 33 years. Shocker.)
As a result, the people who brought you the internet and later the housing bubbles have moved on to commodities (the current food crisis may also be a result of the same development):
Commodities have become especially enticing to investors as the credit crisis has roiled other investment opportunities such as stocks and debt-related securities. The recent flood of investment money has transformed the markets for oil, as well as uranium, wheat, cotton and other goods, into a volatile realm that some insiders call the Wild West of Wall Street.
Unfortunately, when the oil bubble bursts, there will be devastating consequences for banks, pension funds and universities:
The recent craze in commodity investing is partly due to the emergence of commodity index funds, which act like mutual funds except they hold futures contracts rather than stocks. Such funds have made commodity purchases far easier for a wide range of investors, including hedge funds, investment banks, pension funds and university endowments.
George Soros, one of the nation's leading investors, testified in a Senate hearing this week that index funds were contributing to the rapid rise in commodity prices and were possibly creating a bubble. If it were to burst, sending prices tumbling, the fallout could wreak havoc on banks, retiree funds and colleges across the nation.
"I find commodity index buying eerily reminiscent of a similar craze for portfolio insurance, which led to the stock market crash of 1987," Soros said.
Once again, the American population and institutional pillars of our society will be left holding the bag, while speculators make a killing. A parting gift from President Bush to his most loyal cronies. (There is brief mention of thus-far ineffective efforts in Congress to push the CTFC to do more.)
Full article here.
This would be a great issue for our nominee to take up on the campaign trail....