Why You Need To Try To Understand How Markets Work


On September 29, in the District Court of the District of Columbia, Judge Robert Wilkins threw out U.S. Commodity Futures Trading Commission’s(CFTC) new position-limits rule, sent the regulation back to the agency for future consideration. Wilkins ruled by law, the CFTC, which was required to prove that the position limits in commodity markets are necessary to diminish or prevent excessive speculation—. So why does that matter? It may sound a little technical if you haven’t been following this story, but this decision WILL affect the cost of your food, the cost of your fuel, and many other basic necessities of life.

Position limits are the tool in place to limit Wall Street speculators from gumming up commodity markets. If they are not limited in their speculative bets that they place, they have a tendency to unmoor commodity prices from supply-demand fundamentals.

So, for example, if you look at crude oil, the price of crude oil is way above what it should be if supply-demand just played a role. In fact, you know, most of the big oil companies say crude should be at about $70, $75. It’s now—it was up to $100 this week, went down to $91. The simple point is, look at gasoline, which is the main derivative of oil. You’re paying a premium that has nothing to do with production and has everything to do with lining the pockets of Wall Street.

So position limits say no individual player or finance institution can have more than x percent of any specific commodity market. And that used to be the case, right? Well, it still is the case, ironically enough. But Congress, in passing Dodd–Frank, wanted the position limits to affect a much broader market, which Wall Street uses to speculate on food and energy prices. So the more limited rule is still in effect that emanates from pre-Dodd–Frank. But Congress—well, the question was: did they order the CFTC to put these position limits in effect, or tell the CFTC, only do it if you think it’s necessary and appropriate? And that was the essential issue.

And the argument that the CFTC and many market reformers made, is that Congress couldn’t be clearer that they were very worried about the role speculation was playing in inflating food and energy prices—they demanded the CFTC to do something about it, and they said the vehicle you should use are position limits as appropriate.

However, in this ruling the district court judge said the word “as appropriate” also applies to whether or not you do the project to begin with. So he sent it back to the agency and said, now you’ve got to tell me by a majority vote—it’s a five-person commission; the original rule came out on a three-two vote—now a majority of the commission have to tell me that you’re doing this in a way that’s appropriate. So he’s added a burden on the CFTC and many members of Congress, by the way, to validate a view that was never intended. Can you now see how these banksters and criminals are “rigging” the game, because if the legislation says, do it, you don’t have to study whether you need to do it, and they had a three-to-two vote in the commission, which already agreed with that interpretation. You also need to understand that at one point the CFTC came up to 105 studies that showed unless you limited Wall Street speculation, we were going to have inflationary commodity prices that had nothing to do with supply-demand fundamentals. Duh!

We have gasoline prices as high as $5 a gallon in some regions of the country and food prices are beginning to soar out of sight. However, this does not only deals with what United States citizens pay for their gasoline, their heating oil, their energy products, and their food products, but in the Third World, many Third World countries believe speculation is leading to starvation because it’s so inflating the price of food beyond that which market fundamentals would dictate.

So what this judge has done is essentially set this thing aside. For at least a half-year, maybe a year, we will not have the kind of regulation that Congress demanded. And of course you’ve got the problem that the Republicans are fighting this agency by limiting its appropriations through the House of Representatives so it doesn’t have enough personnel to continue the legal battles  and doesn’t have enough enforcement personnel to police these speculators.

We must not just, as citizens, defer understanding these things because “they are just too complicated to understand” or have the attitude that it only “effects banker and investors” because that is exactly what these banksters and speculators are counting on.  Shock your congressional candidates with your knowledge and demand that they support dictating BY LAW that position limits are to be imposed.  There are already 49 million Americans on food stamps and 1 in 6 Americans go to bed hungry every day now! So what, we are going to wait until half of us are starving and cold?

Advertisements

Author: redhawk500

International business consultant, author, blogger, and student of life. After 35 years in business, trying to wake the world to a new reality. One of prosperity, abundance, and most importantly equal opportunity. it's time to redistribute wealth and power.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s