The regulation of excessive speculation in commodity markets: what’s at stake
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Professor Greenburg of Johns Hopkins University
- Price volatility is not a demand situation but an issue with casino culture in banks
- Speculative fever does not represent real demand and leads to price distortion
- Supply and demand equilibrium remain the same despite price volatility
- Limits imposed on speculative practices internationally are not enough
- Speculation leads to significant price volatility leading to inability to effectively hedge prices
- In 1991 Goldman Sachs invited wealthy people to bet against the market: they hedge their position by shorting markets; the paper market on oil was 13 times actual oil market
- French, Japanese and Germans are committed to regulating speculation
- Middle East crises has nothing to do with oil price volatility
- Purely based on speculative attack
Sean Cota, advisor to US Congress on regulatory reform
- "You measure bubbles after they collapse, until then it’s supply and demand"
- Botswana to host unregulated markets
- Leverage is good if used correctly otherwise can be destructive; it is a key component of speculation. Market players can get infinite leverage.
- There is a major glut of oil yet prices remain high, demonstrating market distortion of speculation
- Over-financialisation and unregulated markets tend to create disequilibrium and major market distortion
- Regulatory infrastructure needs to be developed
David Frank, financial analyst
- Need to follow evidence
- Level of commodity speculation is unprecedented
- Speculators often engage in spreading investments to make up losses
- Argument that speculation increases liquidity is specious at best
- Amount of hedgers have actually declined while speculators have increased
- Best solution is to allow 30% speculation maximum and to eliminate index funds
