This is from Gene Epstein, Barrons economic editor who is Mr. Optimistic (I’ve called him pollyannish) free-market guy who says speculation is causing food and energy bubble:
“Much as I hate to agree with any politician who blames the speculator whenever goods get too dear, which usually amounts to shooting the messenger, Homeland Security Committee Chair Joe Lieberman unfortunately had a point when he accused speculators of “artificially inflating the prices of food and fuel futures.
The rules the CFTC should enforce are position limits that specify the maximum number of contracts in a given market that any single speculative entity can hold. These limits, which generally amount to about 2% of all contracts outstanding, are set for a good reason: The commodity markets are too small to absorb an excess of speculative dollars. Even at current inflated prices and a near-record level of trading interest, the total contract value on all domestic commodity exchanges comes to only $960 billion. By way of comparison, even at current depressed prices, the total market capitalization of all domestically traded stocks tops $13 trillion.
History teaches that regulatory commissions often become hostage to the very industry they’re supposed to regulate. In that regard, it’s worth noting that CFTC Commissioner Jill Sommers is a former Head of Government Affairs at the International Swaps and Derivatives Association.
Say that legislators do ride herd over the CFTC by requiring that it enforce position limits. Even if, as proposed, the rules were phased in slowly, Briese fears an anticipatory collapse in prices that could drive the swaps dealers into bankruptcy. While that would hardly be welcome, the decline in food and energy prices would provide welcome relief to consumers.”
Even he has become cynical, fearing that regulators are beholden to their industry!!
