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Thread summary:

Commodities futures market being flooded by investment bankers and foreign investors, futures market regulated to keep out fund managers and investment bankers

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Old 04-25-2008, 03:09 PM
 
Location: Chino, CA
1,458 posts, read 3,062,672 times
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Are commodities futures really a good thing? I believe the purpose for futures markets is to reduce volatility and to ensure some sort of contract on delivery for farmers/producers goods.

But, has it really been a good idea for Investment firms to be able to get in on the action? I don't know when futures markets became "Open", but it looks like the purpose of the futures market has been spoiled by the mass amounts of "investment" capital poured into them.

Speculators/Investors don't really want the actual goods... ie. gold, silver, corn, rice, wheat, etc. They are in those markets because all other markets are currently in limbo. With no where else to put money, they are bidding against each other in commodity markets to maintain Investment Fund returns.

Unfortunately, behind these commodity markets are actual goods that are consumed by people, produced by people, and bought by countries. Should Fund managers and Investment banks be able to participate in a market that they aren't even part of or know enough about? The end result of all their bidding is an over production (mining/drilling) of commodities/grain. Once they leave these markets for "Better" returns... all that is left is over production, surplus, and "ghost" towns for the actual producers (hmm...sounds familiar doesn't it - housing?).

Should investors/investment banks be regulated in terms of which markets they are allowed to be in? Or is it really a free for all... Drain... and then move on market?

Sizzling commodities market puts heat on farmers : Retail : Ventura County Star (http://www.venturacountystar.com/news/2008/apr/19/sizzling-commodities-market-puts-heat-on-farmers/ - broken link)

I guess there is waaaaay too much money out there... foreigner's or the rich are just too rich! We should tax/tariff them!

-chuck22b
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Old 04-25-2008, 03:12 PM
 
Location: Raleigh, NC
9,043 posts, read 12,047,858 times
Reputation: 1395
Quote:
Originally Posted by chuck22b View Post
Are commodities futures really a good thing? I believe the purpose for futures markets is to reduce volatility and to ensure some sort of contract on delivery for farmers/producers goods.

But, has it really been a good idea for Investment firms to be able to get in on the action? I don't know when futures markets became "Open", but it looks like the purpose of the futures market has been spoiled by the mass amounts of "investment" capital poured into them.

Speculators/Investors don't really want the actual goods... ie. gold, silver, corn, rice, wheat, etc. They are in those markets because all other markets are currently in limbo. With no where else to put money, they are bidding against each other in commodity markets to maintain Investment Fund returns.

Unfortunately, behind these commodity markets are actual goods that are consumed by people, produced by people, and bought by countries. Should Fund managers and Investment banks be able to participate in a market that they aren't even part of or know enough about? The end result of all their bidding is an over production (mining/drilling) of commodities/grain. Once they leave these markets for "Better" returns... all that is left is over production, surplus, and "ghost" towns for the actual producers (hmm...sounds familiar doesn't it - housing?).

Should investors/investment banks be regulated in terms of which markets they are allowed to be in? Or is it really a free for all... Drain... and then move on market?

Sizzling commodities market puts heat on farmers : Retail : Ventura County Star (http://www.venturacountystar.com/news/2008/apr/19/sizzling-commodities-market-puts-heat-on-farmers/ - broken link)

I guess there is waaaaay too much money out there... foreigner's or the rich are just too rich! We should tax/tariff them!

-chuck22b
You said it. There's too much money out there.

Don't blame futures traders. Blame Helicopter Ben.
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Old 04-25-2008, 03:16 PM
 
Location: Chino, CA
1,458 posts, read 3,062,672 times
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Originally Posted by ViewFromThePeak View Post
You said it. There's too much money out there.

Don't blame futures traders. Blame Helicopter Ben.

Are you saying that the billions given to banks/investment firms ... which are suppose to be pushed out to the people/small business, etc.. through loans, credit lines, etc.... are being diverted to commodities? I think that may be a possibility and part of it, but there are other "monies/currencies" involved...... could we have some regulation here on these "free markets" before another crash happens in the food stuffs and commodities market? Please?

Next we'll see farmers going out of businesses because they can't selll the millions of tons of over produced food... or mines closing because they have way too much iron ore, or other things.

-chuck22b
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Old 04-25-2008, 03:29 PM
 
Location: Raleigh, NC
9,043 posts, read 12,047,858 times
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Quote:
Originally Posted by chuck22b View Post
Are you saying that the billions given to banks/investment firms ... which are suppose to be pushed out to the people/small business, etc.. through loans, credit lines, etc.... are being diverted to commodities? I think that may be a possibility and part of it, but there are other "monies/currencies" involved...... could we have some regulation here on these "free markets" before another crash happens in the food stuffs and commodities market? Please?

Next we'll see farmers going out of businesses because they can't selll the millions of tons of over produced food... or mines closing because they have way too much iron ore, or other things.

-chuck22b
Put the world on a gold standard, see what happens to commodity prices.

Every country is inflating their currency. America is just doing it much quicker and lying about it through altered CPI methodologies or outright suppression of data (M3).
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Old 04-25-2008, 03:50 PM
 
Location: Chino, CA
1,458 posts, read 3,062,672 times
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Quote:
Originally Posted by ViewFromThePeak View Post
Put the world on a gold standard, see what happens to commodity prices.

Every country is inflating their currency. America is just doing it much quicker and lying about it through altered CPI methodologies or outright suppression of data (M3).
I don't think the gold standard is that great. Let's say we are all of a sudden put on a gold standard.... and that $890 is 1 troy ounce... and the Fed or other central banks can not produce any more money.

That means, the level of growth in the economy is limited to the fixed amount of Gold in the world. So, in a sense, the pool of global wealth is "Fixed". That sounds great and all, because in theory there shouldn't be any inflation and definitely less volatility.

But, for example, if I produce gadget A and sell it for X ounces of gold then I get a profit of X ounces of gold. What if, through technology, investments, etc... I'm able to produce two gadgets A at the same costs. That means I can get twice as much gold for the cost of one gadget. I've gained an efficiency gain and therefore can make more gold for less gold costs. Growth through efficiency/productivity.

Another example, what if population is 5, and then there's kids, and it grows to 10. With the "Fixed" gold standard, the population that grew all of a sudden diminished or killed their "wealth" level in half. Gold Standard would kill population growth - vise versa if there are 5 people there'd be wars/fights to be the "One" person that has all the wealth.

Basically, using a "Fiat" currency allows for "efficiency/productivity" gains and population gains for growth. It's the Solow Model, or Exogenous Growth Model. Without a "controlled" currency... human kind has no opportunity for growth. Solow Model states that economic growth is possible through technology or population growth or simply "productivity".

-chuck22b
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Old 04-25-2008, 03:54 PM
 
Location: Raleigh, NC
9,043 posts, read 12,047,858 times
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Quote:
Originally Posted by chuck22b View Post
I don't think the gold standard is that great. Let's say we are all of a sudden put on a gold standard.... and that $890 is 1 troy ounce... and the Fed or other central banks can not produce any more money.

That means, the level of growth in the economy is limited to the fixed amount of Gold in the world. So, in a sense, the pool of global wealth is "Fixed". That sounds great and all, because in theory there shouldn't be any inflation and definitely less volatility.

But, for example, if I produce gadget A and sell it for X ounces of gold then I get a profit of X ounces of gold. What if, through technology, investments, etc... I'm able to produce two gadgets A at the same costs. That means I can get twice as much gold for the cost of one gadget. I've gained an efficiency gain and therefore can make more gold for less gold costs.

Another example, what if population is 5, and then there's kids, and it grows to 10. With the "Fixed" gold standard, the population that grew all of a sudden diminished or killed their "wealth" level in half. Gold Standard would kill population growth - vise versa if there are 5 people there'd be wars/fights to be the "One" person to have all the wealth.

Basically, using a "Fiat" currency allows for "efficiency/productivity" gains and population gains for growth. It's the Solow Model, or Exogenous Growth Model. Without a "controlled" currency... human kind has no opportunity for growth. Solow Model states that economic growth is possible through technology or population growth.

-chuck22b
The industrial revolution, the highest real rate of GDP growth in America's history, occurred while we were on a gold standard.

The amount of money can grow in relation to population. You could theoretically run the entire world economy on 1 ounce of gold, given an electronic standard.

Inflation, IMHO, merely sacrifices future prosperity for growth today. It also creates more volatility in the markets with larger boom/bust cycles thus creating an otherwise unnecessary need for further regulation.
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Old 04-25-2008, 03:58 PM
 
Location: Chino, CA
1,458 posts, read 3,062,672 times
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The amount of money can grow in relation to population. You could theoretically run the entire world economy on 1 ounce of gold, given an electronic standard.
There you go... that is not a Gold standard. If money grows with population X dollars won't equal X amount of gold anymore.

Inflation/Deflation is caused by the amount of demand/supply of a product/service/good. Even with a gold standard... if there was only one more Grain of Rice in the world, and 20 people vying for it... the price they'll pay even in a limited fixed value of gold would be infinite.
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Old 04-25-2008, 04:17 PM
 
Location: Raleigh, NC
9,043 posts, read 12,047,858 times
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Quote:
Originally Posted by chuck22b View Post
There you go... that is not a Gold standard. If money grows with population X dollars won't equal X amount of gold anymore.

Inflation/Deflation is caused by the amount of demand/supply of a product/service/good. Even with a gold standard... if there was only one more Grain of Rice in the world, and 20 people vying for it... the price they'll pay even in a limited fixed value of gold would be infinite.
All I'm saying is that the value of the existing gold increases with additional population.

Also, gold is mined and discovered at a rate somewhat commensurate with population growth.

Production growth brings more food (monocropping, etc). Of course, the Earth might only be able to maintain about 1-2B population post peak oil, depending on whether a viable alternative is discovered. If by some miracle, cold fusion is somehow possible, all energy problems go away tomorrow and we only have population growth limited to space to grow food.
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Old 04-25-2008, 04:29 PM
 
Location: Great State of Texas
86,068 posts, read 76,995,336 times
Reputation: 27653
The gold standard worked for us. Go read The Monster of Jekyll Island for a good story.
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Old 04-27-2008, 11:39 PM
 
48,508 posts, read 88,832,394 times
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Why not the crude oil standard as gold seems to have loss it's luster. maybe that will make them open drilling areas and quite whining .
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