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Now the government is waking up and wants to control speculation in the market, especially the commodity sector. Some one tell me how and where will they start. Lets take oil, where we have seen speculation inflating prices as high as 60%, a vast amount of oil future contracts is traded in otc markets, which the cftc do not regulate or account for, and most in ice terminals from europe to usa in which case they can control what is happening in usa only, but not other parts of the world. Secondly how do you know a trade is from a speculator or is for gains through price movements or not. A trade is a trade.... we do not know the motive of a trade. I totally agree that excessive speculation, especially in commodity, is a major problem, but I am struggling to see how can this be sorted out.
Me thinks that the money that POURED INTO the campaign coffers of the winner from Wall Street will result in NO SUBSTANTIAL changes to commodity speculation. However the lack of transparency that is key to "dark trading" will have to happen without backing (as in the "too big to fail") of Uncle Sam.
This means that if Goldman Sachs wants to keeping running its non-public exchanges and the other banks want to participate they are going to have to have a "we'll fix the next screw up our selves" plan or the US DOJ will shut em down...
I think that was the argument that the banks used about 4 years ago and that is not really true. The actual level of portability of these exchanges, public or closed, is rather limited. Once any government gets a taste for the taxes that they could impose on trades and outlines the banking regulations needed for efficient clearing it becomes obvious that you can't run exchanges in a nation that does not have court system like the US. Trust is one thing but being able to efficiently bring suit for bad trades is quite another. The exchanges will be part of the US system and they will be run outside of the normal bank balance sheet. Count on it.
I think that was the argument that the banks used about 4 years ago and that is not really true. The actual level of portability of these exchanges, public or closed, is rather limited. Once any government gets a taste for the taxes that they could impose on trades and outlines the banking regulations needed for efficient clearing it becomes obvious that you can't run exchanges in a nation that does not have court system like the US. Trust is one thing but being able to efficiently bring suit for bad trades is quite another. The exchanges will be part of the US system and they will be run outside of the normal bank balance sheet. Count on it.
I take your point but I think we may underestimate the appetite for other jurisdictions in the developed world (i.e. with a stable and reliable legal system) to supplant the US as the home for these markets. It then becomes a question of whether the pain being inflicted by an enhanced US regulatory regime is sufficient incentive for them to move.
You have to blame the Federal Reserve most for intentionally devaluing the dollar and forcing down US treasury rates. That leaves investors with little else but commodities to hedge their investments against the dollar and inflation. In his congressional testimony, Ben Bernanke explains that he provided foreign banks with 500 billion dollars to keep their banks forced selling of assets from causing a rise in the US dollar and a corresponding fall in dollar-denominated assets such as treasury bonds, commodities, and stocks. A fall in the value of treasury bonds would've caused longer maturity rates to rise and forced the Fed to lift short-term interest rates from zero.
He didn't know who the european central banks were. And he didn't know when the federal reserve act was...."a long time ago", lol.
Grayson could look through Bernanke's ear and see from one side of the room to the other. Nothing in there.
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