Can you blame "speculators"?

Jun 04, 2008 Published under China, Economics, Environment, Global, United States

I was initially persuaded by media and pundit assertions that what is behind this meteoric rise in raw materials is at least connected to "speculation" – ie, hedge funds plowing in billions into commodity future contracts and other financial investments that make the goods artificially rise in cost.

But look at the Deutsche Bank chart (which my law school buddy Stanley Haar shared with me) below.

Exchg vs. Non-Exchg prices

Non-Exchange traded commodities have risen more than those traded on exchanges. Unless hedge funds are also buying the physical goods in all these sectors, the more likely culprits are sheer global over-consumption and over-consumerism.  For years the mantra was that we should only hope the rest of the world will have a standard of living that is closer to the Western world’s.  Now that India and China are more than catching up, we are learning how this taxes our planet.

A better plan would be for all of us to learn to live just a little bit more modestly and less wastefully

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  1. Even the Wall Street Journal Can Make Mistakes in Economics | Daniel Lubetzky said:

    [...] know if speculators are indeed behind the roller coaster ride of commodity pricing.  And prior posts in this blog have pointed to arguments against blaming them.  I just found it entertaining [...]

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