Pain at the Pump?
5th May 2008
Those pesky economic bubbles just seem to keep popping up. Then they pop. Things are calm for a little while and then another bubble comes along. There is all this money that wants a home and a “good” rate of return. Now commodities like foods and oil are bubbling.
There is a government commission called the Commodity Futures Trading Commission (CFTC) that is supposed to regulate investment in commodities so that speculators who neither produce nor consume don’t come along and make the prices go crazy. From the US Commodity Exchange Act (CEA)– “Excessive speculation in any commodity under contrasts of sale of such commodities for future deliver…causing sudden or unreasonable fluctuations or unwarranted changes in the prices of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity.” The CEA directs the CFTC to establish such trading limits “as the Commission finds are necessary to diminish, eliminate, or prevent such burden.” Obviously they are not doing their job.
Unfortunately, this commission is a little too friendly with the industry it is supposed to be regulating.
The explosion of “over the counter” futures investment vehicles and trading methods has left any serious regulation far behind. They are exempt from CFTC by a provision insert into legislation by Enron and other large energy companies. (Gone but not forgotten!)
In addition to oil, basic foods such as rice, wheat and corn are being hammered by price increases of up to 100% in the last year driven by rampant speculation.. People can’t eat and commerce is grinding to halt while the speculators are having a ball (and making a lot of money!)
Now food riots are breaking out all over the world. When a family in the third world is spending half their income on food and the food prices double, there is no money left for fuel, medicine, rent, etc. Unless the US and other governments steps in and reasserts regulation of the commodities markets, this mess could bring down the world economy. Worse yet, a lot of people will suffer and some will die to feed the greed of these speculators.