Exploiting it is what gives it value... The solution to the problem you see is raising the cost of extraction rights, people buying less stuff and being willing to pay more (relative to their labor) for the stuff they do buy.
Then you could take it as a powerful argument for the regulation of anything.
The problem with the argument that everything should be extensively regulated is that it assumes government can be trusted to do what is best for society in general. Which, based on past history, is one hell of an assumption.
So increasing the minimum margin requirements makes it easier for non-millionaires to invest? No.
In a properly functioning system: Lower margin = higher risk and all is fine. Unless you think margin requirements are the reason our system is not functioning properly, your "solution" just makes everything worse.
Correlation does not equal causation. The prices of everything plummeted... Perhaps there was a common cause. If many debts were being defaulted on there was simply less money around leading to deflation. If consumers had less money to buy petroleum products the demand will drop. Then a bunch of new money was created so people had more to buy stuff and speculate with sending the prices back up.
The costs of almost everything you mention have been rising exponentially since the 1970s. The economic crisis is not over, the Fed just increased the money supply by many times generating a bubble on top of the deflationary spiral. More resources will now by allocated inefficiently until the crash resumes. It remains to be seen how long this game can be played. The "markets know best" needs to be understood in the context of a system that has seen bubble after bubble pumped for decades. We are so far away from a free market that the concept is almost irrelevant to analyzing what is going on.
Mass change in lifestyle will happen quickly if the cost of oil spikes, thus lowering demand and bringing down oil price. I do not want things to go down this way, but it is the default solution to the problem. It is inevitable unless one of the other three scenarios unfold.
I do not actually "want" money. I use my bank account to store wealth, this is a crappy way of doing it since the interest I am paid is far below the rate at which the USD depreciates. People who buy condos and rent them out do not actually want to live in the condo, they want the future source of income. It makes perfect sense to store your wealth in a thing you think will appreciate rather than depreciate in value.
People will just stop investing in stocks except "sure bets" thus discouraging innovation and encouraging the rise of huge conglomerates and monopolies... The price of commodities would jump around tens of percentage points since the market is so illiquid. People are already storing the commodities. The speculators must either sell it or pay someone to store it. If you want them to be forced to store it in their office (illegal to pay someone else to store it), I don't know what to say. The world you propose would be Idiocracy X 10
Why is this such a widespread "solution". Someone is already being paid by the speculators to store the oil. For some reason you want to force the actual person to store it themselves in their office or something... it makes no sense. The idea is literally nonsense.
How is this not happening? Someone is storing the commodities somewhere and the cost of storage is factored into the price... You are just saying that every individual trader needs to negotiate with the storage center rather than one doing it and the others buying contracts off him/her. It really does make no sense.
It is not an "excuse" for the price. It is people betting that the price will rise more often than that it will fall. There are numerous reasons the price could fall:
1) Huge unexpected oil reserve found. 2) Breakthrough in some alternative energy technology 3) Mass change in lifestyle 4) A Major industry converts to natural gas, etc.
Compare the likelihood of the above with the likelihood of:
1) USD will inflate 2) World population will grow, increasing demand 3) Oil supply will continue to be used up
I think it is likely the price of oil is below its true value.
The only reason this works is because the actual, true demand for oil can be counted on to continue rising at a pace faster than the supply. If a sudden breakthrough in solar panels occurred, all those people holding oil futures would get screwed. As long as the government doesn't bail them out, all is fine.
Why can't they hire someone else to take possession on their behalf?
Who is selling the "oil" without holding the oil? Somewhere down the line there is a person being paid to store the oil and this is factored into the price. So the system you describe is what we have now.
Yes, it is called speculating on the future supply and demand. One is widely expected to go down and the other is widely expected to go up. The spot supply and demand estimates are only part of the equation.
Yes, the current system is unfair and does not provide proper recourse to smaller players. That is why I said "change the rules" and "or something". Perhaps pricing the externalities into extraction permits would be a better solution.
The only reason the "externality" of limited supply is not factored into the price would be government intervention. All signs point to rising prices in the future: Limited supply, growing population, USD inflation. These are obvious.
I agree it makes no sense to sue over that. It is not really an externality like pollution, etc. As for being a "public good" then the government should charge more for oil rights and use that money to fund it's activities providing for the general welfare.
Well I clicked the first link and it claims 135 billion undiscovered technically recoverable oil. So you are off at least by a factor of 10. Either that or the estimates of "undiscovered" resources vary so wildly as to be meaningless.
Also, it requires resources to get the oil from the ground and refined. Oil that is more difficult to extract and refine requires more resources devoted to these tasks. Does your calculation take this into account?
So if the speculators were causing a drop in gas prices would the politicians be just as willing to step in and regulate?
That article is strange because it looks for "who to blame". It appears that when regulations are side stepped, energy prices rise dramatically. Why should we not assume that this is actually the market taking future supply into account?
Slashdot Mirror
Exploiting it is what gives it value... The solution to the problem you see is raising the cost of extraction rights, people buying less stuff and being willing to pay more (relative to their labor) for the stuff they do buy.
Or it is high because at the same time the oil is running out and more and more people want it.
Then you could take it as a powerful argument for the regulation of anything.
The problem with the argument that everything should be extensively regulated is that it assumes government can be trusted to do what is best for society in general. Which, based on past history, is one hell of an assumption.
If you accept his premise that the study is flawed then why would you continue to make the claim?
So increasing the minimum margin requirements makes it easier for non-millionaires to invest? No.
In a properly functioning system: Lower margin = higher risk and all is fine. Unless you think margin requirements are the reason our system is not functioning properly, your "solution" just makes everything worse.
This makes no sense.
Correlation does not equal causation. The prices of everything plummeted... Perhaps there was a common cause. If many debts were being defaulted on there was simply less money around leading to deflation. If consumers had less money to buy petroleum products the demand will drop. Then a bunch of new money was created so people had more to buy stuff and speculate with sending the prices back up.
The costs of almost everything you mention have been rising exponentially since the 1970s. The economic crisis is not over, the Fed just increased the money supply by many times generating a bubble on top of the deflationary spiral. More resources will now by allocated inefficiently until the crash resumes. It remains to be seen how long this game can be played. The "markets know best" needs to be understood in the context of a system that has seen bubble after bubble pumped for decades. We are so far away from a free market that the concept is almost irrelevant to analyzing what is going on.
Mass change in lifestyle will happen quickly if the cost of oil spikes, thus lowering demand and bringing down oil price. I do not want things to go down this way, but it is the default solution to the problem. It is inevitable unless one of the other three scenarios unfold.
I do not actually "want" money. I use my bank account to store wealth, this is a crappy way of doing it since the interest I am paid is far below the rate at which the USD depreciates. People who buy condos and rent them out do not actually want to live in the condo, they want the future source of income. It makes perfect sense to store your wealth in a thing you think will appreciate rather than depreciate in value.
People will just stop investing in stocks except "sure bets" thus discouraging innovation and encouraging the rise of huge conglomerates and monopolies... The price of commodities would jump around tens of percentage points since the market is so illiquid. People are already storing the commodities. The speculators must either sell it or pay someone to store it. If you want them to be forced to store it in their office (illegal to pay someone else to store it), I don't know what to say. The world you propose would be Idiocracy X 10
Why is this such a widespread "solution". Someone is already being paid by the speculators to store the oil. For some reason you want to force the actual person to store it themselves in their office or something... it makes no sense. The idea is literally nonsense.
The hedge fund manager would just pay someone else to store it or find a buyer... which is what is already happening.
How is this not happening? Someone is storing the commodities somewhere and the cost of storage is factored into the price... You are just saying that every individual trader needs to negotiate with the storage center rather than one doing it and the others buying contracts off him/her. It really does make no sense.
It is not an "excuse" for the price. It is people betting that the price will rise more often than that it will fall. There are numerous reasons the price could fall:
1) Huge unexpected oil reserve found.
2) Breakthrough in some alternative energy technology
3) Mass change in lifestyle
4) A Major industry converts to natural gas, etc.
Compare the likelihood of the above with the likelihood of:
1) USD will inflate
2) World population will grow, increasing demand
3) Oil supply will continue to be used up
I think it is likely the price of oil is below its true value.
The only reason this works is because the actual, true demand for oil can be counted on to continue rising at a pace faster than the supply. If a sudden breakthrough in solar panels occurred, all those people holding oil futures would get screwed. As long as the government doesn't bail them out, all is fine.
Who is selling the "oil" without holding the oil? Somewhere down the line there is a person being paid to store the oil and this is factored into the price. So the system you describe is what we have now.
Yes, it is called speculating on the future supply and demand. One is widely expected to go down and the other is widely expected to go up. The spot supply and demand estimates are only part of the equation.
Yes, the current system is unfair and does not provide proper recourse to smaller players. That is why I said "change the rules" and "or something". Perhaps pricing the externalities into extraction permits would be a better solution.
Haven't dealt with them yet.
The only reason the "externality" of limited supply is not factored into the price would be government intervention. All signs point to rising prices in the future: Limited supply, growing population, USD inflation. These are obvious.
I agree it makes no sense to sue over that. It is not really an externality like pollution, etc. As for being a "public good" then the government should charge more for oil rights and use that money to fund it's activities providing for the general welfare.
Well I clicked the first link and it claims 135 billion undiscovered technically recoverable oil. So you are off at least by a factor of 10. Either that or the estimates of "undiscovered" resources vary so wildly as to be meaningless.
Also, it requires resources to get the oil from the ground and refined. Oil that is more difficult to extract and refine requires more resources devoted to these tasks. Does your calculation take this into account?
The seller/producer still needs to compete with other seller/producers as well as the seller/producers of other energy sources.
So if the speculators were causing a drop in gas prices would the politicians be just as willing to step in and regulate?
That article is strange because it looks for "who to blame". It appears that when regulations are side stepped, energy prices rise dramatically. Why should we not assume that this is actually the market taking future supply into account?
Where do "we" buy the oil that gasoline is made from?