yeah futures magazine. that's about the 25th article they wright about how innocent speculators are. wonder why
only blaming the U.S. Government (monetary policy) for rising oil prices is quite frankly too simple. or was the printing machine on full blast till mid 2008 and then shut off all the sudden? didn't think so either.
Why 70, why not benchmark it to 120$? As I see it, if price doesn't stay high, human race will only race ahead to finish off oil quicker than ever. Let the prices go still higher. Living happily ever after doesn't mean cheap petrol.
Speculators do not have a good or bad side. But when the party is over they all rush to the exit at the same time. This is what is called a crowded trade.
As you said before, we need higher oil prices to develop alternative energy supplies. In the end oil will be replaced for various reasons: price, impact on environment, changed demand structure. I have never understood, why you need a vehicle of 2 short tons to move around 1 passenger of 200 pounds. 90% of the energy is used to move the vehicle!
The answer lies within game theory. Let me try to explain.
You need a heavy vehicle, because in case of an accident, the passengers of the light vehicle will suffer from a greater decelaration than the passengers of the heavy vehicle. Also the heavy vehicle will probably have superior stability. This induces everyone to buy a heavy vehicle, which in turn increases the danger for all other vehicles. The additional safety of the large vehicle is immediately consumed, as it is only a transfer of safety from other drivers to the buyer of the heavy vehicle.
Defection in a n-person prisoners dilemma means that you gain an advantage by defecting. Defection - buying a larger vehicle - is a dominant strategy in terms of a Nash equilibrium. However, if everybody drives a heavy car, there is no advantage for anybody. The outcome does not guarantee Pareto-Optimality.
The problem here is that the sanctions for non-cooperative and selfish behavior are insufficient. This game is a repeated prisoner's dilemma, so in the long term cooperative strategies will be superior to defective strategies. However, a social and moral norm - for example appropriate laws - is needed to support the development of cooperation. This in turn is not understood by a lot of stupid politicians - let us call them liberals - who think that market autoregulate towards an equilibrium.
Markets never find the optimal solution - the nervous breakdown of CL today was just another example -, markets cannot be Pareto-Optimal, they need to be tamed. The same applies to the American - and other - people. Let alone they achieve the Nash-Equilibrium, which is not really what we need.
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Game theory applied to political science is a fascinating topic Fat Tails. I saw an incredible presentation by Bruce Bueno De Mesquita where his computer program (focused largely on self interest dictating decision making) calculated that Iran would get a nuke but not use it. He wrote a book called "The Logic of Political Survival" that, if anything like his speech, will be great for those who have a mind for game theory.
I wonder how the political representation of a country would come into play under game theory for your idea of highly regulating (Americans need to be informed not "tamed") an aspect of life as important as personal transportation.
In the 70's America made the best "affordable" cars in the world. Then there was year after year of emissions regulation adjustment that literally made them start from scratch. Some people worth listening to know of US politicians, who were heavily invested in Japanese car makers using motorcycle engines at the time, but now they dominate the US market. Mean while, many American made cars in the 90's proved heavier isn't always safer; it's where the car caves in on impact.
In the 2000's Bush offered tax breaks for gas guzzlers and some people worth listening to feel he benefited greatly.
Maybe both examples are a partial result of our dependence of foreign bond buyers and it was an issue of shorter term foreign dependence leading to longer term. Still there are a lot of questions as to how the restrictive "cooperative strategies" would be decided on and to what benefit.
Do you know of a game theory stand out who focuses on investing?
On a side note, maybe it's a matter of different definitions, but how are you or any of us not a speculator?
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