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Austin, TX
Experience: Advanced
Platform: TradeStation
Trading: Futures
Posts: 839 since Mar 2011
Thanks Given: 124
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Again,
This is a spurious argument.
Goldman Sachs is not driving up the cost of food and neither is their derivatives....
What's driving up the costs of food worldwide is the number of mouths to feed.....
Speculators are anticipating the fact that we can't increase food output indefinitely. The way you combat this is A) Realize that more people = more demand = perfectly natural that food prices go up.....
B) Increase food supplies beyond market needs in order to drive out speculators.
Speculation does add volitility to markets, but it CAN NOT indefinitely alter the underlying physical reality of supply/demand.
To assume so, assumes that every "speculator" thinks the same and that they're all holding hands together in a concerted effort to drive up food prices. Eventually, someone breaks rank and the whole thing unravels and falls back to normal prices.
One need only look at the housing markets to see this phenomenon at work. Eventually, the excess supply overcame the frenzied demand and look what happened....prices came back to face the reality of the physical supply in the marketplace.
Speculators make markets choppy and volitile, but to argue that they've driven prices up for an extended period of time seems a bit foolish to me. Eventually, these greedy speculators begin to disagree and the whole thing comes crashing down.
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