Last night, a guest on Colbert made some comments on commodity speculation. As someone who makes his living trading, I had a lot of reactions on her opinions on commodities speculation, especially because my entire trading strategy is commodities focused. The general message of the interview was that commodities speculation was driving up the price of goods and subsequently adding to the current turmoil in the world. I completely disagree with her analysis. Here is a very brief summation of my perspective. If you have questions, I'll try to answer in more detail. In order to combat deflation, the fed engaged in QE and QE2, with the goal of inducing more demand. They explicitly stated they wanted inflation, but one cannot choose where inflation goes. The idea is that if there is inflation, people won't hold onto cash because that cash is losing value. They must then spend it or invest it. The fed can induce inflation by expanding the money supply but they cannot control where that money goes. They focused on creating demand by creating money while the supply in the world has stayed the same or decreased, such as the rich crop in Japan. Investors are simply putting their money into assets which will hold their value the most. When it is reflected in the DOW Jones, it is celebrated. When it is reflected in commodities prices, it is condemned. And another perspective of speculation is that speculation goes both ways. There is absolutely no proof that the speculation on the bull side outnumber the speculation on the bear side. This is pure rhetoric. Governments need a scapegoat for their horrible economic policies and "speculators" is a faceless nameless entity to blame things on. Another perspective, which most will not agree with, but I believe is true is that higher prices increase supply. Prices are going up because there is not enough supply for demand right now because, as I stated earlier, our economic policy has focused on increasing demand rather than supply and all the crisis in the world at the moment. Higher prices will cause people to seek more supply because they will be lured by the high profits. Oil at $150 will be difficult but it will spur more oil exploration and alternative energy investments causing all energy prices in the long run to come down; as opposed to subsidizing oil and trying to keep it cheap. I could go on forever but I'll stop here.