Lieberman Seeks Limits to Reduce Speculation

Discussion in 'Politics, Religion, Social Issues' started by MacNut, Jun 12, 2008.

  1. MacNut macrumors Core

    MacNut

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    A prominent Washington lawmaker said Wednesday that he would propose next week to ban large institutional investors, including index funds, from the nation’s booming commodity markets.

    The idea is one of several outlined by Senator Joseph I. Lieberman, independent of Connecticut, who is chairman of the Senate Homeland Security and Governmental Affairs Committee. That committee will hold a hearing on June 24 to continue examining whether financial speculation is affecting the prices of crops and fuel.

    “There is excessive speculation in the commodity markets that is driving up the cost of food and energy,” the senator said in an interview. “The question is, do large institutional investors play a positive role?” His concern, he said, is that they do not.

    Over the last five years, hundreds of billions of dollars have flowed into commodity futures markets, which play an important role in setting world benchmark prices for a variety of materials, including corn and crude oil.

    One steady source of money has been the growing number of new funds that mirror specific commodity indexes, like the Standard & Poor’s Goldman Sachs Commodity Index. More recently, exchange-traded funds — popular new investment vehicles that trade on stock exchanges but track commodity prices — have followed the index funds into the market.

    Other Washington lawmakers also turned up the heat this week on the investors they blame for sharp run-ups in food and energy prices....

    .....Central to both proposals is the view that both oil and food prices are artificially inflated by financial speculators whose trades do not reflect fundamental factors of supply and demand. But most lawmakers also agree that increased food and fuel demand from China and India, widespread weather problems that have affected harvests, new mandates that have steered food crops into ethanol production, and a weakening dollar have all influenced these key prices as well.

    Besides what he called the “aggressive” idea of banning institutional investors from the commodity markets, Senator Lieberman said he would also put forward other ideas for discussion at the hearing on June 24.

    One less-sweeping proposal would be to strengthen existing regulatory limits on the size of the stake that each speculative investor can hold in a given market, called speculative position limits.

    And he plans to propose barring investment banks from using the regulated futures markets to hedge speculative bets their clients are making in the vast unregulated global swaps market — what he called “the swaps loophole.”
    http://www.nytimes.com/2008/06/12/washington/12trade.html?ref=business
     
  2. SMM macrumors 65816

    SMM

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    #2
    I'll be damned. He finally said something I agree with. But, it is long overdue. I have often felt that the futures markets are far more harmful to fair prices. In fact, I would ban oil futures all together.
     
  3. MacNut thread starter macrumors Core

    MacNut

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    #3
    I was having this discussion with my neighbor yesterday and it really is a legal form of insider trading. The prices are so over inflated to make profits.
     
  4. iJohnHenry macrumors P6

    iJohnHenry

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    #4
    It's too bad that Joe doesn't cut a more "dashing" figure, 'cause he sure makes sense.

    The term "selling America by the pound" comes to mind.
     
  5. iShater macrumors 604

    iShater

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    #5
    Bout time he said something that makes sense. :rolleyes:
     

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