Wednesday, June 18, 2008

Danger: Politicians Ahead

Joe Lieberman wants to stop speculation in commodities....

Funny thing - commodities that have no futures market (hence no speculators) are rising at same rate as commodities with a futures market. I guess that's just an anomaly - guys, look (a) globally (b) at yourself (c) at Uncle Ben's printing presses/helicopters and the $500 Billion of new paper from Europe. Hello? Global competition for resources, along with governments subsidizing consumption stimulating demand over and above where it should be, along with stupid ideas like putting our food supply into SUVs, along with Uncle Ben inflating the money supply so fiat money chases hard assets the world over - why don't we work on those things as issues? Ah, because it would require a mirror. Another bright idea from your leadership, who continues to live with their head in the sand... 1980s sand at that. So predictable... and these "commodity markets" would move to London, Signapore, or Dubai... way to go team. They still live in a closed system where the entire universe revolves around the United States of Subprime.
  • The head of the Senate's government affairs committee Wednesday unveiled a series of restrictive proposals aimed at financial speculators in commodities, including one that would place an outright ban on big pension funds buying agricultural and energy futures.
  • The three legislative ideas from Connecticut's Joe Lieberman, which the independent senator plans to discuss at a hearing June 24, count as the most drastic efforts yet from lawmakers targeting potential culprits behind high oil and grain prices.
  • The most severe would prohibit private and public pension funds with more than $500 million in assets from investing in agricultural and energy commodities traded on a U.S. futures exchange, foreign exchange or over the counter, according to materials provided by Lieberman's office.
  • A second plan would direct the Commodities Futures Trading Commission to establish total limits on the share of the commodity market held by financial investors.
  • A third proposal would direct the futures regulator to impose speculative-position limits on any stakes not related to real hedging activities, an action that could limit the commodities-swaps activities of big investment banks such as Goldman Sachs Group
  • "We are not, as some continue to argue, witnessing the ebb and flow of natural market forces at work. We are instead seeing excessive market speculation at work and that is why our government must step in with new laws to protect our economy and our consumers," said Lieberman in a statement.
  • Investment banks and pension funds aren't waiting for that forum to make their anxiety about Lieberman's proposals known. A statement penned by six influential trade groups, including the Securities Industry and Financial Markets Association, the Financial Services Roundtable and the Investment Company Institute, warned that efforts to bar financial investors from commodities markets could "substantially harm the ability of Americans to protect themselves against inflation."
  • Some investors and exchanges, including the CME Group (CME) and Nymex (NMX) New York Mercantile Exchange, however, have warned that more restrictions could drive investors to overseas or less-regulated markets -- and could even inflate prices further. (Bingo!)
Remember, free markets in good times, socialism in bad times. The US has really turned on its head the last 12 months... amazing to watch the hypocrisy of "free market capitalism" that we attempt to force on every other country.

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