The regulation of excessive speculation in commodity markets: what's at stake Civil society event at the World Bank spring meetings, 13 April 2011

Minutes|Bretton Woods Project|14 April 2011|url
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Professor Greenburg of Johns Hopkins University

• Price volatility is not a demand situation but an issue with casino culture in banks
• Speculative fever does not represent real demand and leads to price distortion
• Supply and demand equilibrium remain the same despite price volatility
• Limits imposed on speculative practices internationally are not enough
• Speculation leads to significant price volatility leading to inability to effectively hedge prices
• In 1991 Goldman Sachs invited wealthy people to bet against the market: they hedge their position by shorting markets; the paper market on oil was 13 times actual oil market
• French, Japanese and Germans are committed to regulating speculation
• Middle East crises has nothing to do with oil price volatility
• Purely based on speculative attack

Sean Cota, advisor to US Congress on regulatory reform

• "You measure bubbles after they collapse, until then it’s supply and demand"
• Botswana to host unregulated markets
• Leverage is good if used correctly otherwise can be destructive; it is a key component of speculation.  Market players can get infinite leverage.
• There is a major glut of oil yet prices remain high, demonstrating market distortion of speculation
• Over-financialisation and unregulated markets tend to create disequilibrium and major market distortion
• Regulatory infrastructure needs to be developed

David Frank, financial analyst

• Need to follow evidence
• Level of commodity speculation is unprecedented
• Speculators often engage in spreading investments to make up losses
• Argument that speculation increases liquidity is specious at best
• Amount of hedgers have actually declined while speculators have increased
• Best solution is to allow 30% speculation maximum and to eliminate index funds

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Published: 14 April 2011 , last edited: 14 April 2011

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