Credit the Obama Administration with consistency if nothing else. When there is a choice between government control and the free market, the Obama Administration will pick government control every time. We’ve seen it in Government Motors, The Amazing Technicolor Stimulus Plan, the Wonder Twins of TARP and TALF, and ObamaCare. Now the administration is going to regulate the heck out of commodities markets.
An article and an opinion piece in the Wall Street Journal today lay bare the deficiencies with the Obama Administration’s proposals.
First, the article. ‘Puter’s going to have to go from his memory of his early morning read, because as a Luddite, ‘Puter hasn’t quite managed to get his online subscription working yet. And his 16k external modem (with dial-up service) takes forever to load a page anyway. For those like ‘Puter who can’t manage their online selves out of a paper bag, here’s WaPo’s take. The CFTC is proposing new regulations to shut down “speculative” trading, which the Obama Administration blames for the spikes and crashes in the oil market. The Administration’s position is that hedging against increases (or decreases) in prices is fine for those involved in the markets (e.g., airlines, refiners). However, people who play the markets for financial purposes only are an existential threat to life as we know it on Earth.
‘Puter’s got a message for Mr. Gensler, chair of the CFTC, pictured above. Lighten up. The reason the market is wacky right now is because (1) generally, traders are uncertain as to which way the shaky economy is trending and (2) specifically, traders are uncertain as to what unproven academic theorem the government is going to try out on the economy next. As such, traders have no handle on the demand side of the equation. That is, if the economy is going to go gangbusters, then demand will rise to meet or exceed production quotas set by OPEC, leading to increased prices for the commodity. If the economy tanks, as it has recently, prices will fall, as manufacturing and consumer demand for oil and its products (plastics, chemicals, etc.) will fall. When the future seems uncertain, the markets will reflect that uncertainty in wild price swings. These uncertainty based swings will occur regardless of who the actual market participants are, be they insiders or speculators.
Here’s some free advice for Mr. Gensler. If you want to have a market that actually reflects the worth of a commodity, welcome all players. Markets do a pretty good job of setting prices, as even speculators are in it for the money. Also, how about doing something about the cartel gaming the supply side of the equation? ‘Puter’s pretty certain that OPEC nations’ monopolistic setting of production levels has a greater impact on the oil futures market than all the speculating hedge funds combined.
Now, the opinion piece. You may have heard of its authors, Prime Minister Gordon Brown of Great Britain and President Nicolas Sarkozy of France. Both the Prime Minister and Monsiuer le President make the same error our homegrown CFTC makes. Brown and Sarkozy blame the market participants for market fluctuations rather than those pesky bastards Mr. Supply and Ms. Demand. Blaming the market for doing what it is supposed to do (i.e., mirror extant conditions) is madness. And the proposed “solution” of additional government regulation (in this case, ill thought out world government regulation) will only exacerbate market instability. If the markets are regulated so that they will not reflect reality, what private capital providers in their right mind would participate? And when private capital flees, what happens to the markets then?
Both the United States and its European allies propose a heavy-handed solution to a non-existent problem certain to cause consumers pain in the wallet. For our governmental betters, increased government regulation is the solution to every problem, consequences be damned.
Always right, unless he isn’t, the infallible Ghettoputer F. X. Gormogons claims to be an in-law of the Volgi, although no one really believes this.
’Puter carefully follows economic and financial trends, legal affairs, and serves as the Gormogons’ financial and legal advisor. He successfully defended us against a lawsuit from a liquor distributor worth hundreds of thousands of dollars in unpaid deliveries of bootleg shandies.
The Geep has an IQ so high it is untestable and attempts to measure it have resulted in dangerously unstable results as well as injuries to researchers. Coincidentally, he publishes intelligence tests as a side gig.
His sarcasm is so highly developed it borders on the psychic, and he is often able to insult a person even before meeting them. ’Puter enjoys hunting small game with 000 slugs and punt guns, correcting homilies in real time at Mass, and undermining unions. ’Puter likes to wear a hockey mask and carry an axe into public campgrounds, where he bursts into people’s tents and screams. As you might expect, he has been shot several times but remains completely undeterred.
He assures us that his obsessive fawning over news stories involving women teachers sleeping with young students is not Freudian in any way, although he admits something similar once happened to him. Uniquely, ’Puter is unable to speak, read, or write Russian, but he is able to sing it fluently.
Geep joined the order in the mid-1980s. He arrived at the Castle door with dozens of steamer trunks and an inarticulate hissing creature of astonishingly low intelligence he calls “Sleestak.” Ghettoputer appears to make his wishes known to Sleestak, although no one is sure whether this is the result of complex sign language, expert body posture reading, or simply beating Sleestak with a rubber mallet.
‘Puter suggests the Czar suck it.