Friday, May 9, 2008

Blame it on the rain

"If the CFTC acts, will this bubble in the commodity market burst? Probably, yes. Wide price swings in the grain market, well above industry fundamentals, will belong to the past. Wheat and other grain prices will return to their real value under normal pricing structures. Speculative money is undermining the world order and it is a dangerous game. The U.S. regulatory agency must step in soon; otherwise, civil unrest will become the norm."

that was part of a quote from an (as far as I can tell) unidentified analyst that Nadler at kitco provided a couple days ago. read the whole thing I guess - if you can bear to - but the gist is that some people are desperately trying to scare the Food Bubble away. who Knows, maybe someday the Government will get a bug up its ass and attempt a smack-down on derivatives players, but the fact is that Government policies, up to now at least, have obviously been geared toward pumping up the prices of ag products. anyway, a few points regarding the quote above:

1) the 'wide price swings' complaint makes me giggle. ag commodities in particular have always enjoyed great volatility. and there's aways someone complaining about it and casting blame.

Blame it on the rain (rain)
Blame it on the stars (stars)
Whatever you do don't put
the blame on you
Blame it on the rain yeah yeah
You can blame it on the rain

2) 'well above industry fundamentals' - uh oh, we've got a fundamentalist here. we see time and again and the world over what happens when fundamentalism dictates State policy. whether religious or financial, it ain't pretty.

3) 'return to their real value' - I could just as easily (and with more justification) declare that by going up prices are returning to their 'real' value. just look at the price history of ag commodities priced in 'real' terms - in gold, that is:

what a bubble! run and hide!
perhaps our eminent, if unidentified, axiologist would care to entertain an alternative interpretation: maybe the God-demmed currencies the grains are sold for are returning to their 'real' value?

4) 'Speculative money is undermining the world order' - where did all this speculative money come from I wonder? every order bears within it the precipitant of its own demise. something like that. and hundreds of trillions of electronic termites are doing their thing on the world order we call Central Bank Capitalism.

oh and another thing, if the CFTC actually does kick the speculators out of the derivatives, the speculators will just go out and buy the actual grain and hoard it. a futures contract can be created ex nihilo and sold to a speculator. but actual bushels...quantities are limited. say, I wonder what would happen to the price of corn if some specs went out to try and buy two or three billion bushels?