Are Futures Traders to Blame for High Oil Prices?
The president of the Futures Industry Association, John Damgard, answers that question in this FT.com video.
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, June 13, 2008
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- Name: Mark J. Perry
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Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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3 Comments:
He claims no manipulation, yet he admits that hedge funds and pension funds drove the price up. This is called contradiction.
The fundamental issue is defining what manipulation means.
Also, defining passive and active manipulation.
IMO, buying oil futures to benefit from price momentum is passive manipulation if looked accross the board.
It's time to terminate oil futures trading in exchange for a more efficient system of forward agreements between producers and end users.
That will drive speculators out and could drop prices substantially.
Of course, exchanges will resist. Who cares...
How about increasing the margin requirements for commodity speculators to something like 50%
Putting up "real" money might slow the gamblers a tad
"Putting up "real" money might slow the gamblers a tad"
Funds have no problem with money and can borrow up to 10:1 or more.
Margin is nto a problem for speculators. Increasing margin to 50% will drive out small time intraday traders or what is known as "noise traders" who do not affect price momenutm because they stay flat after market close.
The sooner they shut down oil futures, the better will be for the world because every month a new equilibrium level is set.
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