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Lots of people, myself included, arguing that speculation -- at least in the sense in which we understand that sort of thing -- in commodities markets is playing only a minor role in the run-up in oil prices. That, of course, won't stop this week's House Agriculture Committee meeting on whether the Commodities Futures Trading Commission (CFTC) is doing its job. A more interesting discussion is the role of swaps, those off-exchange trades among large institutional investors, a class of commodities investing that has ballooned from less than $6-billion to $260-billion over the last decade. The allegation is that swaps are largely invisible, and they are larger commodities bets, so they have the capacity to move markets in a more savage way than larger markets of smaller traders can. Swaps aside, so far there has been little light on this subject, but lots of heat. A new paper, however, tries to help out. It seems to show that for short-term contract supply dictates prices, but for lo
InfectiousGreed Sunday, July 06, 2008

Banking Losses to Hit $1.6-Trillion