Bring back common sense rules to commodity markets
A good article that explains some of the problems that Senator Wyden’s STOP Commodity Speculation Act will remedy can be found here.
The author points out that earnings on commodity futures speculation is only taxed at a 23 percent rate, while earnings from equities is taxed at 35 percent, creating an incentive to drive investors into commodity markets. If we are to gain control over the commodity markets again, this tax incentive will have to [Read More...]
Sean Cota and Dan Dolan, two energy company representatives give a good interview about how the financial reform law will affect energy markets.
The Institute for Agriculture and Trade Policy (IATP) describes how the financial reform bill being signed into law today by President Obama will benefit farmers and consumers around the world. See their press release here.
“This bill will help markets work for agriculture and all Americans, not just for Wall Street and the transnational corporations that hide their deals in private markets”
“Countries dependent on agriculture imports for food security will be able to forward [Read More...]
If the influence of speculators on the price of oil and food staples like wheat, corn and soybeans hasn’t caught your attention, then surely the cornering of the cocoa market (where our chocolate comes from!) will. While this may result in higher chocolate prices for consumers in the global North, the increased price volatility brought on by such speculation has had significant effects on countries like the Ivory Coast and Ghana who depend on cocoa [Read More...]
The World Development Movement’s campaign recently released an excellent report titled, “The great hunger lottery – How banking speculation causes food crises,” which gives a good background to the problem of excessive commodity speculation as well as giving concrete solutions to remedy the problem.
The Senate passed a cloture vote on the financial reform bill yesterday, another step toward getting the bill signed into law, hopefully within a few weeks. Members of the Commodity Markets Oversight Coalition created a list of the parts of the bill that will improve the functioning of commodity markets. These changes should help avoid future breakdowns like we experienced in 2008 and help diminish volatility in commodity prices.
The financial reform bill will:
Fully [Read More...]
A number of articles have been published recently erroneously saying that the derivatives reforms in the financial reform bill will cost small and medium businesses millions in added costs. This is not true as commercial end users will be exempt from the new requirements.
The Commodity Markets Oversight Coalition has sent out a letter that spells out what is really in the bill as well as provides a good background to the use of derivatives:
The Organization for Economic Cooperation and Development (OECD) recently released a study by two Illinois University professors allegedly showing that the recent volatility in commodity markets was not caused by excessive speculation. The study “The Impact of Index and Swap Funds on Commodity Futures Markets” was released strategically in the final days of debate over the financial reform bill.
Luckily, the article apparently had little effect on those debates. A new non-profit called Better Markets, [Read More...]
The Congressional conference committee voted to pass a version of the financial reform with fairly strong derivatives reform. One financial analyst estimates that 80 to 90 percent of the opaque over-the-counter (OTC) will be required to clear through clearinghouses. These unregulated derivatives were a large part of the overall financial meltdown and had a significant effect on global food and energy prices.
Hedge fund manager Mike Masters gives a great interview to CNBC here. He [Read More...]
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