Why speculators are good for us

[jensend]

by the way,you should've noticed i didn't say speculators are bad. read the article.

[cottonpicken]

i told you who.
your right i dont know what i'm talking about.
your right everthing is running smoothly.
your right 12% inflation is nothing to be concerned about.
your right most of all because you have proven you have vastly superior gramerical capabilities,which means you must be smart and everyone else dumb.

"were going to hit the wall"
-Rob Mcewan founder/former ceo of goldcorp

[Fransisco]

Gee jensen, and I thought when you said, "rigged casino" you meant it in a bad way.

BTW, I don't buy the analogy, many have tried to corner the market, none have succeeded.

[Fransisco]

I didn't say <b>EVERYONE</b> else cotton.

Your sloppy writing is symptomatic of, not the cause of your sloppy thinking.

I put out a thoughtful defense of 'speculators' and speculation as presented by Dr Williams. Your reaction was to call him an "a-hole" and a "keynesian", and try to change the subject to currency devaluation. Now you want to talk about "12%"(?!?) inflation.

Whether or not currency devaluation has something to do with the current climb in commodity prices(and I believe it does have something but not everything to do with it) is beside the point.

At least Jensen 'gets' the argument understands it, has a counter argument/contribution to the discussion and actually backs it up with something more than just bluster and name calling.

[Fransisco]

Now back to the topic at hand. I found this on Economic Professor Mark J. Perry's Blog.


<b>The Stabilizing Role of Speculators</b>

1. People who argue that speculation is destabilizing seldom realize that this is largely equivalent to saying that speculators lose money, since speculation can be destabilizing in general only if speculators on the average sell when the currency (commodity) is low in price and buy when it is high.

~Milton Friedman, Essays in Positive Economics (p. 175)

In other words, speculators who continually lose money by buying high and selling low (which would increase volatility and be destabilizing) will be forced to leave the market eventually, and only rational speculators – those who will actually help to stabilize prices – will survive.

2. Speculators anticipate shortages and buy up commodities early, thereby removing them from the market. This alerts consumers to the oncoming shortage, fulfilling the important financial market role of providing information and allowing them to reduce consumption as prices rise. Later, the speculator sells, ameliorating the shortage while making a profit.

Speculators anticipate and warn others about shortages—they do not cause shortages. As a result of their trades, price swings are less severe than they otherwise would have been. We do not blame doctors, police, or firemen for profiting from the misfortune of others because it is understood that they help a bad situation. Speculators deserve the same consideration.

[Fransisco]

Let me reemphasize that last paragraph.

<blockquote>"Speculators anticipate and warn others about shortages—they do not cause shortages. As a result of their trades, price swings are less severe than they otherwise would have been. We do not blame doctors, police, or firemen for profiting from the misfortune of others because it is understood that they help a bad situation. Speculators deserve the same consideration."</blockquote>

[jensend]

there is a difference between a lot of small specs adding liquidity to a market and fund managers moving tens of millions of dollars into a market in a short period of time. read the article and see that traders say the market is not finding value, just serving as a vehicle for large fund managers to relieve actual industry participants of their capital. free enterprise is wonderful but it doesn't exist in many places anymore. wally williams is a fraud.

[cottonpicken]

inflation and currency devaluation are one in the same.

i'll bet you a shiny nickel he is a keynsian.

when the house of economic cards he helped build comes crumbling down,you will understand my distain.

it took 200 years for the us to accumulate its first trillion of debt.

now it is doing it yearly.

when it starts doing it hourly,you'll understand.

[cottonpicken]

one million dollars=a stack of one thousand dollar bills 4 inches high

one trillion dollars=a stack of one thousand dollar bills 64 miles high

[Fransisco]

If Williams is a Keynesian then the Pope must be an atheist.

I have no love for Keynesian economics myself, most of our current problems stem from the implementation of its interventionist theories.

[Fransisco]

And the topic is still speculation and speculators not inflation and or currency devaluation if that's what you want to talk about start another thread.

[cottonpicken]

See fran,we probably have more common ground than you could imagine.

I dont jump into threads i dont know alot about because the doubt fairy visits my brain.

The specs have entered the market for a number of reasons.

The most important are the ones i've talked about thread after thread,year after year.

Thats why i jumped on this thread.

Maybe i'm wrong,maybe i'm right.

Doesnt really matter.