On Markets

The argument for speculators in the commodity market is that it provides liquidity. Now you see where that extra liquidity takes us.
I would expect any Chinese bank who sets up such a thing as an Exchange Traded Fund to be prosecuted for criminal conspiracy. The US law does allow such prosecutions, against the parts of banks running such schemes and the management above them, but unfortunately President Obama and many congressmen are dependent on money from Wall Street to finance their re-election campaigns.

xywdx said:

Participant A offers to sell X barrels at $Y per barrel to Participant B.
A did not have the supply on hand and expected to purchase at a cheaper price what he has already sold. Price goes up, A has to deliver what he promised so he buys X barrels at $Y+1 per barrel from B.
And it keeps going.

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Thanks for the explanation though I understood the forward contract partjust not the repurchase fromdark inventory part.

The derivatives market, which holds most of this commodity speculation, is pretty much a big casino that has grown out of all proportion to the normal global economy. And its instability/the effects it has on the market for commodities makes it a threat to the normal productive global economy.

Every which way I look at the global economy, it looks grim, mostly for the West. There's too many unresolved problems. For the last 30 years the world's financial institutions and central banks have been running a big confidence game Ponzi scheme, antithetical to free markets but cloaked in free market rhetoric, and it's all coming to an end because the imbalances have become too large.

CardSharp said:

Thanks for the explanation though I understood the forward contract partjust not the repurchase fromdark inventory part.

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The key is neither A or B has any Oil whatsoever, they are just causing the prices to rise by trading dark inventory. Essentially A has repurchased his initial dark inventory at $Y+1 per barrel, B does not have the supply to deliver so he will inevitably end up buying at $Y+2 per barrel, the cycle continues.

He He If we sold something we never had in the world outside the commodities market, we would get charged for fraud. Even presenting a cheque that didnt have the funds to cover it despite the fact that youve got every intention to make good the amount during the course of the day.

On the subject of Markets and free-market based ideas, I recommend getting to know Mr. Iyad al Baghdadi, a great author and commentator from Dubai, and his ideas about the Arab Spring and what he calls "Islamic Libertarianism", an answer to the seemingly contradictory and unsatisfying paths of complete Westernization and "traditional" Islamism.

xywdx said:

Participant A offers to sell X barrels at $Y per barrel to Participant B.
A did not have the supply on hand and expected to purchase at a cheaper price what he has already sold. Price goes up, A has to deliver what he promised so he buys X barrels at $Y+1 per barrel from B.
And it keeps going.

Click to expand...

thanks for the explaination. This is worse than gambling, one is effectively playing with assets he does not own.