[lbo-talk] Food Prices Again

Shane Mage shmage at pipeline.com
Wed Feb 16 14:42:32 PST 2011


On Feb 16, 2011, at 1:34 PM, Jordan Hayes wrote:


> Shane Mage writes:
>
>> Any role of speculation in "running up prices" is absolutely
>> offset by an identical role of speculation in "running down
>> prices."
>
> That's not necessarily true. Higher prices can become acceptable
> and normal, after the shorts have covered; higher futures prices can
> get "baked in" by producers locking in a price.

Whoever knows the least little but about economics--any variety of economics--knows that prices are determined by the supply and demand functions relevant to the given market structure. If higher or lower prices get "baked in" and "acceptable" that means those were the prices that would come about irrespective of speculation (which of course has its role in the path taken by those price movements). "After the shorts have covered?" If the prices have risen, when the "shorts" (ie., half the speculators) cover they have lost more than the "longs" have won (the difference being the bank's vigorish).


> Those prices get passed along to the products that are made from
> the commodities. For a speculator, there's no time limit: he can
> always roll forward into the next contract[*].

Taking a loss [if long]whenever the prices have failed to rise enough or have actually fallen. Speculation is a zero-sum game, profitable on a net basis only to the "house."

Shane Mage

"All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods."

Herakleitos of Ephesos, fr, 90



More information about the lbo-talk mailing list