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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: patron_anejo_por_favor who wrote (93755)4/23/2008 2:45:40 PM
From: Tommaso  Read Replies (3) of 110194
 
I get a free magazine from the IMF --"Finance and Development"-- that from time to time has an interesting article. The latest one has a piece on the commodity boom ("Riding a Wave")that goes through all the causes of the boom carefully--even laboriously--with charts and argumentation. It identifies five causes:

1. demand from emerging economies

2. biofuels

3. slow supply response

4. linkages across commodities (i.e. such as corn and soybeans competing for acreage)

5. low interest rates and dollar depreciation

Nowhere in this carefully researched article is there even a mention of speculation. Commodity speculation within the United States has a huge effect on the financial position of those who engage in it. But "speculation" is often a word that people use when they really do not understand what is going on. It's almost like "they."

There is a separate box that covers "commodities as alternative financial assets" that does address speculation and says: "a number of recent studies suggest that speculation has not systematically contributed to higher commodities prices or increased price volatility." Indeed, it says, the CFTC has actually argued that speculation has reduced market volatility. And much of what may appear speculative is hedging against risk, not taking on risk.

Maybe this article can be found online . . . by damn! it can!

imf.org
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