Ron Paul Supporters not welcome in Louisiana GOP

MSimon · Post by **MSimon** » Thu Jun 28, 2012 6:58 am

Speculators perform an important function. Price discovery.

palladin9479 · Post by **palladin9479** » Thu Jun 28, 2012 7:37 am

The difference between everything you just posted and speculation is leverage.

Your doing all that with money you have, your not using imaginary future earnings to make profit today. It's the leveraging that creates the problems with speculation, it's using imaginary money to buy something and thus creating artificial demand. You never intended to use 10,000,000 USD worth of gas in your car this week, you just bought it intending to sell it next week for 12,000,000 USD. And the guy buying from you isn't intending on using it either, he's going to buy it from you at 12,000,000 then sell it the week after for 14,000,000. Eventually you get to a guy who's buying it not to use it but to sell it, and suddenly there is no one left to sell it to and he's left holding fuel he can't use nor make a profit on. Whomever he borrowed that 20,000,000 (100% markup now) from is going to take a pretty big loss when he defaults. All the mean while, those people who were buying gas to actually use it are now looking at a 100% markup in price, not from rising demand via usage but from artificial demand via speculation. Then the gas price plummets once the speculators start to off load it to reduce their loss's (the bust that follows the bubble).

Now increase that by a few orders of magnitude and have the speculators being major financial institutions / banks and you get the core of the financial meltdown.

Purchasing something to use is fine, purchasing something to sell is fine. Borrowing large amounts of money to purchase something with the intent on raising prices and selling it in the future cause's economic chaos. And because speculation isn't regulated or tracked, it's impossible to tell the difference from the guy buying gas for his car and the guy buying gas to sell next week. Leveraging just makes the speculation dangerous.

Supply vs Demand works amazingly well as a market regulator. It relies on the most universal and powerful of human motivators, greed. But if you artificially skew it one way or another it starts to cease being a good regulator, skew it enough and it stops all together. It's basically a giant ponzi scheme, it requires the next guy to spend more money then the first guy, and eventually the last guys get stuck holding the bill.

palladin9479 · Post by **palladin9479** » Thu Jun 28, 2012 7:56 am

Or let me put it a different want. Merchants used to buy from one country and sell products in another country, for a mark up. The prices they could get for their products were based on availability of that product and how much people wanted for it.

Financial traders (modern day merchants) are now buying across time instead of between countries. Their buying stuff from the now and selling it in the future. When a couple are doing this it doesn't create a dent in the market, but when hundreds, thousands are doing it, and doing it with borrowed money (10~20:1 leveraging) it creates a huge surge of fake demand that artificially raise's prices and limits supply. Thus without actually consuming the material they've both raised demand (they bought it) and lowered supply (their holding it) simultaneously. When done over long enough periods of time it will create a crash. The longer it went on the bigger the crash.

Yes the first groups of people doing this make massive profits, after all their effecting both the supply and the demand sides of the equation. The actual consumers get shafted as their having to pay the artificially inflated prices. Eventually the market will crash when there is no one left to buy the commodity at the every increasing speculated price. And when it does crash, whomever was invested into it gets stuck holding the debt.

Look no further then both the housing and oil markets to see the results of unchecked leveraged speculation. It's not a good thing.

Skipjack · Post by **Skipjack** » Thu Jun 28, 2012 8:15 am

Speculators perform an important function. Price discovery.

I am actually in favor of the introduction of a speculation tax of sorts. In contrast to you, I dont think that speculation has any positive affect on an economy as a whole. In fact, I think that its effects are negative. Much of the rises in oil prices is based on speculation, not on the actual market. The high oil prices have hurt the economy everywhere and they are driving up inflation.

MSimon · Post by **MSimon** » Thu Jun 28, 2012 10:56 am

Skipjack wrote:
Speculators perform an important function. Price discovery.
I am actually in favor of the introduction of a speculation tax of sorts. In contrast to you, I dont think that speculation has any positive affect on an economy as a whole. In fact, I think that its effects are negative. Much of the rises in oil prices is based on speculation, not on the actual market. The high oil prices have hurt the economy everywhere and they are driving up inflation.

Much of the current fall in gasoline prices (in the US) is based on speculation.

What about that?

If speculation raises prices then consumption goes down before a decline in production. I see an advantage in that.

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Say a gasoline price rise is expected. Gasoline stations raise prices in advance in order to have the capital to be able to buy at the new higher prices.

===

Yes - leverage is a problem. But that is a central bank/money supply problem. Zero or negative effective interest rates make the matters worse. All the problems stem from the business cycle. As long as you have interest there will be a problem. And without interest money will not be loaned. That will tend to accelerate concentration of wealth.

If I can't get a loan for my good idea (another form of speculation) advancement slows.

There are problems in any money system. I'm not unhappy with the current system because the growth is front loaded. I'm willing to pay the price of the once in a lifetime (roughly) depression.

Skipjack · Post by **Skipjack** » Thu Jun 28, 2012 2:37 pm

Much of the current fall in gasoline prices (in the US) is based on speculation.

Sorry, but the way I see it, gasprices in the US as still higher than they used to be and that is all thanks to the speculation. Here in Europe it is even worse.

hanelyp · Post by **hanelyp** » Thu Jun 28, 2012 5:51 pm

Supply / Demand states that the value of something is only what someone else is willing to pay for it, speculation artificially increases value as speculators are appraising things at what they would be worth in the future not what their worth now.

Speculation will only incorrectly raise the price of a commodity if the speculators in mass over value the commodity, and invest accordingly. When they do so, they take it on the chin when reality reasserts itself.

In so far as speculators correctly guess the future market, which they must do to make a profit, they shift prices towards addressing future shortages and surpluses.

paperburn1 · Post by **paperburn1** » Thu Jun 28, 2012 7:01 pm

hanelyp wrote:
Supply / Demand states that the value of something is only what someone else is willing to pay for it, speculation artificially increases value as speculators are appraising things at what they would be worth in the future not what their worth now.
Speculation will only incorrectly raise the price of a commodity if the speculators in mass over value the commodity, and invest accordingly. When they do so, they take it on the chin when reality reasserts itself.

In so far as speculators correctly guess the future market, which they must do to make a profit, they shift prices towards addressing future shortages and surpluses.

speculation artificially increases value as speculators no longer have to have a sustantal investment in the product. I belive it is now less than ten cents on the dollar so risk is small and the potental to gain is huge. before a certian administration the ratio was 1 to 4 so huge fluctuations were not probable.

MSimon · Post by **MSimon** » Thu Jun 28, 2012 7:13 pm

I belive it is now less than ten cents on the dollar so risk is small and the potental to gain is huge.

But if the trade goes against them the loss is huge. Thus a margin call. BTW speculating is very high risk. Ask any trader.

Skipjack · Post by **Skipjack** » Thu Jun 28, 2012 7:18 pm

But if the trade goes against them the loss is huge. Thus a margin call. BTW speculating is very high risk. Ask any trader.

Well yes, but many speculators are bankers (who often have no clue anyway) and if they fail, they simply let the government bail them out.

MSimon · Post by **MSimon** » Thu Jun 28, 2012 10:52 pm

Skipjack wrote:
But if the trade goes against them the loss is huge. Thus a margin call. BTW speculating is very high risk. Ask any trader.
Well yes, but many speculators are bankers (who often have no clue anyway) and if they fail, they simply let the government bail them out.

That is not a problem with speculators. That is a problem with government.

palladin9479 · Post by **palladin9479** » Fri Jun 29, 2012 1:45 am

MSimon wrote:
I belive it is now less than ten cents on the dollar so risk is small and the potental to gain is huge.
But if the trade goes against them the loss is huge. Thus a margin call. BTW speculating is very high risk. Ask any trader.

Speculation is NOT limited to financial institutions. The commodities their speculating over are the things you buy and use every day. Their speculating over the basics behind the cost of living.

The speculators do not take it no the chin, the banks do. The speculators get out fast and leave the banks holding the debt, or haven't you noticed that lately. The purpose of the glass-steagal act was to prevent rampant speculation from selling those debts to consumer banks and thus force speculators to hold the full risk of their actions. Where do you think the money for those bets is coming from? The speculators are not raising it, their getting it from banks via leveraged debt. Speculation by itself is not bad, speculation combined with leveraging and debt selling is a recipe for disaster. We've seen this time and time again, no amount of word-fu will change that.

MSimon · Post by **MSimon** » Fri Jun 29, 2012 11:43 am

The speculators get out fast and leave the banks holding the debt, or haven't you noticed that lately.

So the bankers made bad bets too. So what? They put their trust in some one who couldn't be trusted.

And comes the rub. The government put its trust in bankers and now you all are on the hook.

The problem is not the speculator. The problem is the power you gave the government.

You didn't give the government that power? I'll believe it when you work to take it away. With every bone in your body. With all the might you can muster. Your lives, your fortunes, your sacred honor.

palladin9479 · Post by **palladin9479** » Tue Jul 03, 2012 4:32 am

MSimon wrote:
The speculators get out fast and leave the banks holding the debt, or haven't you noticed that lately.
So the bankers made bad bets too. So what? They put their trust in some one who couldn't be trusted.

And comes the rub. The government put its trust in bankers and now you all are on the hook.

The problem is not the speculator. The problem is the power you gave the government.

You didn't give the government that power? I'll believe it when you work to take it away. With every bone in your body. With all the might you can muster. Your lives, your fortunes, your sacred honor.

Again blindly following your religion.

The Government is charged with national security, that includes financial security. So yes it does have the constitutional power to do what it did.

If the government did not back those banks when it did, the resulting crash would of been much much worse, full on depression worse. Those banks hold too much currency, way more currency then any single entity should be allowed to hold. You think 6tn USD vanishing from circulation was bad, try to see what happens when 10tn USD vanishes. You want a full on depression, do you want to destroy your country. Is your blind faith in your ideology so strong that you would willing wish disaster, despair and bad times upon your country and countrymen? Simon are you a traitor? Do you value your own ideological faith over the well being and soundness of your country?

That isn't a rhetorical question, think long and hard over it. Government getting involved in private banking is a BAD THING. I absolutely hate that it came to that. Thing is, it was necessary, the consequences otherwise would of been devastating. It became a situation of help the bad guy or die.

What we should thus do is look to what enabled the bad guy to put himself in the position where we were forced to help him. What created the situation of "bail us out or die". People like to blame ideologies, the bishops and preachers behind those ideologies like that, it gives them power and blinds people to logic and reason. When digging deeper you see that the financial entities simply became too large, too much currency and capital focused into a single entity, too many of those single entities.

The root of all that power, rampant speculation combined with unlimited funding. High stakes gambling (financial speculation) should never be combined with night-unlimited capital generation (banks).

MSimon · Post by **MSimon** » Tue Jul 03, 2012 4:37 am

palladin9479,

I get it. You fear liberty. Fine. When the current fight is over I'm selling out to the victors. It will give me a bit more liberty.

Just a reminder: any power you give government will eventually be used against you. In modern parlance Regulatory Capture.

And pray what do you intend to do to eliminate greed from the hearts and bellies of men? I know of no earthly power that can do it. The best that can be done is pit the greedy against the greedy. In capitalist systems we call that competition.