Saturday, May 14, 2011

Blame the Fed for Commodity Speculation

Zero Interest Rate Policy. What more do you need to know?
Since Y2K, Alan Greenspan and Ben Bernanke have proven they are nothing but serial bubble blowers.
As the current chairman said:
I have two problems but only one tool.-Ben Bernanke
Testimony to the House Budget Committee
Jan. 16, 2008
From Central Banks to "Flood" Markets with Liquidity:
From Bruce Krasting:
The President of the United States has hit commodity investors. Several Senators, the Attorney General, the CFTC and most of the other global exchanges have joined in. I think they are all pointing fingers in the wrong direction. It's the Federal Reserve that is behind all the speculation of late. Let me throw out some raw numbers to make a point:

(I) Copper futures on the CME have seen average volume of 50,000 contracts a day this year. Each contract is for 25,000 pounds. Therefore the average turnover of copper at just the CME is 570,00 tonnes. The annual global consumption is 20mm tones so Copper futures at the CME (alone) are equal to 5.7Xs total world consumption (200 day trading year)....

...Consider this review of longer-term volume in the futures markets. They all show a big jump in volume around 2008. That is ZIRP at work:

(click to enlarge)
The President can yell all he wants. He can sick the Attorney General on the players. The CFTC (and all the other exchanges) can play around with margin rules all they like. Those Senators making a fuss are crying to the moon. None of these steps will make a damn bit of difference....MORE