NBC Blames 'Speculators' for Higher Commodity Prices
In a continued search for someone to blame for inflation â€“ specifically higher commodity prices â€“ the media have decided to go after speculators, who perform a vital and perfectly legal function in the free market.
â€śHereâ€™s a big reason youâ€™re paying more â€“ no one can pinpoint how much more â€“ for bread, coffee, corn,â€ť NBC correspondent Bob Faw said. â€śIn the last year, commodity prices here have soared 50 percent. Many experts blame voracious worldwide demand. Not so, says a former federal commodities regulator.â€ť
â€śWhat we see today is the speculators dominating this market and driving the prices up,â€ť
Greenberger also appeared in a May 30 segment of CNNâ€™s â€śAmerican Morning,â€ť attacking the Bush administration for allowing â€śinvestment banks, hedge funds and wealthy investors in dark cornersâ€ť of markets for â€śtaking money out of the consumersâ€™ pockets.â€ť
The â€śNightly Newsâ€ť segment acknowledged that speculators take risks, but failed to explain how speculators help the market.
â€śThatâ€™s what a speculatorâ€™s role in the market is,â€ť Kevin Ferry, co-founder of Cronus Futures Management and a CNBC contributor, said. â€śWeâ€™re bearing down the risk of being wrong every day, and that risk is important to the functioning of these markets.â€ť
â€śSay that todayâ€™s price of corn is $6 a bushel,â€ť Williams wrote for Townhall.com on May 28. â€śI have a hunch that because of future supply and demand conditions, such as drought, war and increased other uses for corn, that in May 2009 corn will sell for $12 a bushel. I stand to make a lot of money if I buy corn now for $6 a bushel, hold it, and in May 2009 sell it for $12 a bushel. Sure, Iâ€™ve made a bundle of money for myself but is my speculative activity deserving of condemnation? The answer is no; I've served a valuable social function.â€ť
But, as Williams also points out â€“ what if the speculator was wrong? They stand to lose a lot of money.
â€śMy guess could be wrong,â€ť Williams wrote. â€śThere could be a bumper crop of corn and its May 2009 price might be $3 a bushel. Iâ€™d have to sell corn that I bought today for $6 a bushel for $3 in May 2009 and suffer a big loss.â€ť
The â€śNightly Newsâ€ť segment also featured the perspective of a farmer without an appreciation for the importance of commodity futures trading.
â€śPrices I canâ€™t control. The only thing I have control of is what I do on a daily basis as far as work with my hands,â€ť Brian Danceler, a farmer in favor of speculation limits, said. â€śSpeculators who donâ€™t know what a soybean looks like, theyâ€™re buying soybeans. Theyâ€™re in the market speculating on soybeans.â€ť
Greenberger agreed with Dancelerâ€™s idea about speculation limits â€“ an idea that would involve more government to enforce such regulation.
â€śIf speculation limits were re-imposed in a meaningful way, the prices would drop overnight,â€ť Greenberger added.