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.
âHereâs a big reason youâre paying more â no one can pinpoint how much more â for bread, coffee, corn,â NBC correspondent Bob Faw said. âIn 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
âWhat we see today is the speculators dominating this market and driving the prices up,â
Greenberger also appeared in a May 30 segment of CNNâs âAmerican Morning,â attacking the Bush administration for allowing âinvestment banks, hedge funds and wealthy investors in dark cornersâ of markets for âtaking money out of the consumersâ pockets.â
The âNightly Newsâ segment acknowledged that speculators take risks, but failed to explain how speculators help the market.
âThatâs what a speculatorâs role in the market is,â Kevin Ferry, co-founder of Cronus Futures Management and a CNBC contributor, said. âWeâre bearing down the risk of being wrong every day, and that risk is important to the functioning of these markets.â
âSay that todayâs price of corn is $6 a bushel,â Williams wrote for Townhall.com on May 28. âI 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, Iâve 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
But, as Williams also points out â what if the speculator was wrong? They stand to lose a lot of money.
âMy guess could be wrong,â Williams wrote. âThere could be a bumper crop of corn and its May 2009 price might be $3 a bushel. Iâd have to sell corn that I bought today for $6 a bushel for $3 in May 2009 and suffer a big loss.â
The âNightly Newsâ segment also featured the perspective of a farmer without an appreciation for the importance of commodity futures trading.
âPrices I canât control. The only thing I have control of is what I do on a daily basis as far as work with my hands,â Brian Danceler, a farmer in favor of speculation limits, said. âSpeculators who donât know what a soybean looks like, theyâre buying soybeans. Theyâre in the market speculating on soybeans.â
Greenberger agreed with Dancelerâs idea about speculation limits â an idea that would involve more government to enforce such regulation.
âIf speculation limits were re-imposed in a meaningful way, the prices would drop overnight,â Greenberger added.