The following excepts are from today's WSJ's "Opinion Page (editorial insights)." I want to draw your attention to the second paragraph that puts forth an hypothesis for the real reason behind the CFTC pronouncement yesterday.
"Last summer, as oil prices were peaking, the Commodity Futures Trading Commission "CFTC" launched an investigation into whether $100-plus oil was the result of market manipulation by those “speculators.” That interim report, issued in July 2008, concluded that price movements were largely driven by—wait for it— supply and demand. The report noted, among other findings, that so-called speculators were net short during some of the biggest run-ups in oil prices over the past several years. In other words, they were, if anything, putting downward pressure on prices during some big spikes. The CFTC also found that markets in which futures trading is outlawed altogether—such as onions (yes, onions)—price volatility tended to be even greater than in commodities like oil with deep and efficient futures markets."
"So the CFTC is now poised to issue a follow-up repudiating the commission’s earlier findings. This week’s hearings are being held without the benefit of the CFTC’s actual findings, which are due out in August—but no matter. The CFTC’s about-face is all about the politics, not the economics, of price discovery. And the real goal is not to blame the evil speculators for last year’s price spike or this year’s oil rally, but to lay the groundwork for explaining away the commodity-price bull run that we’re likely to see as a result of the Federal Reserve’s easy money and the Obama Administration’s spending and debt party."
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