Thank God, OUR government has Acted

As our whorehouse of a government steps into the futures markets by LIMITING the amount of speculation...

Get Real. Futures markets came into being when the farmers used to see their entire crops sitting on rail sidings with no buyers, no matter what. When farmers could finally sell it was too often at prices that were below the costs to produce. A few farmers sold their crops "forward" meaning that they would contract to sell after harvest at a predetermined price that was agreed upon in the spring or summer. The problems with these agreements were quality of product, in some cases reduced amounts of product available due to bad weather, and many times the buyer having no money. Needless to say things were very messy, sometimes evolving into actual range wars.

So....somebody devised a method whereby producers could sell their crops "in the future" with predetermined quality assured and if the quality fell below the contracted grade the prices were adjusted downward. Payment was also guaranteed.

So WHO could take "the other side?" Who would buy the crops? The processors of the crop, the people who turned the corn into corn oil, flour, pasta and the rest "made the market." They found comfort in knowing how much they'd have to pay for their needed raw product and could set their own prices for pasta "in the future." However it was quickly realized that there were imbalances in crops "hedged" and crops bought. So it simply "happened" that a gambler or two stepped up to the plate and agreed to gamble on a future price. Thus liquidity was finally assured in the markets. There could be no buyer without a seller and vice versa BUT the good part was that the Exchange upon which these "bets" were made would guarantee both sides of the trades. This meant that you bought from the exchange and sold to the exchange and the exchange would actually buy and sell product.

Now, since the exchanges all guarantee payment it is absolutely necessary for a "gambler" step up to the plate to assure liquidity (cash) at all times. The speculator guarantees that the market has enough cash at all times.

GETTING RID OF SPECULATORS: it can't be done. As we can see from the past, arrangements will always be made between producer and user and if Congress has its way in government supervision of speculation, the speculators will move to offshore futures exchanges (there are at least 20) and "forward" contracts will be placed by corporations. These arrangements will not listed anywhere. The result will be horrifying volatility with nobody knowing the real price, ever.