The war on precious metals has expanded. It’s now a war on commodities.
Considering the ‘Pearl Harbor’ effect or the initial success of interventions with silver, the series of price manipulation will now include hikes in credit margins of oil and gasoline products.
According to the CBS Marketwatch, (bold highlights mine)
U.S. exchange operator CME Group CME +1.17% said Monday it is raising the margin requirements for trade in a wide range of oil products, effective Tuesday. The requirement for a new position in benchmark New York Mercantile Exchange crude contracts rises to $8,438 from $6,750 previously, with margins also higher for contracts in benchmark Brent crude, gasoline and other products. The hike was the first of its kind since March 4, according to TheStreet.com. June crude oil CLM11 -0.62% traded at $101.95 a barrel early in Tuesday's electronic session, down 56 cents, or 0.6%, from the close of floor trading Monday on the New York Mercantile Exchange.
It would be so naive for some to believe that this equates to “mitigating” the effects of loose monetary policies.
Commodity traders suffer undue losses by the rigging the rules of the game by regulators (I know they are private regulators but they appear to be working in behalf of the government).
This is equivalent of robbing commodity traders of their property rights...just to justify current policies.
What if the US government decides to apply the same to the stock market?
Yet this New York Times article says that CME officials, in raising credit margins, have not been aware of the consequences of these interferences on the commodity markets. (bold highlights mine)
On April 25, half a dozen officials from the CME Group, which runs many of the nation’s commodities exchanges, met via videophone to discuss the eye-popping rise in the price of silver, which had doubled in just six months to about $47 a troy ounce.
They didn’t realize it, but they were about to take the first step toward popping a bubble in global commodities prices.
Worried about the speculative run-up and the increased volatility of the silver market, the officials concluded that it was time to raise the amount of money that buyers and sellers had to put down as collateral to guarantee their trades. The first increase in so-called margin requirements took hold the next day, effectively making it more expensive for speculators and other kinds of traders to play in the market...
This is unalloyed hogwash, if not a sheer self-contradiction in reporting. Yes this smells more and more of the Fed's 'signaling channel' or state engineered propaganda aimed at manipulating inflation expectations.
Raising credit margins for FIVE times (or more than double the existing rate) signifies as deliberate measures to curb the price acceleration of silver.
It’s silliness to say that the effect of this measure had not been known and that officials acted on this out of worries.
Also, the fact that they are now expanding coverage means officials see the initial effects as a policy success, which it hopes to replicate on other markets. In short, path dependency.
Even more nonsensical is to the attribution of a commodity bubble.
What should be underscored as a bubble is the bubblehead policies to justify more intervention.
It is even foolish to believe that price controls or manipulation will continuously work under the current regime which promotes such ‘speculative’ dynamics.
That’s because inflationism induces a flight to real assets. For as long as governments, most especially the US government, continue to debase her currency, people will seek shelter through commodities via the marketplace.
And further is the asinine impression that markets operate in inertia.
The markets function as a discounting mechanism. Since the market has priced in new information or that it is now aware of the rigging of game by political operators, the market has begun to adjust accordingly.
Proof of this is that despite the announcement of increasing oil margins, oil, silver and gold surged yesterday!
What this only means, at this early state, that price manipulation efforts appear to be wearing off! And so goes the ‘mitigation effects’.
As Ayn Rand aptly wrote
When you see that trading is done, not by consent, but by compulsion -- when you see that in order to produce, you need to obtain permission from men who produce nothing -- when you see money flowing to those who deal, not in goods, but in favors -- when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you -- when you see corruption being rewarded and honesty becoming a self-sacrifice -- you may know that your society is doomed.
Attacking the symptoms, engendered, fostered and nurtured by policymakers, won’t solve or cover the problem. Instead, it is a sign of societal degeneration.
1 comment:
They needed to raise margins to stop the wide spread chronic long speculator that has been driving the cost of commodities up. they should have done this 2 years ago. they said there was no inflation over this same time period. yet food, gas, utilities have sky rocketed. food makers have not raised their prices. but simply gave you smaller portions to off set there cost. simply put its a VAT tax you never see!
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